New Study about the “Family Glitch”

Anyone who’s paid any attention to what we’ve been saying for the past 4+ years has heard us explain, repeatedly, how the design of the subsidies is goinig to create big problems for employers and employees. As we all know, when an employer offers health insurance coverage that provides minimum value, the entire family is blocked from receiving a premium tax credit in the individual market if the cost of employee only coverage does not exceed 9.5% of the entire household income. In other words, the IRS says that if it’s affordble for the employee it’s affordable for the dependents – even though it’s not actually affordable for the dependends since the family premium is much higher and usually not subsidized by the employer.

Well, now what we’ve been saying is official because there’s a new “study” that reaches the same conclusion. Not that anyone needs a study, of course. It’s common sense 1) that families that would otherwise be eligible for a subsidy might seek out employment that does not block them from this government assistance and 2) that employers might realize they’re hurting their employees and drop their group health coverage altogether.

Still, the study, put together by the American Action Forum, can be useful. As we pointed out in a September 8th blog post about another recent study, “people react to headlines, and this is a good headline to get people’s attention.” We concluded the post by suggesting that brokers consider using the article and other recent headlines about the law in their marketing efforts. This latest report is another one you should use because it puts what we’ve been saying in writing, and for some people that’s enough to turn them into believers. So, without further adieu, here are a few excerpts from the study:

“One result of the glitch that we should expect to see even among upper income families is that family members will be forced into two, three, or even four different health insurance plans, all with different benefits, rates, and provider networks. This could be burdensome and confusing, and create continuity of care issues.”

“Another effect of the glitch will be the creation of a disincentive for unemployed or underemployed people to accept better jobs with benefits packages. For example, someone who works only 29 hours a week could completely lose insurance for their entire family by accepting a full time job that offers benefits only to the employee because they would lose subsidy eligibility—if the job offers insurance they could be ineligible for subsidies and may even be worse off financially than they were without the job.”

“Another scenario exists where someone who is unemployed would have to reconsider the benefits of employment if it jeopardizes his or her entire family’s Medicaid eligibility. These scenarios would be made even more dramatic if one of the employee’s family members had any kind of serious or chronic illness that makes being uninsured untenable, and therefore makes Medicaid preferable to employment.”

A final suggestion is that people who are subsidy eligible forgo getting married or consider getting divorced so one family member doesn’t block the rest of the family from health coverage. Here’s a link to the study – take a look and see what you think. It should help you explain to employers why they should consider dropping group health coverage and sending their employees to the individual market.

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