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Vague language within Obamacare will result in nearly 2 million Americans being unable to afford health insurance, according to a new report by the American Action Forum (AAF).
The so-called “family glitch” occurs when an individual is offered health insurance through their employer but the plan is not extended to the rest of their family. Due to the Internal Revenue Service’s (IRS) interpretation of the law, other immediate family members are not eligible to receive subsidies for insurance, even if their income is below the federal poverty level.
The AAF has estimated that 1.93 million Americans will be affected by the glitch, making it “practically impossible” for them to obtain affordable health care coverage.
“The ‘Family Glitch,’ as it has become known, is an odd and particularly problematic side-effect of the Affordable Care Act (ACA),” the report said. “Since several provisions of the law are rather ambiguous, they unfortunately combine to create a perfect storm where obtaining affordable health insurance is practically impossible.”
Under Obamacare, Americans below 138 percent of the poverty line are eligible for Medicaid coverage, and anyone up to 400 percent of the poverty level can also receive subsidies to help pay for insurance purchased through the health exchange.
However, this provision does not apply to families who have been offered employer-sponsored insurance (ESI), even if it is only offered to the individual employee.
“This provision of the law lacks clarity on the point of whether or not the coverage offered must be family coverage, or whether individual coverage is sufficient,” the AAF said. “The Internal Revenue Service (IRS), through rule making, has interpreted the statute as only requiring an employer to offer individual coverage, and pegged affordability at 9.5 percent of the employee’s household income. The glitch occurs when one (or both) spouses are offered affordable individual ESI under the IRS definition, but family coverage is either not offered or is unaffordable.”
“Spouses and children of an employee offered ESI could be unable to afford the employer plan, but because it is offered to one family member, the rest are made ineligible for subsidies in the Exchanges,” the report added.
Using census data from April 2013, AAF estimated 947,000 spouses and 984,000 children could fall into this category, and left uninsured. The glitch will affect up to 428,000 women and 519,000 adult men.
If Children’s Health Insurance Program (CHIP) funding expires, 2.28 million children would also be affected, according to AAF.
The provision could have unintended consequences for employees in the middle class, forcing them to not accept higher paying jobs out of fear of losing subsidy eligibility to pay for their family’s health insurance.
The AAF also said the glitch could result in families choosing to separate or divorce, in order to keep subsidies.
“The family glitch is just one of many problems that will inevitably arise from the ACA's complete restructuring of the health care system,” the report concluded. “It is an unintended consequence that creates hardship and perverse incentives for American families struggling to obtain affordable health insurance. This year alone 1.93 million Americans will be impacted by this glitch and that number will likely increase as the employer mandate goes into effect.”