The Affordable Care Act's "Kids Glitch"

New regulations implementing the Affordable Care Act (ACA) appear to leave many children without coverage from their parents' employers or from the new Exchanges due to open in October for open enrollment.

Employers with more than 50 employees have to provide "affordable" health care for their employees and dependents, or face fines and penalties. But the regulations state that spouses are not dependents. Even worse, the regulations define "affordable" as a plan that limits the employee's share of the premium to a cap of 9.5% of an employee's income, but only for the employee's own coverage. The insurance will still be considered "affordable" even if it costs more than 9.5% for the dependent coverage. The employer won't have to pay a penalty, and the insurance for the kids won't be affordable.

To add insult to injury, because the employer is offering insurance that is "affordable" for the worker, the dependent children will receive no tax credits or cash subsidies if they go to the Exchange to buy insurance.

The outcome seems obvious:  many children whose parents work will not be able to afford health care coverage. In Washington speak, this problem is called "the kids glitch," although a more apt phrase would be "keeping kids sick."

The only bone thrown our way is that a family will not have to pay penalties for not complying with the individual mandate for dependent children, if the cost of the insurance for dependents is more than 8% of family income.

The silver lining to this gray cloud?  Union plans will be more necessary than ever for working parents whose employers won't offer truly affordable health care for children.

By Bill Sokol

Legal Developments