President Biden Moves to Fix a ‘Glitch’ in the Affordable Care Act

President Joe Biden announced Tuesday that his administration is proposing a tweak to the Affordable Care Act to make health insurance more affordable for millions of Americans.

The shift would fix what is known as the “family glitch,” a loophole that has prohibited more than 5 million people from accessing subsidized health plans on the ACA marketplaces even if they don’t actually have other affordable options.

“It’s a huge deal,” says Katie Keith, director of the Health Policy and the Law Initiative at Georgetown Law’s O’Neill Institute. “It’s one of the biggest things the Biden Administration can do on its own to expand coverage.”
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The fix, which the Administration can make on its own without relying on the Democrats’ slim majorities in Congress, represents Biden’s latest effort to use the ACA as a vehicle to lower costs and improve coverage for Americans. Biden announced the new change at an event with former President Barack Obama, who signed the ACA into law 12 years ago and was making his first visit to the White House since leaving office in 2017. Biden’s other health care agenda items remain stalled in Congress.

The Treasury Department will propose the new rule; it is expected to go into effect for 2023, a senior Biden Administration official told reporters Monday. That timing could be ideal for Democrats hoping to tout health care achievements before the midterms this fall, when Americans will be preparing for the next open enrollment period.

What is the ‘family glitch’?

The family glitch has to do with who can buy subsidized plans on the ACA marketplaces. Most people can only buy health insurance on the ACA marketplace if they do not have access to a health plan through their employer. The law does allow people to buy ACA plans if the premiums through their job’s health plan would amount to about 10% or more of their household income.

But when Obama administration officials wrote the rules implementing the ACA, they calculated eligibility for subsidized ACA plans based on the premiums for an individual employer policy, not one that includes an employee’s spouse or children. Individual policies are usually much cheaper than family coverage. So this has meant that there are cases in which a family’s employer coverage costs far more than 10% of their income but the family members can’t buy a cheaper marketplace plan because the individual employer policy costs less.

“Once today’s proposed rule is finalized, starting next year working families in America will get the help they need to afford full family coverage,” Biden said on Tuesday.

About 5.1 million people across the country fall into the family glitch, according to an estimate by the nonpartisan Kaiser Family Foundation last year. Most of these are women and children. Not all of these people would choose to switch their plans immediately, but the White House estimates that 1 million people would move to cheaper ACA health plans if the rule takes effect, and 200,000 uninsured Americans would gain comprehensive coverage.

Another executive order

Biden and Obama used the event Tuesday to promote how the ACA has helped Americans gain insurance coverage over the years, as well as the steps the Biden Administration has taken to strengthen the law. Both men emphasized the need to push back on Republican efforts to undermine the law.

“I know how discouraged people can get with Washington,” Obama said during Tuesday’s event. “But what the Affordable Care Act shows is that if you are driven by the core idea that together we can improve the lives of this generation and the next, and if you’re persistent, if you stay with it, you’re willing to work through the obstacles and the criticism, and continually improve where you fall short, you can make America better.”

Biden also signed an executive order on Tuesday that piggy-backs on a 2021 order directing federal agencies to take actions to strengthen the ACA and Medicaid. This order directs agencies to “continue doing everything in their power to expand affordable, quality health coverage.”

Democrats still hope to expand health coverage through the Build Back Better Act, which would extend expanded subsidies for ACA health plans and make free or cheap marketplace plans available for low-income Americans in states that have not expanded Medicaid. The legislation, which has been stalled for months, would also lower prescription drug prices by allowing Medicare to negotiate with pharmaceutical companies.

It’s unclear whether the Biden Administration’s signature legislation will clear moderate Senate Democrats’ objections. For now, Biden and Obama touted the latest ACA change as the next step forward.