A Proposed Solution for the Affordable Care Act (ACA) Family Glitch

In April, the Biden administration proposed a solution to the ACA's "family glitch", a technical issue that has impacted family health premium subsidies since the program's inception.

Currently, people who are without access to "affordable" health insurance through a job may qualify for a premium tax credit to be applied towards a plan on the ACA’s health insurance marketplaces.  However, regulations that determine if employer-based insurance is affordable give consideration only to the employee, without any need-based calculations allowed for spouse or children.  

In the current situation, family members of the employee may have access to coverage through the employer, but the cost is often prohibitively expensive and out of reach for the household budget.  The so-called "family glitch" affects about five million people and has made it impossible for many families to use the premium tax credit to purchase an affordable ACA marketplace plan.

Should the proposed rule be finalized, family members of workers with affordable self-only coverage but unaffordable family coverage may qualify for premium tax credits to buy an ACA plan, according to a statement from the White House.  The proposed rule would extend marketplace tax credits to only the family members of workers who are not offered affordable job-based family coverage.

"Most people thought it would be up to Congress to remedy the family glitch.  But since getting modifications through Congress has proved nearly impossible, advocates have pushed for executive action,” said Julie Rovner of Kaiser Health News. “That is not as foolproof as passing a law and is subject to a challenge through lawsuits."

It is not uncommon where employee-only coverage is affordable but family coverage is not.  Most employers offer family coverage, but many do not subsidize the cost for family members of the employee.  The Kaiser Family Foundation’s 2021 Employer Health Benefits Survey shows premiums and employee contributions have increased significantly.  In 2021, average premiums for employee-only coverage were $7,739, compared to $22,221 for family coverage.  That's nearly $2,000/month!

The IRS will hold a hearing on the proposed rule on June 27.  Assuming the rule is finalized as proposed, the family glitch would no longer exist, and dependents offered unaffordable job-based family coverage could be eligible for more affordable marketplace coverage beginning in 2023.

Click here for the Fact Sheet distributed by the Biden Administration.

Until next time,

Andrew Herman