Will the family issue fix help my family?
Q: Will solving the family problem help my family?
A: Maybe, but maybe not. As with most aspects of health insurance and health care reform, it’s complicated.
What is the family problem?
Due to the “family issue”, individuals applying for coverage in the exchange/marketplace are not eligible for subsidized premiums if they have access to employer-sponsored health insurance that is considered affordable and provides value. minimum.
But the determination of affordability has always been based solely on the cost of the employee’s coverage, without considering how much the employee will have to pay to cover family members. If the employee’s individual coverage is considered affordable, the entire family is considered ineligible for exchange subsidies, regardless of how much they must pay for family coverage.
The proposed fix
According to the solution proposed by the IRS, the White House has projected that nearly one million people will see their health coverage become more affordable and that 200,000 uninsured people will get coverage. But according to a KFF analysis, there are more than 5 million Americans who fall through the cracks of the ACA’s affordability provisions due to family issue. Obviously, not all of them will have more affordable coverage once the new rules are finalized. But it is certainly a step in the right direction.
The proposed rule change would make premium subsidies newly available to some of the people who are currently affected by the family issue. Employees who are offered affordable health coverage would still not be eligible for premium subsidies in the marketplace. But if offering employer-sponsored coverage for their families is not considered affordable, family members would potentially be eligible for market subsidies. If you want to know more about the proposed rule change, we have a detailed explanation here.
However, the proposed rule would not change the employer mandate rules (which require large employers to provide affordable coverage for full-time employees, but with no affordability requirement for family members). And it wouldn’t change the way premium tax credits are calculated when some family members are covered by a market plan while others are covered by an employer-sponsored plan.
Who will the family problem help?
Let’s look at a few examples to illustrate a situation in which the fix for the family problem will help and another in which it will not.
Tanya and Renee
Tanya and Renee are both 45 years old and have two sons aged 8 and 6. Their household income is $55,000. For 2022 health coverage, this puts them at 208% of the poverty line, which would allow them a solid market subsidy if they did not have an offer of coverage from an employer.
Tanya’s employer provides health coverage, but Renee’s does not. For Tanya to enroll in her employer’s health plan on her own, the monthly payroll deduction is $245. That’s just over 5% of their household income, so Tanya’s coverage offer is considered affordable. (In 2022, the affordability limit is 9.61% of household income.)
Under current rules, that means no household member is eligible for premium subsidies if they were to purchase a market plan instead of taking out employer-sponsored coverage. Unfortunately, the cost to add Renee and the boys to Tanya’s insurance is $1,100/month. So covering the whole family with Tanya’s insurance will cost them $1,345/month, or 29% of their household income.
But the family lives in Iowa, where CHIP is available for children in households with incomes up to 307% of the poverty level. So their sons can have coverage for a maximum total of $40/month (waived during the COVID emergency period). But if Tanya only adds Renee to her employer-sponsored plan, the additional payroll deduction will be $600/month. That puts the total premium for Tanya and Renee at $845/month, which is still over 18% of their household income.
Under current rules, Renee can either sign up for Tanya’s plan — with nearly 20% of their household income going towards health insurance premiums — or she can pay full price for a health plan on the market. (In their region, these packages range from $372/month to $621/month.) Renée is completely taken by the family glitch.
If the new IRS rules were already in effect, Tanya could qualify for a premium subsidy of $377 per month. This would range the price of its market plan options from $0/month to $244/month. Even if she chooses the more expensive option, the total cost of Tanya’s employer-sponsored plan and Renee’s market plan would still be less than $500/month. (Note that subsidies are larger in 2022, following the U.S. bailout. Unless Congress takes action to expand these provisions, subsidies will be lower in 2023.)
Daunte and Natasha
Now consider Daunte and Natasha. They are both 30 years old, have no children and live in Cleveland, Ohio. Daunte’s employer offers him coverage for $200/month. But adding Natasha will bring the total monthly cost to $900.
Natasha is self-employed, so she does not have the ability to purchase employer-sponsored coverage herself. Their total household income is $60,000, so enrolling them both in Daunte’s employer plan will cost 18% of their income.
They have the option of having Natasha signed up for a plan through the Marketplace, with plans ranging in price from $247/month to $586/month.
But even with the fix for the family issue, Natasha won’t be eligible for premium grants in the market.. Indeed, the second-cheapest Silver plan (on which the subsidies are based) has a full price cost of $288/month. This represents approximately 5.8% of their household income, which means that no subsidy is available. (Their income is above 300% of the poverty line, so the price is considered affordable without subsidy; here’s how it works.)
Again, it is important to remember that grant amounts are based on how the total market premiums compare to total Household Income. This is true even if some household members are enrolled in out-of-market coverage.
If Natasha signs up for the second-cheapest Silver plan, their total monthly premiums will be $488. This represents about 10% of their household income. That’s probably still realistic for them, but it’s higher than the percentage of income they’d pay if Daunte didn’t have an employer-sponsored coverage offer and they both signed up. at the market level.
(If Daunte’s employer did not provide coverage, he would be expected to pay 7.1% of his household income for market coverage. A household income of $60,000 is 344 % of poverty line for 2022 coverage. Here’s how their premium subsidy would be calculated. They would qualify for a total subsidy of $221/month, and the second-cheapest Silver plan would cost $355/month for both of them.)
So although Natasha would potentially be eligible for premium subsidies under the proposed new IRS rule (because family coverage under Daunte’s employer plan would not be considered affordable), she would only end up being eligible for no subsidy. Daunte and Natasha’s situation would be the same with or without the family fix. It should be noted, however, that if Natasha was 60 instead of 30, she would again be eligible for grants once the family issue is resolved. Here is an example that illustrates this.
Fixed a family issue: your mileage may vary
These are just two examples. There are as many unique combinations of circumstances as there are people enrolled in market plans. Eligibility and premium subsidy amounts – even without the family issue – depend on location, age, income and family size.
In the newly proposed rules, the IRS noted that for various reasons, “exchange cover coverage can be modest for eligible families.” Some families, like Tanya and Renee, might find the solution to the family problem is putting affordable coverage at their fingertips, and will likely enroll at least some household members in market coverage with newly available financial assistance. Others, like Daunte and Natasha, might find that their eligibility for Market Grants does not change.
And others might be newly eligible for market subsidies, but might still decide to stick with a more expensive employer-sponsored family plan. This could be due to better benefits, a more robust provider network, or greater plan flexibility (e.g., a PPO versus HMOs in the market; this varies by region).
In short, some people will find that they are much better off with the new rules, others will find that their options are unchanged, and others will find that they have new options, but those new options might not be the better suited to their needs.
If you have an employer-sponsored coverage offer that seems unaffordable for your family, you probably know a little about the family problem. The good news is that the issue will likely go away after 2022 ends. But you’ll need to check your specific family details to see how it will affect you.
Open enrollment for 2023 coverage begins in November, and it’s not too early to start thinking about your health insurance options for next year. If you get quotes now, be aware that prices will change for 2023 and subsidies won’t be as strong unless Congress takes action to extend the U.S. bailout subsidy improvements.
But you can ask your employer for a breakdown of premium costs for the employee and family members, and start to get a feel for whether solving the family problem might open up new, affordable options for your family.
Louise Norris is an individual health insurance broker who has written about health insurance and health care reform since 2006. She has written dozens of opinion pieces and educational articles on the Affordable Care Act for healthinsurance.org. His updates on the state’s health care exchange are regularly quoted by media that cover health care reform and by other health insurance experts.