The Biden administration on Tuesday announced a regulatory solution that will make health insurance more affordable for many people with high-cost work-related insurance.
The final rule issued by the Treasury Department addresses the “family blunder” that has for years made the Affordable Care Act marketplace’s financial assistance inaccessible to many people who need it because their employer-sponsored health insurance is prohibitively expensive. After the rule change, millions of people with expensive employer insurance can now access the marketplace subsidies.
The Treasury Department is finalizing the resolution to allow the Affordable Care Act “to work as Congress intended, reducing the cost of coverage for families across the country,” President Joe Biden said in a statement Tuesday.
Individuals who sign up for Marketplace Coverage 2023 during the open registration period beginning November 1 will be able to use the solution.
The family error stems from the ACA approach to measuring affordability of health plans. By law, people are not eligible for financial help in the marketplace if they have access to employer insurance that is deemed affordable. Previously, employer coverage was considered affordable when coverage for the employee alone fell below a certain threshold – 9.6% of family income for 2022 – regardless of the cost of protecting other family members under that plan. Under the rule change, affordability for family members will be based on the cost of coverage for the worker and those family members – not the worker alone.
According to the Kaiser Family Foundation, around 5.1 million people – most of them children – are affected by the family breakdown. But not all of them will benefit from the regulatory solution, said Cynthia Cox, vice president at KFF. If employee-only insurance is below the affordability threshold but the cost of family insurance exceeds it, for example, the employee could remain in the employer plan while the spouse and children enroll in a marketplace plan — exposing the family to two premium rates and deductibles.
The federal government estimates the rule change will help about 1 million people either get coverage or get more affordable insurance.
Proponents have been urging the federal government to address the family breakdown for at least 10 years. President Biden announced the proposal to fix the bug at a White House event in April alongside former President Barack Obama. The Treasury received nearly 3,900 comments on the proposed rules, and many of those comments included personal stories from family members who are uninsured when employer insurance is prohibitively expensive and market premium tax credits are not available, the Treasury said in its final rule. A couple, the Treasury Department found, testified to a state lawmaker that they divorced so the husband could remain eligible for market subsidies when the new employer offered his wife family insurance that cost more than half of the husband’s annual income .
In particular, people with employer cover from smaller companies can benefit from the rule change. According to the Kaiser Family Foundation, nearly 30% of insured workers at companies with fewer than 200 employees were required to contribute at least $10,000 for family insurance in 2021, compared to 5% of insured workers at larger companies.
According to the KFF, around 2.8 million people affected by the family breakdown are children under the age of 18. These children are not eligible for the Child Health Insurance program, the state program that covers children in many low-income families. If children are uninsured, they may miss annual visits to healthy children to monitor developmental milestones, as well as immunizations, mental health services and other critical care, said Elaine Dalpiaz, vice president of health systems and strategic partnerships at First Focus on Children. a non-partisan children’s advocacy organization. The rule change, she said, “will cover more children, which is very important given both the challenges in the economy and because of COVID, which is still a factor.”