Obamacare ‘family glitch’ is finally getting an overhaul

A flaw in the Affordable Care Act (ACA) — also known as Obamacare — is being addressed by the Biden administration.

The White House announced on Tuesday a fix for the ACA’s “family glitch,” which comes from the current interpretation of the ACA’s eligibility criteria by the US Treasury Department.

“It’s a very significant change,” Sara Collins, vice president for health care coverage and access at the Commonwealth Fund, told Yahoo Finance. “It’s particularly important for middle-class families.”

An individual is currently eligible for ACA marketplace plans if they spend more than 9.83% of their income on their company’s health plan premium. However, additional costs from adding family members to an employee’s plan aren’t factored in to that premium cost cap. Spouses and children are deemed to have affordable coverage regardless of how much of their income goes towards health insurance.

Most of those in the Obamacare family glitch are dependents part of an employer-sponsored insurance policy. (Chart: Kaiser Family Foundation)

As a result of this policy, an estimated 5.1 million people are ineligible for ACA subsidies, according to the Kaiser Family Foundation. Most of them are either children who don’t qualify for the Children’s Health Insurance Program (CHIP) or women.

ACA subsidies are premium tax credits designed to alleviate the financial burden of health insurance costs. To qualify, a person’s household income must be between 100% and 400% of the federal poverty level.

The new plan would make those family members eligible for financial assistance in the form of subsidies if health coverage costs more than 10% of a household’s total income versus just the individual employee.

“Once today’s proposed rule is finalized, starting next year, working families in America will get the help they need to afford full family coverage,” President Biden said during a press conference that was attended by former President Barack Obama.

WASHINGTON, DC - APRIL 5: US President Joe Biden and former President Barack Obama attend an event to mark the 2010 passage of the Affordable Care Act in the East Room of the White House on April 5, 2022 in Washington, DC.  With then-Vice President Joe Biden by his side, Obama signed 'Obamacare'  into law on March 23, 2010. (Photo by Chip Somodevilla/Getty Images)

US President Joe Biden and former President Barack Obama attend an event to mark the 2010 passage of the Affordable Care Act, also known as Obamacare, in the East Room of the White House on April 5, 2022 in Washington, DC. (Photo by Chip Somodevilla/Getty Images)

According to the White House, an estimated 200,000 uninsured people would gain coverage through this change while nearly 1 million Americans would obtain more affordable coverage.

“Many families would be able to save hundreds of dollars a month thanks to lower premiums,” the White House said in a press release. “This proposed rule would amount to the most significant administrative action to improve implementation of the ACA since its enactment.”

Adriana Belmonte is a reporter and editor covering politics and health care policy for Yahoo Finance. You can follow her on Twitter @adrianambells and reach here at adriana@yahoofinance.com.

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