Now that the Affordable Care Act is in full swing, many Californians are feeling tremendous relief that they have affordable health coverage, some for the first time.
But what Obamacare giveth, it also taketh away.
In July, I wrote about a little-known provision of the new law that could leave some husbands, wives and children of insured workers without affordable health care options.
It’s alternately known as Obamacare’s “kid,” “family” or “affordability” glitch.
Last summer, the glitch was theoretical, something that could happen. Now it’s a reality that is causing pain for a number of California families.
What does their reality look like?
It looks like the Tipton family of Merced – Laura, Mike and their 7-year-old son Ty – who were denied tax credits from the state’s health insurance exchange, Covered California, because of the glitch.
As a result, their most “affordable” option costs them $565 per month in premiums, with each member of the family belonging to a different health plan.
Farther south, in Yorba Linda, reality has hit the Yates family, which soon will be welcoming its second child.
They can’t get tax credits, either, which means they’re currently paying $675 per month in premiums. Here, too, each member of the family belongs to a different health plan.
“The law was supposed to help people, but it’s actually hurting us,” says Amy Yates, 33, who is due in May. “Our situation is worse than it was last year with all these out-of-pocket costs going up and the plans are getting worse.”
So what is this glitch that has hurt families who thought Obamacare would help them?
If you have health insurance through an employer or a loved-one’s employer, but don’t like it or can’t afford it, Obamacare allows you to drop that coverage and shop for plans on your own, either through Covered California or on the private insurance market.
The federal government offers sliding-scale tax credits to individuals and families who earn between 138 percent and 400 percent of the federal poverty level. If you already have job-based insurance, however, you have to pass a second test to qualify for tax credits: Your employer’s insurance also needs to be considered “ unaffordable.”
The law’s definition of “unaffordable” is complicated, so I’m going to focus on one measure: Employer-based insurance is considered unaffordable when the employee’s individual premium is more than 9.5 percent of annual household income.
Please note the emphasis above. It is important.
They mean that if premium costs for the employee alone are less than 9.5 percent of household income, then that employee and his or her family members are ineligible for tax credits. Not even if the cost of family coverage exceeds 9.5 percent of household income.
That’s the glitch, and it affects more people than you might think. Employers often offer “affordable” insurance to their employees, but sometimes make it outrageously expensive to add spouses, children and other dependents to the plans.
In the case of the Tipton family, work-based coverage for Mike Tipton, 46, is $159 per month, less than 9.5 percent of the household’s income and therefore “affordable” under Obamacare. But adding his wife and son to the plan would cost an additional $1,048 per month, Laura Tipton says, which means the family would spend more than 25 percent of household income on premiums.
It doesn’t matter. They don’t qualify for tax credits.
If Laura and Mike weren’t married, on the other hand, Laura and possibly Ty would be eligible for the credits.
“We should be entitled to the same benefits as an unmarried family,” Laura Tipton says. “My husband, who works hard to provide for his family, is being penalized for being responsible.”
The Yates family is in a similar predicament.
Andrew Yates, 31, pays $88 per month for his job-based insurance to cover himself, which the law deems “affordable.” Adding his wife would bring the cost to $530 per month for both, or about 15 percent of annual household income.
“That’s ridiculous. That’s not affordable,” says Amy Yates.
She may be right. But there isn’t much hope for a fix.
Groups such as First Focus, which advocates for children and families, have protested the glitch and want lawmakers to amend the law.
But in a Congress where some members still talk of repealing Obamacare, there’s little chance of compromise, even over a piece of the law that many consider unfair.
“That’s been the biggest barrier, that both sides aren’t even wanting to have the conversation about fixing it,” says Bruce Lesley, president of First Focus.
It’s not even clear how to fix the glitch. If you allow more people to receive tax credits, it costs the government that much more to provide them.
At that point, the question becomes whether fixing the glitch would be affordable for the government.
“The fact of the matter is that sort of fix would cost a ton of money,” Lesley says.
So where does that leave families who get stuck in the glitch? It leaves them stuck.
As I’ve written many times, there’s no question that Obamacare helps a lot of people by making health insurance accessible and affordable to them. They qualify for great plans at great prices and aren’t denied coverage because of their medical histories.
But it doesn’t help everyone. There are many others who pay more for health insurance now, who have had their health plans – which they liked – canceled, or who can’t see their doctor anymore.
The families who fall into the kid glitch belong to this group, perhaps victims of unintended consequence.
“When the new plans rolled out, I was really excited. I thought this was going to help us,” Amy Yates says. “I’m just disappointed that it’s only helping some people.”