Obamacare has helped more than 8 million Americans get affordable health care coverage to date and introduced an array of new consumer protections like ending discrimination based on your health history. Attention is now shifting to remaining health reform issues like closing the coverage gap in states that didn’t expand Medicaid and bringing down the overall cost of health care.
But there’s a lesser known and urgently needed improvement that is leaving family members without an affordable option for coverage.
This so-called “family glitch” affects people who depend on a spouse’s or parent’s employer sponsored insurance but find that option unaffordable. The glitch? Obamacare’s measure of affordability says it is affordable.
Under the Affordable Care Act, employer-sponsored coverage is deemed affordable if it doesn’t cost more than 9.5% of the employee’s family income. If coverage costs more, then that employee is eligible to receive tax credit subsidies to buy health insurance at healthcare.gov or the state’s marketplace. These tax credits help families quite high up the income stream- a family of four, for example, might qualify with income up to $94,000 a year.
But as IRS interpreted it, the affordability measure only applies to the employee cost, not dependents, meaning that the cost of putting dependents on your employer’s health insurance doesn’t factor into the calculation. So even if the total cost to cover an employee and dependents through employer coverage is more than 9.5% of total family income, but the cost of employee-only coverage is less than 9.5%, that spouse or child can’t simply forego the insurance and seek discounted coverage in the Marketplace. Proportionately, employers make a much smaller contribution to the cost of family coverage, making this especially burdensome for employees.
The glitch leaves families deciding whether to pay the ever increasing amount required to add dependents on at work, buy coverage on their own without any financial assistance, or simply remain uninsured. Up to 500,000 children could be affected by the family glitch.
Yesterday, Senator Franken introduced the Family Coverage Act to close this loophole. The bill changes the definition of affordability to allow family members who are not offered affordable employer-sponsored coverage to access tax credit subsidies in the health insurance marketplace. Consumers Union has advocated for a fix to this glitch since passage of the Affordable Care Act and we applaud Senator Franken for taking this important step.
If passed, the Family Coverage Act will help many thousands of hard working Americans access an affordable coverage option to their spouses and children.
Email mhutson at consumer dot org if you or someone you know fell into this family glitch. We need your help to get this solution passed.