Biden administration finalizes rule to get rid of ACA's 'family glitch'

By Robert King / October 11, 2022

The Biden administration finalized on Tuesday a rule that fixes a glitch in the Affordable Care Act that can inadvertently raise insurance costs on certain families. 

The Treasury Department released a final rule on Tuesday that targets a lingering issue that has led some low-income families to not receive premium assistance. The new rule will go into effect next month. 

“About one million Americans will either gain coverage or see their insurance become more affordable as a result of the new rule,” said President Joe Biden in a statement Tuesday. “It builds on our progress so far, which has brought the rate of uninsured Americans to a record-low eight percent. 

The rule doesn’t change significantly from the proposal issued in April. The regulation focuses on a provision of the ACA that entitles low-income Americans to get premium assistance on the marketplace if their employer-sponsored insurance doesn’t reach a certain threshold. 

An employee would qualify for such assistance if they must spend more than 9.5% of their household income on premiums. However, a glitch in the regulation meant that the threshold only affects the individual’s health plan and not the premium for dependents. While the individual and family can meet the 9.5% threshold, they would only get premium assistance for just the individual’s healthcare costs.

An analysis from the Kaiser Family Foundation shows that 5.1 million people are affected by this glitch, with most of them being women and children. 

The final rule creates a separate minimum value threshold for an entire family. The threshold that triggers assistance is when a plan’s contribution does not exceed 9.5% of the total household and family income. 

Comments on the rule were largely supportive, but some questioned whether the administration had the authority to make the changes. But the Treasury Department and Internal Revenue Service, which released the rule, argued in the final text that the regulations are consistent with the ACA’s goal of providing “access to affordable, quality healthcare for all Americans.”

It argued that under the prior system some family members of employees couldn’t get any premium assistance for exchange coverage “even if their only offer of employer coverage was a family plan with exorbitant premiums (about 16% of income, on average),” the rule said.

Several studies have estimated that between 600,000 to 2.3 million individuals would be newly eligible to get insurance coverage on the ACA exchanges.

“Families with incomes below 250% of the federal poverty level and families with employees who work for small employers were expected to benefit the most,” the regulation said. 

Several patient advocacy groups cheered the final rule, noting that it opens up new affordable coverage options.

“Unjustly and unfairly penalizing low-income workers and their families by creating barriers to affordable coverage they need to get and stay healthy is not a ‘glitch,’” said Families USA Executive Director Frederick Isasi in a statement. “It is an assault on what the Affordable Care Act’s authors intended.”