Health & Fitness

Biden Has Plan to Fix Obamacare’s Family ‘Glitch’: How it Could Affect

  • President Joe Biden announced a new plan to fix an Obamacare loophole that affects millions.
  • It would fix the “family glitch” and make certain tax credits available to more families, who face high premiums for health insurance.
  • The administration estimates about 5 million Americans are impacted by this “glitch.”

More families in America will soon become eligible for tax credits to get affordable health insurance under new changes proposed to the Affordable Care Act (ACA), the White House announced on Tuesday.

The proposed changes would eliminate the “family glitch” — a loophole that has provided affordable insurance coverage to individuals but not their family members.

Currently, a worker qualifies for an ACA plan if they spend over 9.61 percent of their individual income on health insurance, but the costs of their family’s care is not taken into consideration.

If the rule goes into effect, family members will now likely qualify for financial assistance if over 9.61 percent of the family’s household income goes toward health coverage costs.

The proposed regulation would expand coverage to approximately 200,000 uninsured family members and lower the cost of healthcare insurance for about 1 million Americans.

“A step in the right direction as we need our policy makers to move with alacrity and intention to bridge healthcare equity and affordability gaps. There is more more work to be done and more tweaks and bold moves are needed,” Dr. Daniel Fagbuyi, an emergency physician who served as a biodefense expert in the Obama administration, told Healthline.

What is the family glitch?

Under the current ACA structure, an individual is eligible for financial help to buy an ACA plan if they spend over 9.61 percent of their income on health insurance, but costs from family members, including spouses and children, aren’t factored into that spending limit.

Dylan Roby, PhD, Associate Professor of Health, Society and Behavior with the UCI Program in Public Health, says the controversy is in what enrollee premium should be used to calculate whether an affordable offer of insurance is made available.

“The Department of Treasury decided to use self-only coverage as the benchmark for the affordability test, while advocates and some members of the House Democratic caucus felt it should be based on the share of the family premium that an enrollee had to pay,” says Roby.

As a result of this affordability test, if a worker spent less than 9.61 percent of their income on healthcare, the plan was considered affordable — despite the fact that family coverage could get expensive and account for over 9.61 percent of the worker’s income.

“Even if the family premium would cost that worker 25 percent of their wages, the ‘test’ precluded the family members from going into the Exchanges and getting tax credits to help them buy coverage,” Roby said.

Some workers took the individual coverage offered to them, leaving their family members uninsured. Many others paid premiums that accounted for a high percentage of their income in order to cover their family members.

What is changing?

According to the Kaiser Family Foundation, “the family glitch” has caused an estimated 5.1 million people to not qualify for ACA subsidies.

The new regulation would lower premium costs and expand access to affordable healthcare coverage to thousands of American workers and their families, says Fagbuyi.

To access these benefits, families will need to sign up for insurance coverage through their state insurance exchange or healthcare.gov during the next open enrollment period, which begins this fall.

The health insurance exchanges will calculate the tax credits and apply them to the family plan they select based on eligibility criteria.

The bottom line: 

New changes proposed to the Affordable Care Act will expand coverage to thousands of American workers and their families by eliminating “the family glitch” — a loophole that has provided affordable insurance coverage to individuals but not their family members. Under the new ACA plan, families that allocate over 9.61 percent of their household income to coverage will qualify for tax credits. The changes will expand coverage to approximately 200,000 uninsured family members and lower the cost of healthcare insurance for about 1 million Americans.

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