The Family Glitch and How It Might Drive Up YOUR Insurance Costs

I can’t help but wonder why the companies that manufacture automobiles ever came up with the “Check Engine” light. It’s just so… useless.

I’m driving along and the light pops on — BING! CHECK ENGINE.

When a modern car says, “Check Engine,” what it’s really saying is, “Sorry bub, you need to take this car to the dealership right away and let them hook it up to a machine that costs many thousands of dollars so it can talk to the computer in your car and see why it turned on your Check Engine light!”

Until you do that, no one on planet Earth knows what is wrong with your car. It might seem like it’s running just fine. And the LAST thing you are qualified to do as an owner or the person paying the notes is check the engine. Everything that happens after that is below the radar. It’s going to cost you a lot of money, there’s nothing you can do about it, and it’s all quietly going on where you can’t see it.

You know what’s also expensive and quietly going on below the radar since Jan. 1, 2014, and is still going on? The employer health insurance family glitch.

Healthcare’s “Check Engine” Light

The “family glitch” is a health insurance industry term used to describe a particular lack of protection for spouses and dependents when they are added to someone’s employer health plan.

You see, when Congress wrote the Affordable Care Act, the government (rather arbitrarily) broke up the employer insurance world into two big pieces. Companies with 50 employees or fewer (“full-time equivalents of labor” is the technical term) got one set of rules about how insurance was regulated, measured and priced, and companies with 51 employees or more got an entirely different set of rules.

Whenever an employee of a company with 51 employees or more gets an offer of health insurance from his company, that offer has to comply with a slew of federal rules, one of which is an affordability standard. The employer has to guarantee that the employee’s offer of coverage won’t cost that employee more than 9.83% of his gross income out of pocket. This effectively puts a cap on how much an employer can force employees to contribute to their health insurance and helps keep that coverage affordable.

That same law also says that an employer at the company with 51+ employees MUST offer coverage to an employee’s dependents as well. That sounds great, but there are two significant gaps in this part of the law that have never been fixed. First, the term “dependents” does not include spouses in the legal definition. So, large employers are not required to offer health coverage to their employees’ spouses under federal rules. As if that wasn’t bad enough, the employer coverage that dependents can get has NO AFFORDABILITY TEST. In other words, if the employer wants to charge an employee 100% of the cost for his dependents’ coverage, that employer can do so.

To make matters worse (yep, they can get worse!), the ACA also says that once an employee’s dependent gets an offer of coverage through an employer, no matter how expensive or shabby it might be, that dependent is immediately disqualified from getting ANY help when purchasing health insurance on healthcare.gov. Even if they could get better coverage way cheaper than the employer is offering. No help, no tax credits at all. The mere offer of coverage from an employer to a dependent is enough to disqualify the dependents from getting financial help to shop for coverage. That’s because in the ACA, there are no rules or standards about the price or quality of healthcare coverage that an employer has to offer to dependents or spouses of the employees.

The “Check Engine” Light Is Still On …

And to make matters even worse (sorry there’s more!), on April 1, 2021, The American Rescue Plan Act (ARPA21) went into effect, which made those same tax credits on healthcare.gov dramatically larger and available to folks with much higher incomes. This potentially makes individual coverage on the federal marketplace MUCH better coverage for dependents. And the affordability standard on healthcare.gov is now 8.5% of someone’s gross income, meaning coverage there should be even cheaper.

But, ARPA21 did NOTHING to help those dependents who are stuck with an offer of employer coverage that is far beyond what they can likely afford. And, employers are doing nothing illegal by making dependents pay 100% of the cost, if that’s what they want to do. There’s also STILL no legal requirement to offer dependent coverage to employees’ spouses. Those are the gaps in the Affordable Care Act, which, as of this writing, remain unaddressed.

These gaps in coverage and regulation have come to be known as “the family glitch.” You probably never heard of it, but it is keeping millions of people from getting affordable coverage.

Like a federal “Check Engine” light, there’s nothing you can do about it. It’s expensive and flying totally below the radar.

Straight Talk is, I think it’s about time we woke up a few people and got a fix for this “family glitch,” don’t you think? You don’t even have to lay it on employers who are being really stingy; you can simply loosen the rules to let dependents and spouses shop on healthcare.gov – which, by the way, would be fewer members on the employer’s plan. That could potentially lower the employer’s costs by having fewer people to cover. It’s the least we can do at this point to make healthcare coverage more affordable for more people.