Fix the ACA family coverage “glitch”

August 18, 2015 by

ACAIn the two years since the Affordable Care Act (ACA) took effect, more Americans have health insurance than ever before. In 2013, before the law took effect, there were 14 states with over 20 percent of their residents uninsured. Now Texas is the only state with more than 20 percent uninsured, but even Texas reduced the number of uninsured by nearly 7 percent. Over the same period, the number of uninsured in Arkansas and Kentucky decreased from over 20 percent to less than 10 percent.

While celebrating these successes, we should also take a step back and recognize that it is vital that Congress continue improving the law. First and foremost, we need to address the so called “family glitch”. You may not have heard of it, but it’s leaving between two and four million Americans uninsured, including about 500,000 children.

So here’s the problem: the ACA provides Americans with access to reasonably priced coverage through subsidies for plans purchased in the Health Insurance Marketplace. Workers who have access to an “affordable” plan through their jobs lose access to these subsidies. In many cases this makes sense, but it relies on the Internal Revenue Service’s definition of what “affordable” means. And the IRS messed up.

The IRS decided that an entire family has access to affordable coverage without a subsidy if one family member has coverage that costs less than 9.5 percent of the family’s household income. The cost to cover the entire family is not considered.

This is a huge problem because the average family plan costs over four times as much as a self-only plan. This means there are many low- to moderate-income families who can’t afford the family plan offered through an employer, but because the employedfamily member can afford a self-only plan, everyone else loses eligibility for  marketplace subsidies. So a family of three or more is left without affordable coverage for all but one member.

Some parents are forced to leave their children uncovered. While children in low-income families are eligible for federal children’s health insurance (CHIP) coverage, many parents are going without coverage.

To make matters worse, the decision by states like Maine, which did not accept federal funds to expand Medicaid, disproportionately affects such families. Denied access to Medicaid, these low-earning Mainers must rely on their employers or the marketplace and more often caught in the “glitch”.

The IRS’s interpretation of the law is in clear contradiction with the goal of the ACA: to make health care more affordable. There is no reason for it, and as Bill Clinton put it, it’s just “bad policy”.

Senator Al Franken from Minnesota recently authored a bill that would fix the problem and change the definition of affordable so that it’s based on family plans. Congress should move ahead to fix this glitch and realize the ACA’s clear objective to provide these families with affordable coverage.

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