ACA ‘family glitch’ unlikely to be fixed soon

Last week’s elections rout in Congress by Republicans makes it less likely that one of the most frustrating problems with the Affordable Care Act will be fixed any time soon.

Known as the “family glitch,” this bug makes people ineligible for health insurance subsidies as long their spouses can buy affordable insurance through their employers. The ineligibility applies even when family coverage becomes unaffordable, which is often the case with employer-sponsored plans.

According to a policy brief issued Monday by Health Affairs and the Robert Wood Johnson Foundation, the current political climate makes in unlikely the glitch will be fixed even though “experts at every point along the political spectrum agree that the current interpretation unfairly penalizes families.”

The glitch stems from a legal interpretation by the Internal Revenue Service that defines employer-sponsored health insurance to be “affordable” as long as covering the employee costs less than 9.5 percent of household income, the federal affordability limit under the ACA.

Under the IRS interpretation, coverage remains affordable under the law even if adding a spouse and children to the policy exceeds the 9.5 percent limit of household income.

The problem is particularly pronounced for government employees in North Carolina, which offers health coverage without charging monthly premiums. Premium-free coverage is very affordable to the state employees, but adding families to those health plans makes the policies too expensive for many.

N.C. Insurance Commissioner Wayne Goodwin, a Democrat, testified about the problem before Congress in 2012.

“The average salary of North Carolina state employees is about $41,000,” Goodwin said, according to a New York Times story. “And the cost of family coverage in the basic plan is $516 a month, which is not affordable for many state employees.

“Because employee-only coverage for this plan is provided at no cost to the employee,” Goodwin continued, “all family members would be prohibited from obtaining subsidies through the exchange.”

According to Monday’s policy brief, the average U.S. worker contributed $999 a year for employer-sponsored health insurance in 2013, but the cost of insuring an entire family was $4,565.

The federal health law doesn’t require employers to provide truly affordable health insurance to spouses of employees, only to the employees themselves. “The primary concern was the employers would raise the employee’s share of family coverage, driving even more families to opt for premium tax credits,” the policy brief said.

Sen. Al Franken, a Minnesota Democrat, has introduced a bill to fix the “family glitch” but its prospects are not favorable.

Because the ACA requires that most Americans have health insurance, spouses who can’t afford coverage will have to apply for an exemption under federal law so they can avoid paying penalties.