While millions are able to receive subsidized coverage through the health insurance marketplaces, there is one group that seems oddly blocked from those subsidies. That is because of the “family glitch,” a loophole in federal rules that essentially bars the family members of a worker from subsidized coverage if the worker has access to employer-sponsored coverage with a premium that is affordable to the worker, but not the family members. The glitch is easy to fix, through either regulation or legislation. But, earlier this week, the Galen institute released a paper, based on an incorrect assumption, claiming a fix is illegal and harmful.

The Family Glitch

The ACA has a firewall that keeps people with an offer of affordable employer coverage from being eligible for subsidized coverage. But there’s an odd rule in defining whether employer coverage is affordable for family members of a worker eligible for that coverage, such as spouses or children. Under existing regulations, the affordability of employer coverage available to family members is  based on only the cost of covering the worker. It doesn’t matter how much it costs to cover the family members. This is the family glitch. Between 5.1 and 6 million people are ineligible for subsidies because of the family glitch. The family glitch increases family health care costs by thousands of dollars – it is not unusual for a couple to face about $9,000 in additional health care costs because of the gamily glitch. This is in part because the family glitch doesn’t just lock people out of premium subsidies, it also locks people out of cost-sharing reduction plans which can have low or no deductibles and low copayments and coinsurance.

An Argument Based on A Faulty Presumption

The Galen Institute paper fundamentally misunderstands the administrative fix that is being considered. The premise of the paper assumes that an administrative fix would allow the entire family, including the worker, to receive subsidies in the marketplace. But this isn’t the administrative fix in question. Allowing the worker to receive subsidized coverage would clearly violate the ACA’s firewall provision, so it doesn’t make sense for the Biden administration to consider such a fix without a legislative change. Any administrative fix under consideration would allow only the family members to receive subsidies – the worker would need to remain on their employer coverage.

Because of this fundamental misunderstanding, the Galen paper’s argument that the administrative fix to the family glitch is harmful falls apart. The claim that the fix will hurt employer-based coverage is based on the assumption that workers themselves would be eligible for subsidized coverage in the ACA marketplaces. Since the law is clear that such workers are not eligible for the ACA subsidies, the workers won’t receive them. The paper also argues that fixing the family glitch will expose more employers to the ACA’s employer penalty for failing to offer affordable coverage. But since the workers won’t receive subsidies, employers won’t face penalties for offering unaffordable coverage. The employer penalty only considers the affordability of the worker’s coverage, and nothing in an administrative fix to the family glitch would change this.

The paper also improperly defines the scope of who is barred from affordable coverage because of the family glitch. In explaining the glitch, the paper says that family members are barred from subsidies even if the employer doesn’t offer family coverage. This is a critical mistake in how the employer firewall works. The employer firewall bars employees, and some family members, from subsidized coverage because they have an offer of coverage that is deemed affordable. If an employer doesn’t offer family coverage, then the family members don’t have an offer of coverage. Therefore, family members ineligible for a worker’s employer coverage are not barred from ACA subsidies by the family glitch.

The argument presented that criticizes fixing the family glitch falls flat because it isn’t based on the reality of the situation. The reality is that fixing the family glitch will dramatically improve the affordability of health insurance for millions of American families.