Study: Fixing ‘family glitch’ would lower premium costs and balance risk pool

Removing barriers that prevent low-income families from obtaining insurance through the Affordable Care Act marketplace would help control costs for consumers and stabilize state exchanges with an influx of younger adults, according to a Health Affairs blog post.

Under current ACA regulations, all members of a family are ineligible for tax subsidies if one family member has access to affordable employer-sponsored coverage, which is calculated based on the cost of an individual-only plan. Also known as the “family glitch,” under this glitch these low-income families can't receive subsidies for marketplace plans even though premiums for family coverage are significantly higher.

A study published in Health Affairs earlier this month tested two new scenarios and found that restructuring the family glitch would cut premium costs from 12 percent of a family’s income to 6.3 percent. Allowing low-income families to purchase insurance through the ACA marketplace would also bring an influx of younger enrollees. With new affordability guidelines, as much 68 percent of new enrollees would be under the age of 35, a group Centers for Medicare and Medicaid Services (CMS) plans to target this fall.

Restructuring family tax subsidies would have the biggest impact on those that make 138 percent of the poverty level, dropping premiums from 20.1 percent of their income to as little as 2.1 percent. But it would come at cost to the government, adding between $3.7 billion and $6.5 billion in costs.

In some instances, state-based waiver programs have offered assistance to families that don’t qualify for federal subsidies, but policy experts have continually cited the family glitch as one of the ACA’s major flaws.

For more:

  • read the Health Affairs Blog post
  • here’s the Health Affairs study