Fix of ‘family glitch’ could add to record 16.3M ACA exchange enrollees

By Ayo Mseka

The Center for Medicare and Medicaid Services announced that a record-breaking16.3 million people enrolled in health insurance through the Affordable Care Act exchanges, and this number could grow further due to a fix in the what is called the "family glitch."

“This could grow even further. It has been a year of unprecedented enrollment growth,” said Sarah Heard, director, legislative and regulatory policy, Blue Cross Blue Shield Association, during a recent webinar hosted by the Employee Benefit Research Institute.

The “family glitch” refers to a 2013 ACA rule that based eligibility for a family’s premium subsidies on whether available employer-sponsored insurance is affordable for the employee only, even if it’s not actually affordable for the whole family.

In 2022, the Biden administration proposed a rule change to address the family glitch, and the IRS finalized it prior to the open enrollment period for 2023 coverage.

Fixing the family glitch makes some families newly eligible for marketplace premium subsidies, so the number of enrollees in marketplace coverage is likely to grow.

While enrollment growth is already exceeding previous numbers, many consumers who are eligible for marketplace subsidies remain enrolled in employer-based coverage, making it difficult to estimate the long-term impact of fixing the family glitch.

Heard focused on the implementation of the fixing of the family glitch, and its impact on enrollment.

Some state applications updated

Healthcare.gov, the federal exchange, and several state exchanges have adjusted qualifying questions in their online applications in light of the fix instituted for the family glitch.

But other state-based exchanges lagged due to late finalization of the rule. Exchanges are targeting outreach to consumers who are deemed potentially newly eligible due to the family glitch fix, but consumer awareness remains low.

Also, consumers are eligible for a special enrollment period to move from employer-based coverage to marketplace coverage when they discover that their employer coverage is no longer affordable under IRS’ new rule.

The IRS expects “take-up” of marketplace coverage to increase by 1 million, which is roughly 20% of the newly eligible population, with an even smaller impact on the uninsured.

Heard said that low-income, healthy families have gained the strongest financial benefit from the family glitch fix because of the generosity of ACA tax credits relative to “bronze premiums.”

Employers may be incentivized to stop contributing to dependent coverage or to even offer it, now that Marketplace coverage is more affordable.Sarah Heard, director, legislative and regulatory policy, Blue Cross Blue Shield Association

In addition, employers may be incentivized to stop contributing to dependent coverage or to even offer it, now that marketplace coverage is more affordable, said Heard.

Over 70% of working adults in the U.S. are covered by a group health insurance plan, making it the predominant source of health insurance coverage.

In light of this, new EBRI research recently found that the ACA led to changes in the composition of health insurance coverage within families. The ACA provides numerous rights and protections that make health coverage fairer and easy to understand, along with subsidies (through premium tax credits and cost-sharing reductions) to make it more affordable.

Eden Volkov, EBRI’s research associate, said a recent EBRI study showed the ACA has reduced differences in health insurance coverage within families by increasing Medicaid and group coverage.

Mothers more likely to be coverage providers

In addition, she said, mothers are more likely to be the providers of family group coverage, so the family glitch resulted in reduced marketplace enrollment among women whose partners had group coverage.

After 2014, the share of families with children who were fully covered by Medicaid increased by 50%, and after 2016, the share that was fully covered by a group policy increased by 9%. After 2014, the share of families without children fully covered by Medicaid increased by 60%.

Also, group policy holding increased by 20% among mothers and fell by 10% among fathers. Rising rates of mothers with full-time employment, and their declining rates of employment in the retail, accommodation and food-service industries, can help explain these trends, Volkov said.

Volkov, explaining the family glitch issue, said the ACA stipulates that Americans with incomes that are between 100% and 400% of the federal poverty level are eligible for premium subsidies for marketplace coverage. However, if an individual had a family member who received “affordable” employee-only coverage from their employer, they were ineligible for the premium subsidy.

Volkov said that the ACA has led to convergence in health plan coverage, but disparities still remain. It is an open question as to how or whether the fixing of the family glitch will affect this variation in health insurance coverage.

Ayo Mseka has more than 30 years of experience reporting on the financial services industry. She formerly served as editor-in-chief of NAIFA’s Advisor Today magazine. Contact her at amseka@INNfeedback.com.

Ayo Mseka has more than 30 years of experience reporting on the financial services industry. She formerly served as editor-in-chief of NAIFA’s Advisor Today magazine. Contact her at amseka@INNfeedback.com.