For family trapped in the ACA’s glaring ‘family glitch,’ life gets harder

We always knew there would be Obamacare casualties. The Affordable Care Act was never meant to cover everyone, although the pols glibly used the term “universal” to imply every American would be helped. At its core the ACA is a means-tested welfare program offering subsidized coverage for those who are eligible. As with all welfare programs, there are always people too “wealthy” to qualify, and in the case of the ACA, those too poor to qualify in the 19 states that have not expanded Medicaid.

Perhaps, though, the cruelest omission affects as many as 4 million people caught in what has become known as the “family glitch.” That snag prohibits family members from receiving Obamacare subsidies if the family breadwinner has employer-provided insurance for which he or she pays less than 9.5 percent of the family income for the coverage. (That number is indexed and goes up slightly each year.) Under the law and its interpretation by the IRS, as long as that breadwinner’s coverage is considered “affordable” by that standard, it’s assumed the family can afford to buy its own insurance on the open market without the help of an Obamacare subsidy. The problem is that the IRS looks at the cost of individual coverage rather than family coverage in determining whether the costs exceed 9.5 percent of the family’s income. (Just because breadwinners can afford single coverage doesn’t mean they can afford a family plan). As long as the cost of the individual coverage from the employer falls under that threshold, the family is considered too “rich” for government help.

But are those families too rich, given that the price of family coverage from an employer averages $17,545 ($6,251 for a single person), and premiums for Obamacare policies on the exchanges can easily move into that territory? Well-paid policymakers who make the rules have no trouble paying those amounts, but people whose incomes hover around the U.S. median of about $52,000 and even higher, say in the $60,000 range, find it’s tough to buy insurance without government help.

Consider the family of Jeremy Devor, a technician with an associate degree in engineering whose struggles paying for health care I’ve followed for the Columbia Journalism Review since 2009 (see here, here, here and here). While the battle over Obamacare raged that year, Devor, who lives in Salem, Ill., a town of 7,350 some 250 miles south of Chicago, contacted me to ask if he was going to be helped by the new health care law. He had a wife, five kids, and health insurance for himself from his employer. It was good insurance with low deductibles and copays. Still, he couldn’t afford the premium for family coverage.

So he had accumulated stacks of medical bills resulting from small stuff that kids usually need — stitches to sew up a cut or two, stomach aches, high fevers, sprained ankles. Once he had declared medical bankruptcy, and in 2009 he owed the local hospital about $600 for new services the family had used. By the time I interviewed him, the outlines of the family glitch were in place. Unless his income, then around $44,000 and higher with overtime, dramatically increased, he would have a tough time paying for care. “The single biggest issue in my household is health care,” Devor said at the time.

The news from the Devors family was not good. Bambi, age 40, had been diagnosed with a rare brain tumor. She underwent surgery and had just begun radiation treatment, to be followed by six months of chemotherapy and frequent MRI follow-ups. She had gotten back on the state insurance program, but will lose that coverage again at the end of April because their family income had increased to $62,000 and the older children moved out, shrinking the family size on which her state-subsidized coverage was based. The Devors will have to pay out-of-pocket for the rest of her treatments.

Over the next few years, I kept tabs on the Devor family. His income went up but fluctuated widely depending on how much overtime pay he got. Occasionally his wife worked as a waitress. Jobs weren’t plentiful in small-town Illinois. His kids got coverage through Illinois All Kids, the state-federal subsidized children’s health program, and sometimes his wife was eligible too, depending on how much overtime Devor worked, how many of his older children lived at home, and the changing rules of the program itself. When I revisited the family in late 2012, Devor’s wife Bambi had lost that coverage. The state had sent a letter saying it had run out of money and had to tighten eligibility. Bambi was again uninsured.  

Each time I checked in with Devor over the next few years, paying for health care remained the biggest issue. We talked again in 2014, and he said the $587 a month he would have to pay for family coverage was too much for the budget. His income then was about $54,000. “We’re always on the razor’s edge financially,” he told me. He looked into buying an Obamacare policy on the Illinois exchange for his wife but decided against it. “The cheapest plans would cost $225 a month with a $6,000 deductible,” Devor said. “Who can afford to spend $6,000 a year before insurance pays?” This isn’t even insurance, he concluded. Devor now had his own health problems — arthritis and psoriasis — and the out-of-pocket expenses his insurance required him to pay for doctor visits and medications were becoming difficult to manage. The kids still got the illnesses kids always get. Plus, his employer was warning its employees it was going to change insurance policies, which would provide less generous coverage. Devor’s insurance was considered one of those Cadillac plans Obamacare aims to do away with in 2020.

I didn’t hear from Devor again until a month ago. The news from the family was not good. Bambi, age 40, had been diagnosed with a rare brain tumor. She underwent surgery and had just begun radiation treatment, to be followed by six months of chemotherapy and frequent MRI follow-ups. She had gotten back on the state insurance program, but will lose that coverage again at the end of April because their family income had increased to $62,000 and the older children moved out, shrinking the family size on which her state-subsidized coverage was based. The Devors will have to pay out-of-pocket for the rest of her treatments.

Devor said his psoriatic arthritis is “very bad now,” but he often doesn’t have the money to pay for medicine because of the extra costs of driving every day to St. Louis where his wife is undergoing treatment.

His employer did junk its Cadillac plan, requiring the Devors to pay for more care themselves. One of the ACA’s goals was to make Americans think hard before seeking medical care, thereby giving them “more skin in the game,” as the cliché has it. The new coverage comes with a $4,000 out-of-pocket maximum for Jeremy and $8,000 for the family should he add them to the policy. He says he might do so if he can figure out how to pay for the monthly family premium of around $1300.

In the meantime, the financial prognosis for the Devors is not good. Health care is still the single biggest issue in the household and the family has resorted to a Go Fund Me campaign and money raised in the community from spaghetti suppers.

A recent NPR and the Robert Wood Johnson Foundation poll found that only 15 percent of people say they have personally benefitted from the ACA. Among those affected by the law 25 percent reported they had been personally harmed by the law’s passage. It seems Devor is in the latter group.

Whether the family glitch resulted from sloppy bill drafting or was added deliberately is hard to say. But the IRS interpretation basing family subsidy on the affordability of the breadwinner’s single-coverage eligibility hurts families like the Devors. “This is something that makes no sense at all,” Washington and Lee law professor Timothy Jost told me.

Can the glitch be fixed? Of course, if politicians and policymakers want to do that, but until there’s a new Congress and a new administration, that’s not likely to happen. Even those who think the glitch is unfair are wary of opening up the law for changes, fearing that Republican opponents might have a chance to gut the whole thing. Then there’s the money. “Since the amount of the subsidies can be several thousand dollars a year, one could imagine it amounting to tens of billions of dollars a year,” says health care expert Henry Aaron, a senior fellow at the Brookings Institution. Last year a report from the RAND Corp. estimates the cost could vary between $4 and $9 billion in 2017 to fix the glitch.

So it remains for now the Devors will continue to struggle in our very unequal system of health care.

Veteran health care journalist Trudy Lieberman is Contributing Editor of the Center for Health Journalism Digital and a regular contributor to the Remaking Health Care blog.

[Photo by Jorge Gonzalez via Flickr.]