When it's too expensive to add your family to your health plan

Blame the unnecessary 'family glitch'

Published: December 03, 2014 05:30 PM

Q. My husband gets health insurance at his job for $130 a month, but adding me to his plan would bring our total cost up to $415. We can’t afford this on an income of only $40,000 a year! Do we have any recourse?

A. Grrrr, no. You are among several million victims of the infamous “family glitch” in the Affordable Care Act. And the most infuriating thing is that it didn’t have to be this way.

As we explained just the other day, you can’t get a tax credit to help pay for health insurance if you have the option of signing up for a plan that costs you less than 9.5 percent of your annual income. (This percentage rises to 9.56 percent in 2015.) That's considered an "affordable" plan.

If you are a single person, that’s where the story ends. But if you have a spouse or kids who also need insurance, there’s more—and for people like you, it’s a story with a bad ending. Here’s why.

According to the interpretation of the law by the Internal Revenue Service and Treasury Department, if a worker’s individual coverage is affordable, the entire family is considered to have “affordable” employer coverage—even if, as in your situation, adding a spouse or kids to the plan drives up the price way above the 9.5 percent threshold. Here’s an infographic we created that explains this glitch clearly.

See our complete health insurance information. To find out how to apply for, select, and use health insurance, including Medicare, visit our main health insurance page.

I did the math on your situation. Your husband’s plan is clearly “affordable” because $130 a month works out to about 4 percent of your annual income. But adding you to the plan brings your total cost up to 12.5 percent of your income, which is ridiculous.

But since your plan is technically “affordable” (even though it’s really not), you can’t get a tax subsidy to drive down the cost of buying insurance on your state’s Health Insurance Marketplace.

This makes no sense in the real world, and a lot of legal and policy experts believe that the IRS and Treasury didn’t have to interpret the law this way. They could have gone with common sense and said that in a situation like yours, where adding a dependent to the employee plan drives the cost above that 9.5 percent threshold, you could turn it down and get a subsidy to buy your own coverage.

But they didn’t, because federal policymakers decided that giving people like you a break would cost too much money and drive up the overall cost of the health law. “It is a huge coverage gap and the IRS interpretation of the law should be open to revisions,” says DeAnn Friedholm, director of health reform for Consumers Union, our advocacy division.

Sen. Al Franken of Minnesota has introduced legislation that would fix the glitch, but given the partisan deadlock in Washington these days, it has basically no chance of being enacted.

Meanwhile, back to you. Your choices are pretty grim, I’m sorry to say. You shared your age and ZIP code with me so I was able to price out your options on your state’s Health Insurance Marketplace. Sadly, the cheapest Bronze plan available without a subsidy is $299, which is even more than the $285 extra it would cost to sign up for your husband’s workplace plan. By contrast, if you were able to claim a tax credit just for yourself, you’d be able to get a much better Silver plan for just $131 a month.

I have no idea where your husband works, but his employer would actually be doing you a favor by dropping coverage for spouses completely. That would mean you would not have an “offer” of employer coverage at all, and would then be able to buy that $131 Marketplace plan.

You don’t have kids, but if you did, they would almost certainly be eligible for the Children’s Health Insurance Program. Children whose household income qualifies for CHIP can enroll regardless of whether a parent has access to “affordable” workplace coverage for them.

-- Nancy Metcalf

Submit a question to Consumer Reports' health insurance expert. Be sure to include the state you live in so we can provide a more-detailed answer.

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