The following comments were submitted by Richard Besser, MD, Robert Wood Johnson Foundation (RWJF) President and CEO, on the Biden Harris Administration proposed rule to fix "family glitch" and lower health care costs.
The Robert Wood Johnson Foundation (RWJF) is the nation’s largest philanthropy dedicated solely to health. In partnership with others, we are working to develop a Culture of Health rooted in equity that provides every individual with a fair and just opportunity to thrive, no matter who they are, where they live, or how much money they have. Structural barriers to health, including racism, powerlessness, and other forms of discrimination, greatly limit prospects for good health for all in America.
RWJF is committed to creating a society in which the public and private sectors ensure everyone has comprehensive and affordable health insurance. In support of that goal, we hope to advance the idea that healthcare is a human right, essential to a just society, and foster an equitable and accountable healthcare system and economic inclusion for all families. Therefore, we are commenting in support of the proposed rule change by the IRS and the Treasury Department to amend a feature of the Affordable Care Act that prohibits some families from accessing affordable coverage.1 This feature is commonly known as the “family glitch.”
Under current federal rules, families are ineligible for Marketplace premium tax credits (PTCs) if a family member has an affordable offer of worker-only coverage from an employer, even if family coverage from that employer is unaffordable. To be considered affordable, worker contributions may not exceed 9.6 percent of family income. An employer may offer coverage that meets the affordability threshold for the worker but does not meet the affordability threshold for the family. But under current regulations, only the affordability threshold for the individual may be considered. The worker may access affordable employer coverage, but the affected family members must purchase the unaffordable family coverage or go without insurance. They are not able to access premium tax credits in the ACA Marketplace.
An example was recently highlighted on a podcast, in which a newly married couple in Maine found that they were caught in the glitch. When the wife tried to add her husband to her employer plan, she found that the premiums for family coverage would cost more than 20 percent of their income, far above the affordability threshold. Yet the husband was no longer eligible to remain on his subsidized ACA plan and had to switch to an unsubsidized plan. This increased his monthly premiums from $40 to more than $400 per month. Desperate to reduce their spending on health insurance, they got divorced. Immediately after doing so, the husband’s Marketplace premiums went back to $40 per month.2
Recently, the Treasury Department and the IRS proposed a rule change which would separate the affordability test for workers and their family members by newly considering the affordability of family coverage. In the event that job-based family coverage is unaffordable, family members would be able to access premium tax credits in the marketplace, while the employee can access their affordable offer of single coverage.
RWJF supports this proposed change:
The proposed rule change is good policy and consistent with the goals of the ACA, which sought to assure that affordable health insurance would be available to every American. The law did so by providing PTCs to low- and middle-income families, including those without access to affordable, job-based coverage. The current family glitch interpretation conflicts with that goal by preventing a population of family members that do not have access to an affordable offer of job-based coverage from receiving PTCs through the marketplace.
The population affected by the family glitch is sizable. The Urban Institute estimates that nearly five million people are affected by the family glitch. Currently nearly ninety percent of this group are paying for unaffordable health insurance, and most of the rest are uninsured.3 These costs are significant: a prior study by the Urban Institute found that families affected by the family glitch faced premiums that amounted to, on average, 15.8 percent of household income.4 This amount was even greater for low-income families: for instance, those whose income is below 138 percent of the federal poverty level (FPL) faced premiums that amounted to, on average, more than 22 percent of household income.5 These costs are for premiums alone and do not reflect deductibles, cost sharing, or other out-of-pocket expenses that families additionally pay if they need healthcare.
Nearly half (46%) of family members that would benefit from this rule change are estimated to have incomes at or below 250 percent of the federal poverty level (FPL). Approximately half are children.6 Among adults who fall in the family glitch, most are women.
Savings for those families who would switch from employer coverage to the Marketplace would be considerable, particularly for lower income families. The Urban Institute estimates that families that switch would save an estimated $400 per person in premiums on average per year. Lower income families would save more: families with incomes below 200 percent of the federal poverty level (FPL) would save an estimated $580 per person annually.7 Savings for families would be even greater if Congress extends the temporary enhanced premium tax credits under the American Rescue Plan Act beyond their expiration date of December 31, 2022.8
Since the proposed rule change will not apply to the employee, it is projected that it would have little effect on the employer market. It is estimated that enrollment in employer insurance would decline by only -.2 percent with a “negligible” effect on total employer spending. Meanwhile, the proposed change is estimated to reduce the uninsured population by nearly 200,000.9
The proposed rule will expand access by allowing families, especially low-income families, to choose the plan that works best for them. Not all those who would become eligible for premium tax credits are expected to transition away from job-based family coverage and enroll in marketplace coverage. Families might choose not to because of the cost or complexity of maintaining multiple policies for different members of a single family—or because they would not be aware of this new option. But, even if not all who are eligible take advantage of this option, the proposed change would let families have a choice instead of locking them into unaffordable job-based coverage.
Creating more pathways to affordable coverage has never been more important. Given the inflationary climate and the anticipated increase in health insurance premiums, the number of families who may struggle with unaffordable coverage is projected to rise. Premiums for family coverage are often considerably higher than for single coverage.10 Currently approximately 12 percent of families face a contribution of $10,000 for family coverage. As premium costs increase, this share will likely grow.11 Making this policy change in advance of the 2023 plan year will maximize the potential benefit to families.
Additionally, we urge the Administration to consider developing an implementation strategy to ensure that those who are affected by this proposed rule change are aware of their opportunity to potentially save money by switching to the Marketplace and can easily assess their options. This may involve some shared responsibility by Marketplaces and employers. Such a strategy will increase the impact of this important change.
11. Gary Claxton, Larry Levitt, and Matthew Rae. Many workers, particularly at small firms, face high premiums to enroll in family coverage, leaving many in the “family glitch.” Kaiser Family Foundation. April 2022.
About the Robert Wood Johnson Foundation
The Robert Wood Johnson Foundation (RWJF) is committed to improving health and health equity in the United States. In partnership with others, we are working to develop a Culture of Health rooted in equity that provides every individual with a fair and just opportunity to thrive, no matter who they are, where they live, or how much money they have. For more information, visit www.rwjf.org. Follow the Foundation on Twitter atwww.rwjf.org/twitter or on Facebook at www.rwjf.org/facebook.