Representative Angie Craig Urges Biden Administration to Fix the Costly “Family Glitch” in the Affordable Care Act

WASHINGTON, DC – This month, U.S. Representative Angie Craig pressed the Biden Administration to take executive action to fix the "family glitch" in the Affordable Care Act's subsidized marketplace coverage – a step that could save 62,000 Minnesotans thousands of dollars annually on their health insurance premiums. In a letter addressed to Treasury Secretary Janet Yellen, Craig highlighted the story of Savage, Minnesota, native Allie Krueger – who was laid off during the COVID-19 public health crisis shortly before learning that she was pregnant with twins. Because of the family glitch, choosing a family plan on the individual marketplace would cost the Kruegers more than 25% of their household income.

"On the campaign trail, President Biden pledged to the American people that, if elected, he would work tirelessly to lower out-of-pocket health care costs for hardworking families," said Representative Craig. "Today, nearly six months after the President was sworn in, we have an opportunity to make good on his promise – by fixing the family glitch that has made health care unaffordable for more than 5 million families nationwide. I urge you to take immediate action to rectify this longstanding oversight – and to provide desperately-needed relief to families like the Kruegers all across this country."

The family glitch originated from a 2013 Internal Revenue Service and Department of Treasury rule, which determined that families are ineligible for financial assistance if a family member is offered "affordable" employer coverage. In 2021, the affordability threshold is 9.83%, which means that an individual qualifies for subsidized marketplace coverage if their employer health insurance premiums exceed 9.83% of household income. However, this threshold does not take into account the cost of covering the rest of the household, which can make coverage prohibitively expensive for many families.

A recent analysis estimated that 5.1 million people nationwide are impacted by the family glitch, including 62,000 Minnesotans. In Minnesota, the average annual premium for an individual is $6,904 and the average annual family premium is $20,751. Under the glitch, a family with a household income of $85,000 would not qualify for premium tax credit assistance even if they paid the average family total, which would amount to more than 24% of their household income.

In her letter to Secretary Yellen, Craig argued that fixing the family glitch would align with President Biden's commitment to lowering out-of-pocket health care costs for the American people. In January, President Biden issued an executive order directing federal agencies to review their internal policies related to the ACA in an effort to bring down costs. By sending this letter, Craig is encouraging Yellen to follow through on the President's order via administrative action as soon as possible.

You can find the full text of the letter copied below.

July 14, 2021

The Honorable Janet Yellen
Secretary
Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, D.C. 20220

Dear Secretary Yellen,

Thank you for your service and leadership on behalf of hardworking American families. I write today about the so-called "family glitch," an issue that affects the health care coverage of millions of those families, including many in my district, and to urge you to issue updated guidance that aligns eligibility for financial assistance with the Affordable Care Act's intent to make health care more affordable.

As you may be aware, the "family glitch" is a longstanding gap in eligibility for the Affordable Care Act's subsidized marketplace coverage that is within the Department of Treasury's power to change. The glitch originated from a 2013 Internal Revenue Service and Department of Treasury rule, which determined that families are ineligible for financial assistance if a family member is offered "affordable" employer coverage, even if the cost of covering the entire family is exorbitant.

The Affordable Care Act limited eligibility for financial assistance to those without access to coverage through other means, such as an employer. However, there is an exception for employer-based coverage that is deemed unaffordable, which the IRS determines based on whether an employee's contribution to their yearly premium exceeds a certain threshold. In 2021, the affordability threshold is 9.83%, which means that an individual qualifies for subsidized marketplace coverage if their employer health insurance premiums exceed 9.83% of household income. However, if the yearly premiums of the employee plus their dependents exceed the affordability threshold, but the employee's self-only contribution remains under 9.83%, then the family is ineligible for marketplace assistance.

A recent analysis estimated that 5.1 million people fall into the family glitch, including 62,000 in my home state of Minnesota. In Minnesota, the average annual premium for an individual is $6,904 and the average annual family premium is $20,751. Under the glitch, a family with a household income of $85,000 would not qualify for premium tax credit assistance even if they paid the average family total, which would amount to more than 24% of their household income.

One of these families, the Kruegers, are constituents of mine. Last year, Allie Krueger was laid off due to COVID-19 and learned shortly thereafter that she was pregnant with twins. In exploring her coverage options, she learned that every single marketplace plan would cost a minimum of $25,000 to cover her growing family. While her husband's employer offers an individual coverage Health Reimbursement Arrangement plan that reimburses a certain monthly amount for a marketplace plan, it does not subsidize coverage for dependents.

His self-contribution comprises about 5% of household income, which technically meets the ACA affordability standard as interpreted by the IRS. However, covering the entire family would account for over 25% of the Krueger's household income. Eliminating the family glitch would save the Kruegers and millions of other families in similar positions thousands of dollars in yearly premiums.

Fixing the family glitch would also align with the administration's commitment to lowering out-of-pocket health care costs. In January, President Biden issued an executive order formally stating that the administration's policy is to protect and strengthen the ACA and ensure that high-quality health care is affordable and accessible for every American. The EO directs agencies to review their internal policies related to the ACA to identify and address any barriers counter to the goal of making health care more affordable. Specifically, the EO calls attention to any "policies or practices that may reduce the affordability of coverage or financial assistance for coverage, including for dependents." The family glitch represents one such barrier that could be addressed through administrative action.

I applaud the Administration's dedication to building an economy that works for all Americans. Families cannot get ahead when they are forced to spend significant portions of their household income on health insurance. While many drivers of health care costs in our country are complex and defy simple solutions, eliminating the family glitch is a straightforward step that would go a long way toward making health care more affordable for millions of families like the Kruegers. I urge you to take swift action and thank you for your consideration.