June 10, 2022, 2:00 p.m. News Staff — The Academy this month called for swift finalization of a proposed rule that would benefit millions of patients by clarifying the health insurance affordability provisions of the Patient Protection and Affordable Care Act.
“This proposed rule would address the family glitch eligibility barrier for premium tax credits and improve affordable health insurance coverage,” said the AAFP’s June 2 letter. “The AAFP strongly supports this proposed interpretation.”
The letter — addressed to IRS Commissioner Charles Rettig and signed by AAFP Board Chair Ada Stewart, M.D., of Columbia, S.C. — was sent in response to the proposed rule “Affordability of Employer Coverage for Family Members of Employees,” published April 7 in the Federal Register.
The family glitch is rooted in the IRS’ narrow 2013 interpretation of how the ACA defines an employer’s offer of “affordable” coverage and who is eligible to receive premium tax credits when buying health insurance from ACA marketplaces. That definition considers family coverage affordable if its cost for the employee alone is no more than 9.5% of household income (adjusted for inflation); it does not factor coverage for an employee’s family members into that 9.5%. The resulting loophole affects some 5 million Americans, more than half of them children, who must cover unaffordable insurance premiums out of pocket or remain uninsured. About 450,000 people fall into the latter category.
The Academy has been among the numerous critics of this interpretation, saying it’s out of line with the ACA’s text and intent and is instead a barrier to the AAFP’s policy goal of high-quality, affordable health care coverage for all.
The proposed rule would allow family members of an employee to receive premium subsidies if employer-offered family coverage costs more than 9.61% of household income (9.5%, adjusted for current inflation). It also would mandate that, to qualify as “minimum value coverage,” employer-sponsored plans must meet 60% of the beneficiaries’ health care costs and provide “substantial coverage of physician services and inpatient hospital services” for employees and their relatives. Under that provision, when employer coverage falls short of the 60% standard, employees and their families would be eligible for premium tax credits toward marketplace-purchased coverage even when an employer’s offer of coverage met the affordability standard.
“The AAFP supports the additional requirement that plans must provide substantial coverage of inpatient hospital services and physician services for the entire family,” the letter said of this adjusted definition of the minimum value requirement for employer plans. “If finalized as proposed, this clarification will ensure that related individuals with employer-based coverage also have affordable, comprehensive coverage.”
The Academy pressed the urgency of these adjustments by pointing out that 29% of small business employees pay at least $10,000 in premiums to obtain family coverage, while almost half of the people caught in the family glitch have incomes of less than 250% of the federal poverty level and another 33% report incomes between 250% and 400% of the FPL.
“Fixing the family glitch would provide greater premium savings for those families with incomes under 200% of FPL,” the Academy said, figuring the savings at an average of $580 per person. "Low-income families would also see significant savings in out-of-pocket costs, as a result of cost-sharing subsidies available to families with income under 250% of FPL.
“Improving affordability of health coverage is critically important to improving health outcomes,” the AAFP continued. “In fact, 46% of insured adults report difficulty affording their out-of-pocket costs, and over a quarter (27%) report difficulty affording their deductible, which leads to delayed or forgone care. Moreover, an estimated 450,000 individuals are uninsured due to unaffordable insurance costs because of the family glitch. This proposed rule would ensure approximately 200,000 of those uninsured individuals become insured with affordable, comprehensive coverage.
“This would also improve access to coverage for about 90,000 children who would be enrolled in Medicaid or CHIP when their parents sought marketplace insurance, thanks to the ‘no wrong door’ approach that would automatically identify their eligibility,” the letter added.
The proposed rule follows a public call by President Joe Biden to enact the fix, which he said would be “the most significant administrative action to improve implementation of the ACA since its enactment.”
The Democrats who chair Congress’ IRS oversight committees last month indicated support for the rule, calling it consistent with congressional intent. However, the Republican ranking members of those committees told the administration that the rule as proposed was “troubling and illegal.”
The IRS has scheduled a hearing on the proposed rule for June 27.