Rectifying the ACA Family Glitch Could Drive ACA Premiums Down

Approximately 5.1 million individuals are caught in the Affordable Care Act’s “family glitch,” according to a recent Kaiser Family Foundation (KFF) analysis.

Under the Affordable Care Act, an employee may qualify for subsidized marketplace coverage if their employer-sponsored health plan’s premium costs more than 9.83 percent of their household income.

However, only the cost of the individual employee’s coverage is taken into account. Dependents are excluded from the calculation.

Thus, if an employee’s premium falls below 9.83 percent of their household income but the cost of adding their dependents puts them above that threshold, the employee nevertheless would not be eligible for lower-cost Affordable Care Act coverage.

The researchers used data from the 2019 Current Population Survey to assess the populations that commonly fall into the family glitch. The use of 2019 data means that the current analysis does not include some of the massive enrollment changes that occurred as a result of the coronavirus pandemic.

Over eight in ten individuals who fell into the family glitch (85 percent) were enrolled through employer-sponsored health plans.

“These families are likely spending far more for health insurance coverage than individuals with similar incomes eligible for financial assistance on the ACA Marketplaces and could spend less on premiums if they could enroll in Marketplace plans and qualify for subsidies,” the analysis shared.

Nearly 10 percent of individuals who fell into the family glitch remained uninsured and the remaining 6 percent opted to directly purchase Affordable Care Act health plans on the individual health insurance market.

A third of the individuals who fell into the gap had incomes of 250 percent to 400 percent of the federal poverty level. Another 46 percent of people in the gap had incomes that ranged from 100 percent to 250 percent of the federal poverty line.

Over half of those who fell into the family glitch were younger than 18 (54 percent) and most were female, particularly in the adult population. Nearly 60 percent of the adults that fell into the family glitch were female.

Notably, some of the states with the highest population trapped in the family glitch—including Texas, Florida, and Georgia—also were states that have seen high levels of Affordable Care Act enrollment during the federal special enrollment period. The federal health insurance marketplace also saw a 7 percent boost in enrollment during open enrollment in 2021.

The American Rescue Plan Act (ARPA) provided temporary coverage for almost all of those in the family glitch category, but at least 1.1 million will return to the family glitch even if Congress establishes the Act more concretely in the future, according to the KFF researchers.

A similar share of individuals who fall into the family glitch reported being in excellent, very good, or good health—over nine in ten individuals who were dependents in employer-sponsored health plans, those who had purchased an Affordable Care Act plan directly, and those who remained uninsured.

This means that introducing these healthy individuals into the marketplaces could drive premium costs down, the KFF researchers argued.

“The exact number of people who would benefit from a fix to the family glitch will depend in part on how such a policy change is made and other potential changes to the ACA,” the researchers qualified.

The analysis also noted that costs to the federal government would necessarily increase.

“A fix to the family glitch would increase government spending, with the amount depending on how many of those who fall in the glitch choose to enroll through the Marketplaces,” the analysis explained.

“A Congressional Budget Office (CBO) score of a bill that passed in the U.S. House of Representatives estimates a fix to the family glitch would increase federal spending by $45 billion over 10 years. This estimate does not include the temporarily expanded subsidies under ARPA.”