Law Student Seeks Tweaks to Family Coverage Affordability Rules

In the Matter of:
Affordability of Employer Coverage for Family Members of Employees

BEFORE THE UNITED STATES
INTERNAL REVENUE SERVICE

COMMENTS OF JULIE MEYER, STUDENT
BOSTON COLLEGE LAW SCHOOL

I am pleased to submit this comment in support of the proposed rulemaking by the Internal Revenue Service (IRS) about the change to affordability standards with regard to employer coverage of family members of employees.¹ Before I enrolled at Boston College Law School, I spent years trying to educate the American public on the impact of the Affordable Care Act, and explaining what would happen if the ACA were to be repealed. More than 20 million people have gained access to health insurance since the passage of the landmark legislation, enabling them to live their lives without being forced to make the choice between going to the doctor or putting food on the table.² I was on the steps of the Supreme Court for argument day in the King v. Burwell case that questioned the legality of subsidies to offset the cost of insurance offered on federal exchanges; I traveled around the country on a tour bus and spoke with dozens of people whose lives were directly saved by the ACA; and I met parents of children with complex medical needs who, prior to the ACA, would have exceeded their lifetime caps on coverage before their first birthdays. I write to express my strong support for this proposed rule.

INTRODUCTION

The IRS issued a Notice of Proposed Rulemaking on April 7, 2022, which would solve the so-called “family glitch” that has existed in the Affordable Care Act since 2013.³ The ACA mandates that individuals obtain health insurance, either individually on a health insurance exchange, or through their employer. If people are unable to afford insurance coverage, the government helps subsidize their premiums to make them affordable through Premium Tax Credits (PTC). The law limits the availability of those PTCs to people who are unable to obtain affordable coverage through other means. As such, people who are offered minimum essential coverage (MEC) through their employer at an affordable rate are ineligible for subsidies.

A 2012 IRS regulation determined when employer-based coverage was considered affordable. The 2012 regulation stated that if someone was required to spend more than 9.5 percent (adjusted for 2022 figures) of their household income to insure themselves through their employer-sponsored coverage, they were eligible for a PTC. But if the cost of covering themselves through their employer-based plan was less than 9.5 percent of household income, they were ineligible for those subsidies. However, there was a glitch. The 2012 regulation did not take into account the cost of coverage of a family plan. The test for determining who was eligible for the PTC was based exclusively on the cost of the insurance for just the employee — the so-called “self-only” cost. But, according to a 2020 study conducted by the Kaiser Family Foundation, the average premium for employer-based coverage for an individual was $7,470, while family coverage was roughly three times that, at $21,342.⁴ Because eligibility for a tax credit was determined using the “self-only” cost — the cost to insure just the employee — it meant that if $7,470 was less than 9.5 percent of an employee's household income, he and his family would be ineligible to receive subsidies, even if the cost to insure the whole family, $21,342, was more than 9.5 percent of the household income. Therefore, these families have fallen through the cracks.

The rule the IRS is currently proposing would reinterpret the provision of the Affordable Care Act and would separate the affordability tests for an individual and his family. (It also would clarify the definition of “minimum essential coverage,” but I will not be discussing that in this comment). Under the proposed rule, eligibility for an individual to receive tax credits would still be determined by calculating the cost of coverage for that individual employee through an employer-based plan. If the self-only cost is less than 9.5 percent of his household income, he would be ineligible for subsidies and forced to use his employer-based coverage. But a family's eligibility for the tax credits would be determined by calculating the cost of coverage for the entire family. If the family cost is more than 9.5 percent of household income, they'd be able to get subsidies on the exchanges, separate from the employee himself.

I strongly support the efforts of the IRS to fix this family glitch. I offer the following comments in support of the rule and in the hopes of strengthening it:

I. This fix has the potential to change millions of lives for the better.

A study conducted by the Kaiser Family Foundation notes that more than 5.1 million people have impacted by the family glitch.⁵ Of those, 85 percent — or roughly 4.4 million people — are currently enrolled in health coverage through an employer-sponsored plan, and spend significantly more than the 9.5 percent of their household income deemed “affordable” by the government on that coverage. The Kaiser Family Foundation study estimates that those people spend roughly 16 percent of their income on that coverage.⁶ If they were eligible for subsidies through the health insurance marketplaces, they'd be spending much less than that. According to a study conducted by the Urban Institute, the people who switch from employer-sponsored insurance to the marketplaces would save, on average, about $400 per person in premiums. Poorer families — those with incomes below 200 percent of the federal poverty level — would save, on average, $580 per person.⁷ The Kaiser Family Foundation study also finds that about 9 percent of the people affected by the glitch — more than 450,000 people — have gone without insurance entirely. It is not automatic that a newly eligible family will choose to enroll in the marketplace. There are a number of calculations to take into account, and for some families, the introduction of the subsidies might make coverage only slightly more affordable and would disrupt the health care decisions they've already made for their families. But, the Urban Institute estimates that with a fix to the family glitch, hundreds of thousands of people would enroll in cheaper coverage.⁸ It estimates that 710,000 people would enroll in coverage through the health insurance marketplace and receive subsidies, and of those, 190,000 would be getting coverage for the first time.⁹

The Urban Institute study also finds that closing the family glitch would help everyone in the marketplace — including people not currently affected by the glitch. Those caught in the family glitch gap are often healthier and younger than the rest of the population, so by bringing them into the marketplace, the cost of premiums for everyone on the marketplace would decrease by about 1 percent, on average.¹⁰ The goal of the Affordable Care Act, since its inception, has been to spread out the cost of health insurance for the population and by bringing healthier people into the marketplace, and this proposed rule would help achieve the ACA's original goal of getting more people access to more health care at as low of a cost to them as possible. This proposed fix would strengthen the ACA and help the millions of people currently served by it.

II. The employee should have the choice to join his family on exchange-based plans.

This proposed rule, as it stands right now, would allow an employee's family to access health insurance separate from the employee himself. If the “self-only” cost of insurance on an employer-sponsored insurance plan is less than 9.5 percent of the employee's household income, he would be forced to remain on that plan, whereas his family would be able to go to the marketplace — and avail themselves of its subsidies — if the cost of insuring the whole family is more than 9.5 percent. The Urban Institute estimates that there are 3.6 million workers who fall into that category.¹¹

While that solves the major problem that underlies the family glitch, it would create unnecessary complications for the family in accessing the care they need to keep themselves healthy. I propose a change to this rule that would allow an employee to join his family in the marketplace if the cost of insuring the whole family is more than the “affordable” designation. Because the employee would not receive subsidies for his employer-sponsored plan had he remained on it, he would similarly not be eligible for subsidies on the marketplace, but he would be able to join his family on their plan and streamline the family unit's access to care.

Allowing a family to have one plan for everyone could help lower coverage costs for the whole family by allowing them to have to pay into only one deductible and one out-of-pocket limit.¹² Further, for many families, going to the doctor is difficult and time intensive, so streamlining the process of accessing health care would make it more beneficial for the family. Instead of worrying about two different insurance plans that have different networks of doctors and different copays, deductibles, and co-insurance rules, a family would be able to all see the same doctor and have a better patient experience instead of having to shop around to find providers that take two different insurances.

In addition to helping make the family's health care experience more efficient and streamlined, adding the employee to the marketplace would help strengthen the marketplace. As discussed above, the addition of people to the marketplace — especially healthier and younger people — helps drive down costs. In the same way that the individual mandate helps keep insurance costs affordable by adding healthy people to the marketplace to help defray the costs of premiums for less healthy people, adding the employee to the marketplace would be adding healthier people to the rolls. I recommend studying the impact that allowing the employee to join the marketplace would have on the cost of premiums, in the hopes that this rule can be expanded to include moving the employee over to the marketplace along with his family.

III. The IRS, in its implementation of this rule, as well as the Department of Health and Human Services and the Centers for Medicare and Medicaid Services, in their administration of Open Enrollment in November 2022, should undertake a broad public education campaign to publicize the changes to the system, and to educate the American public on the fix to the family glitch.

As discussed above, there is a lot of utility in having as many people as possible enter the marketplace and buy insurance. Not only will it mean that hundreds of thousands of people will be newly able to access affordable care, but the additional people on the marketplace help lower the costs of insurance for the rest of the marketplace. Since the implementation of the ACA, there has been a strong effort to educate the public about the availability of the marketplaces, the subsidies, and the customer assistance available to help people sign up for coverage that is right for them in an effort to strengthen the marketplace and help the program succeed. The federal government invested heavily in television ads and other forms of advertising to educate people about the ACA in its earliest years, and continued to spend heavily as the program matured, spending $100 million on advertising in advance of the 2016 Open Enrollment period.¹³ The federal government also built a corps of so-called “navigators” who helped people make their way through the enrollment process. However, the Trump administration cut the advertising budget to $10 million for the 2017 Open Enrollment period and cut the budget for navigators by 41 percent in 2017.¹⁴

It's clear that advertising has an effect. There are numerous studies that show that there is a correlation between advertising about the Affordable Care Act — especially when those ads are produced by the federal government — and the shopping for, and enrolling in, insurance coverage on the marketplace.¹⁵ In 2014, the year after the marketplaces were introduced, a study conducted by Health Affairs found that “the strongest predictor associated with applying for Medicaid or Marketplace coverage was greater awareness of the ACA.”¹⁶ And in a study conducted in the aftermath of Congress's failed attempt to repeal the ACA in 2017 and the budget cuts by the Trump administration in advance of the 2017 Open Enrollment period, the Commonwealth Fund found that 40 percent of uninsured adults were unaware of the health insurance marketplaces.¹⁷

As previous and current administrations have shown, there is flexibility in funding Open Enrollment outreach. In 2021, in the midst of the coronavirus pandemic, the Biden administration quadrupled the size of the navigator program.¹⁸ It also expanded funding for outreach conducted by the Centers for Medicare and Medicaid Services, which runs the Open Enrollment marketing for HHS, making the 2021 marketing investment the biggest in the ACA's history.¹⁹ This uptick in funding and increase in education did not take a long time to implement and had immediate and impactful results, with more than 14.2 million Americans signing up for coverage through state and federal marketplaces in 2021.²⁰

As such, the IRS, HHS, and CMS should reinvigorate efforts to educate the American public about Open Enrollment, specifically focusing on this fix to the family glitch. The more people who know about the solution will be able to avail themselves of it, making an already-strong fix to the problem stronger. It may be difficult to specifically target those who fall into the family glitch, because the government has no way to exactly identify them through tax returns — and they're not signed up through federal marketplaces.²¹ However, the government need not specifically target those currently enrolled in employer-based insurance who would be newly eligible for coverage on the marketplaces. Instead, a general, multimodal, and multilingual campaign in advance of Open Enrollment that educates people about what the family glitch is and how it is being solved would be incredibly beneficial and would help increase the number of people who avail themselves of this solution.

CONCLUSION

I strongly support the IRS's proposed rule that would fix the family glitch and help strengthen the Affordable Care Act. It would be extraordinarily helpful to millions of people and would help generally strengthen the Affordable Care Act. I recommend allowing an employee to join his family on the marketplace to help streamline that family's access to care. I also recommend the agency, in collaboration with other appropriate agencies, undertake a public education and outreach plan to help educate people about the change to the eligibility rules and encourage as many people as possible to avail themselves of this new opportunity.

It is my hope that these comments help the IRS consider the power it has to help actualize the legislative intent of the Affordable Care Act and help give as many people as much access to quality, affordable health care as possible. Thank you for your consideration.

Respectfully submitted,

Julie Meyer
Boston College Law School
885 Centre Street
Newton, MA 02459

April 30, 2022