President Obama made news last week by returning to the White House for the first time since he left office. The reason for his visit? A policy announcement by the current president about the former president’s eponymous healthcare law.
The Biden administration wants to fix the so-called “family glitch” — a flaw in Obamacare’s structure that disqualifies a person’s spouse and dependents from subsidized coverage on the exchanges if that person is offered affordable coverage at work.
It’s bad enough that the administration is attempting to rewrite Obamacare by executive fiat. This “fix” will do little to expand access to insurance among those who currently lack it — and will instead induce many people to drop their private coverage for lavishly subsidized public plans.
The family glitch is one of many unintended or unforeseen consequences of Obamacare’s text. Under the law as passed in 2010, any American without access to an employer-based insurance plan deemed “affordable” under the terms of Obamacare qualified for subsidized coverage through the law’s newly established exchanges.
What counts as “affordable” in this context is individual coverage that costs no more than 9.83% of a person’s annual income. That creates a potential problem for workers with families. A worker may find that the individual policy available through his employer is “affordable.” But the corresponding family plan might cost much more than 9.83% of his or her income.
The upshot is that the worker’s spouse and kids have to secure their own coverage on their own — they don’t get any help from the federal government.
From the Biden administration’s perspective, this is a simple mistake. So it’s directing the IRS to reinterpret Obamacare in a way such that workers who are offered family coverage that costs more than 9.83% of income can instead direct their spouse and kids to the exchanges for subsidized coverage.
This is far from a minor reform. This single rule change could extend exchange subsidies to more than 5 million Americans. To put that in perspective, just over 9.7 million Americans received exchange subsidies in 2021.
So it’s only reasonable to ask: Since when does the IRS have the authority to dramatically expand Obamacare in this way? One would think that the power to rewrite the law — and put American taxpayers on the hook for billions of dollars in new exchange subsidies — rests solely with Congress. But the Biden administration isn’t going to let the Constitution get in the way of a good photo-op.
The policy merits of Biden’s reform are also questionable. It will cost an estimated $45 billion over the next decade. The chief consequence of this massive spending increase more than a decade after Obamacare’s passage will be to prompt 1 million Americans currently covered by a private employer-sponsored plan to switch to subsidized exchange coverage.
The reform’s impact on uninsured Americans will be far less significant. Of the roughly 31 million patients who currently lack health insurance, only 451,000 — a little over 1% — are affected by the family glitch. Of those, a mere 200,000 are expected to gain coverage as a result of IRS rule change.
Of course, Biden’s goal with his family-glitch announcement was never to advance sound policy. Rather, it was to notch a superficial victory for himself and his party in the run-up to November’s midterm elections. And what easier way to stump for votes than to stand next to one of the few Democrats who still polls well — even if he left office years ago — and promise to buy millions of Americans health coverage?
That his election-year giveaway will cost taxpayers dearly in the years ahead seems not to matter to Biden. But it certainly matters to the Americans who will be picking up the tab for this wasteful policy and getting little in return.