The Family Glitch: What it is and how it could affect your ACA health insurance

The idea of Marketplace coverage exists because not everyone has employer-cased coverage. The Affordable Care Act (ACA) led to the establishment of the Health Insurance Marketplace. This was to be a place where anyone could buy their own "Obamacare" health insurance plan. And the tax credits created by the ACA meant that this Obamacare could be an affordable way to get coverage if you didn't have another option.

But the tax credits for these Marketplace plans are only an option when other affordable coverage isn't. And according to the ACA, a job-based health plan covering only the employee is affordable if it costs 9.61% or less of the employee’s household income.

If a job-based plan available to an individual is deemed affordable by ACA standards and also meets the law’s “minimum value” standard, then that person and their family are not eligible for a premium tax credit if they choose to buy Marketplace coverage instead. Even if the premiums for an entire family don't meet that same affordability threshold. And that means that affordable Obamacare coverage may not be affordable at all.

Welcome to the “family glitch.”

To see if you qualify for health insurance savings, enter your zip code below. Read on for more information about the family glitch.

What is the family glitch?

The plan used to define affordability when it comes to the ACA is based on the lowest priced “self-only” plan the employer offers—meaning a plan covering only the employee and not any dependents. The mathematical standard for calculating affordability is only used for the employee, not the whole family—it’s not applied to that plan for all the dependents that same plan may need to cover. 

The definition of affordability

What does this mean? An employee may have affordable employer-sponsored insurance for herself. But the premiums for her spouse and children may be very expensive. And because her own premium is technically affordable, her spouse and children will not be eligible for ACA subsidies. 

This means that many plans that legally qualify as affordable may not be so in practicality for many families. And these same families then cannot access premium tax credits for Marketplace plans. Yes, the very tax credits that make Obamacare Marketplace coverage affordable.  

How employer-sponsored coverage applies to families

After the passage of the ACA, companies with more than 50 employees had to offer health insurance coverage to all employees and their children. But this same affordable coverage rule does not apply to spouses. It’s important to remember that large employers legally must offer coverage for an employee’s dependents. However, the employer doesn’t have to pay for that coverage in the same way they do for the employee’s own coverage. 

There is one important distinction, though. If an employee’s spouse isn’t offered health plan coverage, the spouse is still eligible for premium tax credits for Marketplace coverage. This is because technically, no other coverage is available to them. In this scenario, children still would not be able to be eligible for any tax credit for an Obamacare plan. And this is true of children's coverage regardless of what that coverage costs through the employer. 

Who does the family glitch impact?

It’s estimated that anywhere between two and six million Americans are impacted by the family glitch, and low-income families are disproportionately affected. Workers in the lowest 25 percent wage category contribute a much higher proportion of their income towards their health insurance coverage. Furthermore, compensation -- including benefits like the percent of monthly premiums covered by their employer for job-based health insurance plans -- is typically less generous for these lowest-earning workers. 

In comparison, those workers in the highest 25 percent of earners in the U.S.pay on average only 30% of their monthly premium costs for job-based health insurance. That translates to about $4,980 annually. Yet workers in the lowest 25 percent of earners in the U.S. pay on average 44 percent of their monthly premium costs for job-based health insurance. And for this demographic, this means $6,324 annually. 

In other words, the family glitch is yet another glaring example of how it is expensive to be poor in the United States. 

What’s the history of the family glitch?

Moves to correct the family glitch began shortly after the ACA was fully implemented in 2014.

That same year, then-Senator Al Franken (D-Minn.)  introduced the Family Coverage Act, which would expand the eligibility test to coverage for entire families. 

The measure faced criticism for the way in which it would increase federal spending. This was because some were concerned about the impact of increasing the number of Americans eligible for premium tax credits on the Marketplace for Obamacare coverage. Policy analysts estimate that it would cost the United States between four and nine billion dollars should this loophole for premium tax credits for Marketplace health plans be closed. 

During her run for president in 2016, Secretary of State Hillary Rodham Clinton also proposed pegging the affordability determination to the coverage cost for an entire family, and not just the individual covered employee.  And a number of bills have been put forth in Congress to implement this same change -- by Sen. Elizabeth Warren (D-Mass) in the Senate, and Rep. Frank Palline (D-N.J.) in the House of Representatives -- though they have yet to pass through their respective legislative bodies. 

What can families do?

Unfortunately, many families impacted by the family glitch are left with few options when it comes to enrolling their families in truly affordable health care. And as a result, many of these families will likely remain uninsured. 

But many families impacted by the family glitch do have one notable course of action for insuring their children, and that is the coverage available to children through both Medicaid and CHIP, the Children’s Health Insurance Program. Without CHIP, the number of children impacted by the family glitch would likely triple, reaching a total of almost 1.9 million newly uninsured children. 

Impacted by the family glitch? Then your first step should be checking to see if you or your dependents might qualify for Medicaid or CHIP. 

Medicaid

Medicaid is a government-funded health insurance program for low-income people. It provides free or low-cost health coverage for eligible low-income adults, children, pregnant women, seniors, and people with disabilities. It is jointly funded by the federal government and the states, and is administered by each state’s Medicaid agency. 

Medicaid programs and eligibility vary from state to state. However, 32 states and the District of Columbia, however, have expanded their Medicaid programs. This means that in these places,  all people within 138 percent of the Federal Poverty Level can access Medicaid coverage. And this is true regardless of other eligibility factors. 

You can apply to see if you or anyone in your family might qualify for Medicaid at any time. Medicaid enrollment is ongoing year-round. This means that you don’t have to wait for the annual Open Enrollment Period for the Marketplace to apply. And you also don't need to qualify for a Special Enrollment Period in order to apply either. 

CHIP (Children’s Health Insurance Program)

The Children's Health Insurance Program (CHIP) became federal law in 1997. Each state administers their own program, but all CHIP programs have a big similarity. They all exist to help ensure coverage for children in certain kinds of low-income families. This is a program for kids whose parents still make too much to qualify for Medicaid, but would otherwise be unable to afford health insurance. 

The majority of CHIP programs cover children in families with combined household incomes up to 200% of the Federal Poverty Level. CHIP is available to all eligible children ages 19 and younger in families with qualifying incomes. Like with Medicaid, you can apply at any time. You do not have to wait for Open Enrollment. And you do not have to qualify for a Special Enrollment Period. You can apply to see if your child may qualify for CHIP coverage at any time. 

Though the details of each CHIP program vary by state, all CHIP programs must cover some basic things. All CHIP plans cover:

• routine check-ups
• immunizations
• primary care visits
• prescriptions
• dental
• vision
• in- and out-patient hospital care
• emergency services including ambulances and emergency room coverage.

And all preventive care, including annual “well child” exams and immunizations, is completely free for CHIP beneficiaries. 

If you or your family members are impacted by the family glitch, you can apply now to see if you or your children might qualify for either Medicaid or CHIP.