Biden sidesteps Congress, illegally expands health insurance subsidies

Today the Biden administration finalized a rule to fix the so-called “family glitch,” which will expand eligibility for Affordable Care Act (ACA) health insurance subsidies. However, as Bloomberg Law reports, “legal challenges are likely.”

American Experiment has led efforts to counter this illegal rulemaking and, in June, submitted comments to the Department of the Treasury which thoroughly explained how the proposed rule has no legal basis. Ultimately, these comments urged Treasury to withdraw the rule.

Not surprisingly, Treasury pressed forward with the rule and finalized it today largely as proposed.

What is the family glitch

The family glitch prevents certain family members of an employee from qualifying for premium subsidies if they have access to “affordable” employer coverage. The glitch arises from how the law defines affordability for dependents and related individuals in a family with access to employer coverage. For them, the statute bases affordability on the cost of self-only coverage to the employee, not the cost of family coverage. Thus, if individual coverage from the employer is affordable to the employee, then the rest of the family does not qualify for premiums subsidies—regardless of how much family coverage would cost from the employer.

American Experiment’s work bolsters future legal challenges

The rule finalized today amends regulations to base the affordability test on the cost family coverage. The trouble is, the statute very clearly bases the affordability test on the cost of self-only coverage. The text is so clear that even the Obama administration concluded back in 2013 that their hands were tied.

American Experiment’s comment letter made a substantial contribution to future legal challenges. It meticulously walks through the statutory text to explain how the plain language unambiguously includes the family glitch. More important, it provides the first overview of the legislative history which shows how Congress clearly added the family glitch by design. The letter also explained the congressional purpose behind the family glitch. It lowered the ACA’s cost, protected the individual market risk pool, and reduced employer incentives to drop coverage. The latter helped Obama to at least partially fulfill his promise: if you like your health plan, you can keep it.

The incredibly weak response from Treasury to these legal arguments in the final rule further exposes the lack of any legal basis.

Any fix must come from Congress

The ACA passed with several flaws and the premium subsidy design was one of the biggest. As I explained in an article for Health Affairs, the ACA’s subsidy structure inflates premiums because the subsidies rise in lock step with premium increases. Under this structure, knowing the federal government is going to pay for premium increases dollar-for-dollar, health insurers have far less incentive to control costs.

This Biden administration’s unlawful fix to the family glitch only builds off this flawed subsidy design, which will only inflate premiums higher.

The Biden administration cannot be allowed to step outside the text of the ACA and fix whatever flaw or glitch they find with the law. A successful legal challenge will appropriately put Congress in charge of fixing the ACA. After all, they did create the problem.