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Joe Biden Fixes Obamacare Problem You Maybe Never Heard Of
Now a million or so Americans can get affordable healthcare. Pretty neat!
The Biden administration has quietly rolled out an improvement in Obamacare to take care of an issue we'd never actually heard about before. As health policy wonk Charles Gaba explains, it's among the "most irritating" ACA problems that "had nothing to do with Republican sabotage." Rather, this was a problem created by the IRS back when the ACA was created in 2013, and it's come to be known as the "family glitch" because it affected how much health insurance on the exchanges would cost for a whole family.
As health reform expert Louise Norris explained in September, the glitch resulted from the way premium subsidies for families were originally calculated. Basically, If an individual is able to get "affordable" insurance for themselves through their employer, then their family members don't qualify for a subsidy if that person buys insurance on the ACA exchanges.
The catch is that while employers are required by law to offer insurance for dependents, they aren't required to pay for that coverage. So somebody who gets "affordable" individual coverage at work might still pay through the nose for work-based insurance for a spouse and/or kids. But because or the "family glitch," that person wouldn't be able to get subsidized coverage for their family members. As Norris 'splains:
In 2022, employer-sponsored coverage is deemed “affordable” if the cost for employee-only coverage would be less than 9.61% of household income. This threshold is indexed annually by the IRS, and will drop to 9.12% in 2023 .[...]
It doesn’t matter how much the employee would have to pay to purchase family coverage. The family members are not eligible for exchange subsidies if the employee could get employer-sponsored coverage just for him or herself , for less than 9.61% of the household’s income in 2022. As long as the employee’s portion of the premium is affordable, the cost for the family couldend up being 25% — or more — of their household incomeand they’d still have no access to premium subsidies. They can either pay full price in the individual market, or pay whatever the employer requires to cover the family on the employer’s plan, despite both options being financially unrealistic [emphasis added — Dok Z].
That glitch, Norris estimated, affected between 2 and 6 million Americans annually.
As Gaba explains, that all appears to be a result of concerns when the ACA was being written that didn't turn out to be much of an issue in practice, stemming from worries about the bill getting a lower total cost score from the Congressional Budget Office. If the ACA made coverage for family members affordable, then oh no, more people might have moved from pricey employer-provided coverage to subsidized plans. Says Gaba,
This is a core philosophical issue: In my view, one of the goals of the ACAshould bemoving people off of employer-sponsored insurance where it's feasible & practical to do so!
Instead, we ended up with a few million families unable to get affordable insurance either through work or on the exchanges, which was a pretty sucky situation. Legislative attempts to fix the family glitch went nowhere, because Republicans wouldn't think of fixing problems when they could instead call for burning Obamacare to the ground. And while a fix for the glitch was included in the Build Back Better bill, that provision wasn't carried over into the Inflation Reduction Act that actually passed earlier this year. Instead, the administration pursued a regulatory fix that will allow people affected by the glitch to access premium tax credits that will cover family members.
The finalized rules were announced Tuesday by Health and Human Services Secretary Xavier Becerra , who said the rule change should allow about a million Americans to either gain coverage for the first time, or to see savings of hundreds of dollars per month for their coverage. In the statement announcing the new rules, Becerra said,
Under President Biden’s leadership, our nation’s uninsured rate is at an all-time low and Affordable Care Act enrollment is at an all-time high. This is not by accident. We are meeting people where they are to tell them about their health care options through unprecedented outreach efforts. And through landmark legislation like the American Rescue Plan and the Inflation Reduction Act, we have offered the lowest ACA premiums rates in history. Our work to expand coverage and lower health care costs for American families never stops.
That's a hell of a good thing, especially when you remember that, after seeing massive reductions in the uninsured rate during the Obama administration, the percentage of Americans with no health coverage rose sharply as Donald Trump did everything he could to screw with the ACA.
As Gaba points out, the estimate that a million people could gain affordable coverage is short of the roughly 5.1 million who could potentially benefit from fixing the "family glitch," for a number of reasons:
After all, according to the Kaiser Family Foundation , over 10 million uninsured Americans arealready eligiblefor subsidized ACA coverage right now who haven't signed up, and another ~7 million are eligible for Medicaid/CHIP but haven't done so for various reasons.
In the case of the Family Glitch population, a lot of those who are currently shut out by it do have healthcare coverage via their employer; they're just paying through the nose for it.Many of those folks will hopefully move to an ACA exchange plan to save thousands of dollars per year, but not all of them will.
And in fact, since the estimate that a million people would benefit first came out in April, when it looked like BBB's extended subsidies for Obamacare didn't have a chance of passing, Gaba says it's possible the total number of families might now be higher, since premium subsidies were included in the Inflation Reduction Act. Maybe it'll be more?
In any case, we're finally back on the right track again — which is worth keeping in mind as Americans prepare to vote. Republicans, let's remember, are already promising to make prescription drugs and health insurance more expensive if they can, by repealing the healthcare provisions in the IRA. Of course, that's only in a bill being pushed by Marco Rubio, so don't go saying Republicans "have a plan" to increase healthcare costs.
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