A foundational principle of the Patient Protection and Affordable Care Act is to preserve the private insurance market and the means by which most Americans access it – through employer-sponsored health plans. But employment-based coverage isn’t what it used to be. Responding to rising premiums and the general sharp upward trend in health care costs over the last decade or so, employers have shifted a growing share of premiums and out of pocket costs to employees. Some, particularly smaller employers, have opted not to sponsor coverage for an employee’s dependents or only do so provided the employee pays a surcharge to cover spouses and children. According to a report (.pdf) issued in April 2013 by the State Health Access Data Assistance Center and the Robert Wood Johnson Foundation, individuals enrolled as dependents in employer-sponsored health plans declined from 35.4 percent in 1999/2000 to 30.6 percent in 2010/2011.
While the Affordable Care Act assumes most Americans will continue to obtain health coverage through employment, the declining employer sponsorship of dependent coverage has created coverage gap the law does not address known as the “family glitch” or “kid glitch.” For employees, the Affordable Care Act allows them to purchase subsidized coverage in the health benefit exchange marketplace if they would have to budget more than 9.5 percent of their income toward their share of the premium. If an employee is offered coverage below that limit but cannot afford to pay an additional surcharge to cover his or her dependents, those dependents cannot obtain subsidized individual coverage in the state benefit exchange marketplace because the employee is offered what the law deems as affordable coverage. The dependent surcharges don’t count toward the affordability test.
As 2014 unfolds and people continue to attempt to enroll in coverage in the exchange marketplace, there will likely be more media accounts reporting on families such as this one in Oregon that fall into the “family glitch” coverage gap.
Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email