The Affordable Care Act democratized health insurance for untold numbers of middle and low-income workers. But at the same time, the landmark legislation introduced a world of “glitches.”
The Affordable Care Act Creates New Problems
Julie G., a single mom of two kids, had a full-time job at a mid-sized company in Austin, Texas. The business offered a range of benefits, including health insurance, which meant Julie was extraordinarily lucky. Health insurance in the US is notoriously expensive.
Before the Patient Protection and Affordable Care Act (ACA), pre-existing conditions limited health insurance options for thousands of people. If you couldn’t obtain affordable insurance through an employer, Americans were left to fend for themselves and their families in the world of private health insurance. There, the cost of an individual or family plan was astronomical.
Although the ACA solved a lot of problems, it still left a slew of complications and obstacles on the table — many of which hit middle-income parents like Julie particularly hard. One issue, known as the “family glitch,” is discussed in chapter 5 of the book, Decoding Health Insurance. Here’s the gist: Julie’s children were eligible for health insurance through their mom’s employer, but the company was not obligated to help pay premium costs.
Since the single mom was already struggling to make ends meet, Julie turned to the ACA’s Health Insurance Marketplace (aka, Obamacare) for affordable health coverage for her kids. However, that move triggered a chain of events. It turns out that enrolling her dependents in a federally-subsidized health insurance plan left Julie unemployed and uninsured. As a result, she now relies on healthcare services that require her to reside in one of the most expensive counties in the country.
The Family Glitch
The way it works is that companies with 50 or more employees are required to offer health insurance to qualified, full-time employees and their dependents. However, part of the “glitch” is that they’re not obligated to help cover the cost.
An insurance plan is considered affordable if an employee’s share of the premiums is under a certain percentage (less than 10%) of his or her modified adjusted gross income. (That amount can change annually based on inflation and other factors.) But, that is only for the employee’s coverage and does not include the cost of covering dependents. According to Healthinsurance.org, “Somewhere between two million and six million people are impacted by the family glitch.”
For businesses, the glitch can result in a financial penalty – it’s part of the ACA and it’s known as the “employer mandate” and “pay or play provisions.” A penalty is imposed on companies when an employee turns to the ACA Marketplace for healthcare coverage. That was exactly Julie’s predicament. Enrolling her kids in the Children’s Health Insurance Program (CHIP) triggered a penalty for her company.
The Employer Mandate
The fine, which can amount to thousands of dollars per dependent, left Julie’s company with three choices:
- Increase employee benefits by covering a larger chunk of health insurance premiums for dependents
- Pay the penalty, which can amount to thousands of dollars per dependent
- Terminate the worker
Julie got curtain number three.
Realistically, firing Julie may have been the best course of action for the company. Now they don’t have to increase employee benefits across the board, pay a penalty for her dependents, or even replace her and other employees fired for the same reason. They can just re-assign their duties to other workers.
For a struggling business, their best option in this situation may be the least humane for employees. Because companies are in the business of making money, firing workers who can’t afford health insurance is actually pretty common.
The State-Level Health Care Glitch
Since receiving that pink slip, Julie is a freelancer and is no longer limited to an employer-provided health insurance plan. (Another glitch: if an employee has access to insurance by his or her employer, they’re likely ineligible for the ACA’s premium tax credit, even if the employer’s plan is too expensive, but still meets federally-affordable guidelines.) Additionally, she experienced a further drop in income related to Covid and a chronic health condition. That would seemingly increase her tax credit for a Marketplace plan, right? But the glitches are never-ending.
Now, Julie doesn’t earn enough money to qualify for the Affordable Care Act. Huh?? “Affordable” is right there in its name!
For residents like Julie, most states offer Medicaid. But Julie lives in a state that opted against taking available, free, federal funds to expand their Medicaid program. So without health insurance, for primary care, Julie relies on local Community Health Centers and a county-specific medical assistance program. And then for the remaining uncovered services, such as a chiropractor, Julie pays out of pocket.
Community Health Centers
Community Health Centers (CHC) are Federally Qualified Health Centers (FQHC) that focus on primary health care. They’re discussed in chapter 10 of Decoding Health Insurance. Although they serve one in 11 people across the country, they’re known as “safety net” healthcare facilities. And as crucial as this program is, CHCs are chronically underfunded, according to the non-profit, non-partisan organization, Trust for America’s Health. For patients, this results in long waits, high provider turnover, and difficulties getting timely referrals to specialists.
Decoding Health Insurance
Julie’s story is just one of the millions of confounding issues regarding health insurance in America. The Affordable Care Act provided great health care coverage for untold numbers of middle and low-income workers. However, it also introduced a world of state and federal “glitches.”
Navigating health insurance, or, as Lauren Jahnke words it, Decoding Health Insurance, is a full-time job. Have you ever Googled “What is the ACA’s family glitch?” You won’t get a brief definition (or tips for convincing your boss not to fire you when he gets dinged by the employer mandate). The search engine will populate your browser with thousands upon thousands of pages about the ACA and all of its real and perceived glitches. Of course, much of it will be misinformation — some intentional but most of it is just a misunderstanding of how health insurance works.
That’s exactly why you need Decoding Health Insurance and the Alternatives: Options, Issues, and Tips for Saving Money.