Under previous rules, family members of those who had insurance through an employer were not eligible for Covered California. In some cases, those employer plans cover the employee but are expensive for spouses and children, leaving families with few options.
Hundreds of thousands of Californians previously shut out of Covered California — the state program that offers discounted health insurance — soon can participate because the eligibility requirements are changing.
Prior to the new rules, individuals who had access to an employer-based health insurance plan through a family member were not eligible for Covered California. Employer plans are often expensive for spouses or children, driving up the cost of coverage for those family members. Those caught in this unaffordable “family glitch” have few choices: buy the expensive plan, try to buy a bare-bones plan separately or go without health insurance.
In April, the Biden administration issued guidelines to fix the near-decade-long problem and last month the federal government adopted the regulation. Starting in January 2023, if a family’s premium costs more than 9.12% of the household income the family could be eligible for federal susidies, or discounts, through Covered California.
According to the UC Berkeley Labor Center, the “glitch” impacts an estimated 615,000 people in California, mostly women and children from low and middle-income families. The center estimates that about 400,000 of those people would be eligible for financial assistance through Covered California based on their income.
“For the people impacted, it could be worth hundreds of thousands of dollars,” said Anthony Wright, executive director of Health Access California, a consumer rights group. “It really does have an impact on the health and well-being of the family and their finances.”
A state analysis by Third Way, a national think tank, found that a California family of four with $53,000 in annual earnings would likely save about $4,340 a year in health insurance premium costs. The report shows that lower-income households would see the most significant savings.
The federal government is footing the bill for the expansion and pays subsidies directly to the health plans based on Covered California’s marketplace prices. The Congressional Budget Office reported that it would cost $44 billion over the next 10 years to cover family members previously impacted by the family glitch.
Covered California pays for outreach to families, including those who have been caught in the glitch, said Jessica Altman, executive director of Covered California. Covered California has a $109 million annual budget for marketing and the bulk is spent during open enrollment to outreach to Californians to sign up or renew coverage.
Open enrollment started this week and runs through Jan. 31, 2023. Coverage can begin as early as Jan. 1.
In San Jose, this is the change Patricia Moran has been waiting for. Moran doesn’t know yet how much she will save when she’s finally able to enroll in a Covered California plan. She is confident it will be less than what she pays now for health insurance.
Moran, 63, has been on her husband’s employer-provided plan for nearly eight years because she got sick and could no longer work. The plan is expensive but she needs it to pay for monthly injections for her aggressive rheumatoid arthritis.
“I’m stuck. I can’t have Medicare or any other help,” she said.
For Moran’s husband, the plan is free. For her, it’s $1,200 a month — almost half of her husband’s paycheck. That’s $14,400 a year, or about 21% percent of the couple’s total income from his job as a maintenance worker at a school and from the child care program Moran runs at her home.
Even with insurance, the injections cost $250 a month, said Moran, who said they give her mobility and the ability to care for the kids in her child care program.
“This is a big relief,” Moran said about the new policy. “It’s going to help a lot. We can have some savings for our retirement. It’s been so hard because we have to pay the mortgage, we have our bills and all of this stuff.”
California health advocates have been trying to solve the glitch at the state level for years but it was too expensive for the state to pay the cost. The federal government had to decide to fix it and fund it.
This change should help reduce the number of uninsured people in California. The state has experienced the steepest decline in the number of uninsured since the federal Affordable Care Act, also known as Obamacare, launched in 2013. Since then, some 35 million people have enrolled in health plans nationwide, according to the U.S. Department of Health and Human Services.
The state’s rate of uninsured residents dropped from 17% in 2013 to 7% in 2021. More than half of the 3 million still uninsured in California are eligible for some sort of coverage, according to UCLA Center for Health Policy Research and UC Berkeley Labor Center. The remainder, about 1.2 million, are undocumented immigrants who are ineligible for coverage through the exchange, although some may now qualify for public programs..
Any change that increases coverage for Californians, especially children, is a boon, Wright said.
“This is a big deal toward the goal of a government guarantee that everybody has access to affordable health coverage,” Wright said of the policy change. “The more we get rid of asterisks and exclusions the better.”
The change comes as employers continue to shift insurance costs to families. According to a Kaiser Family Foundation survey, premiums for family coverage increased 22% between 2016 and 2021.
Nationally, about 5 million individuals are eligible only for unaffordable employer-provided insurance. More than half of those are children. Among adults, more women than men are caught in the glitch.
“It created an unaffordable situation for a small but meaningful group of people,” said Christine Eibner, a senior economist focused on health care at RAND, a nonprofit research organization that published a report about the issue in 2015. “Most of them were enrolling anyhow and paying the higher premium. They could be paying 15% to 20% of their income.”
In California, of the estimated 615,000 who are stuck with high-priced employer insurance plans as their only option, researchers estimated that about 87,000 are uninsured, Altman said. About 35,000 are in the individual market paying full rates and the majority are paying for that expensive employer-sponsored coverage, Altman said.
“There are families that can save thousands of dollars — middle-income families, lower-income families — that it’s going to make a significant change for,” Altman said. “There is value in helping people who have coverage to connect with lower-cost coverage.”
If people are uninsured or have expensive coverage they are less likely to get the care they need.
Those who stretch their budgets to sign up for employer-based plans may take the least expensive plan with higher deductibles or catastrophic coverage, Wright said. That could result in people going to the doctor less or not using the plans they have because they would still have to pay out of pocket.
“We believe it’s important to have the whole family covered,” Wright said. “There is a real result of not having coverage. The uninsured live sicker, die younger and are one emergency away from financial ruin.”
The Affordable Care Act requires employers with at least 50 employees to offer health insurance to them and their dependents. Spouses are usually included but not required under the law. In California, 47% of people are enrolled in an employer-provided plan. A national study published in the Health Affairs Journal found that families spend an average of 16%of household income paying employer-based premiums.
Before the latest change, the Affordable Care Act allowed employees to obtain insurance through discounted state programs if their employer health plan cost more than 9.1% of their income, which is considered unaffordable. Employers face penalties if their workers are obtaining insurance through those state programs.
Also, prior to the latest change, the law did not define affordability for family members and employers faced no penalties related to the cost of premiums for family members.