A new policy brief from Health Affairs and the Robert Wood Johnson Foundation looks at the Affordable Care Act's (ACA's) so-called family glitch. Low-to-moderate-income families are eligible for a subsidy to purchase health insurance on the Marketplace if the cost of health coverage through their employers is more than 9.5 percent of their household income. However, this formula is based on individual-only coverage and does not account for the higher cost of a family insurance plan. If the family glitch is not fixed, the path to affordable insurance for many spouses and children could be blocked--and children could be even further impacted if Congress fails to extend funding for the Children's Health Insurance Program (CHIP) after the current appropriation ends in September 2015, which the brief also explains.
Topics covered in this brief include:
- What's the background? This problem emerged from a narrow interpretation of "affordable" by Congress' Joint Committee on Taxation and adopted in regulations issued by the Internal Revenue Service (IRS). While the law requires employers to offer family plans, Congress deferred to business interests in limiting an employer's responsibility for providing "affordable" coverage to individual workers, meaning that no explicit standard for "affordability" for family members of an employee was developed. The potential cost to the federal government emerged as the key determinant in limiting access to premium tax credits for family members, and the IRS finalized the rule that brought about the family glitch.
- What's the debate? There is widespread agreement among policy makers that the current interpretation of the statute, which may have come about as the result of a drafting error or administrative oversight, unfairly penalizes families. However, there is little consensus on fixing the problem, and the current political polarization in Washington makes the task very difficult. While a statutory change would send a clear message to the administration to take action through rulemaking or guidance, some experts believe that the problem can be addressed without amending the law.
- What's next? Senator Al Franken (D-MN) has introduced S. 2434, the Family Coverage Act, to amend the ACA and determine family subsidy eligibility based on the cost of family-based coverage, and not self-only coverage. This act conveys a "sense of Congress" that the secretaries of health and human services and treasury have the authority to apply the affordability provision relating to working families without a statutory change. It remains to be seen if the current Congress will pass this bill. Without such a remedy, many low-income families are likely to remain uninsured--and the issue will become even more critical in 2015, when Congress debates the reauthorization of CHIP. The scope of the problem may be highlighted in a report from the US Comptroller General, to be filed by March 2015, about the affordability of health insurance coverage. That report is expected to look specifically at whether the percentage of household income used to determine the affordability of employer-sponsored insurance is appropriate and could provide much-needed assistance in fixing the family glitch problem.
Health Affairs is the leading journal at the intersection
of health, health care, and policy. Published by Project HOPE, the
peer-reviewed journal appears each month in print, with additional
Web First papers published periodically and health
policy briefs published twice monthly at www.healthaffairs.org.
Read daily perspectives on Health
Download weekly Narrative Matters podcasts on iTunes.