by Eva Marie Stahl, Vice President, Public Policy, Undue Medical Debt
Last week, former President Obama stood with President Biden to announce the administration’s proposal to end the family glitch (getting the band back together). The family glitch is exactly how it sounds — it is a snag in the way affordability is calculated to access ACA Marketplace coverage (dig deeper into the background here). When individuals are offered health coverage through their employer and it’s deemed ‘affordable,’ (self-coverage that is less than 9.5 percent of their total income, indexed annually), they do not have access to ACA subsidies and plans. However, if that individual wants to enroll in family coverage and the coverage is 20 percent of their income (or any amount more than the 9.5 percent), the affordability test remains the same. This leaves workers and their family members at financial risk — the family must absorb the higher cost of family coverage or leave some family members uninsured (many children have access to Medicaid or a state’s Children’s Health Insurance Program (CHIP) but about 3 million do notaccording to Kaiser Family Foundation).
Clearly, there is more at risk than financial wellbeing — forgoing health insurance also affects health outcomes. Without insurance, people forgo well visits, preventive care and care for chronic illness. As you can imagine, unlocking the door to affordable coverage for more people is a welcome change. This long-standing barrier to coverage has affected millions of households. According to researchers, over 5 million people are affected by the family glitch. The change, according to the White House analysis, will help those left uninsured access Marketplace coverage and help people transfer to more affordable plans through the ACA Marketplaces. It is good policy to #ditchtheglitch but what does that have to do with medical debt? Quite a bit.
An impossible choice.
When families fall into the family glitch, many are faced with impossible choices that inevitably can lead to medical debt. In 2021, the average annual health insurance premium was $7,739 for a single person and $22,221 for family coverage, according to KFF. These numbers (gulp) are up significantly over the last decade — 47 percent more and have grown faster than wages or inflation.
Keep in mind that people pay premiums plus cost-sharing (their total out-of-pocket cost). As highlighted by numerous studies, cost-sharing (this generally refers to copays and deductibles) is increasing, placing more financial stress on individuals and families. The Commonwealth Foundation highlights that out-of-pocket expenses have more than doubled for people since 2007 (again, outpacing wages and inflation). Thanks to the enhanced ACA subsidies and Medicaid expansion, many low-income people are better protected from high out-of-pocket costs; however, those who earn above those program’s income thresholds are burdened by the increase in cost-sharing. Changing the family glitch can help.
While the ACA offers protection for people who rely on self-only coverage through an affordability test, it leaves families stranded, forcing them to take bets on the health of family members. Families must choose between health insurance or basic needs: housing, transportation and food. COVID has exacerbated this scenario through employment volatility, particularly for low and middle-income people, layered with the effects of inflation that raise the cost of goods.
Journalist Trudy Lieberman best illustrates the harmful effects of the family glitch in 2016 (see long form):
“So he had accumulated stacks of medical bills resulting from small stuff that kids usually need — stitches to sew up a cut or two, stomach aches, high fevers, sprained ankles. Once he had declared medical bankruptcy, and in 2009 he owed the local hospital about $600 for new services the family had used. By the time I interviewed him, the outlines of the family glitch were in place. Unless his income, then around $44,000 and higher with overtime, dramatically increased, he would have a tough time paying for care. “The single biggest issue in my household is health care,” Devor said at the time.”
It is now 2022, and surely many families have “stacks of medical bills” thanks to the family glitch. People stuck in this situation are either uninsured or are paying a ton for their health coverage both of which make them vulnerable to medical debt. The harms of medical debt are well-documented. Medical debt is destructive and can unravel a families’ financial stability and worsen existing health issues. The cycle of medical debt can lead to emotional distress and anguish, including substance use and mental health issues. Medical debt is pervasive but affects some more than others — it is wrapped up in the legacy of racism that barred access to wealth and health. Low-income people, Black and Hispanic people are more likely to hold medical debt and medical debt is concentrated in rural, southern states where access to Medicaid is limited. Fixing the family glitch is a step in the right direction, taking a small but meaningful step to increase access to affordable coverage.
What is next?
The IRS is accepting comments about the proposed rule to fix the glitch; the deadline is June 6th with a public hearing on June 27th. The IRS will need to change how it reviews the cost of individual coverage and make needed adjustments, paving the way for implementation in 2023.
We can expect opposition to the reinterpretation of the affordability language in the statute but we anticipate that the rule will move forward, swinging open the enrollment doors for millions of people. Take the time to make your voice heard. Read here.