Several million Americans have been deemed ineligible for the Affordable Care Act’s subsidies due to the ACA “family glitch”. A proposed rule by the federal government is now under review and could be the way to fixing the issue in 2023.
What Is the ACA “Family Glitch”?
The ACA “family glitch” is referring to a rule that bases eligibility for a family’s insurance premium subsides on whether available employer-sponsored insurance is affordable for the employee only, even if it’s not actually affordable for the whole family.
This means affordability is determined based on the one person directly receiving the employer-sponsored plan, and the glitch does not consider the cost to add family members (dependents).
A person is only eligible for premium subsidies if they are not eligible for affordable employer-sponsored health insurance. So, if a family’s employer-sponsored coverage offer is considered “affordable” (based on the cost to cover just the employee) and provides minimum value, the entire family is ineligible for subsidies.
Family members would remain ineligible for subsidies if the employee could receive employer-sponsored insurance just for themselves, for less than 9.61% of the household’s income in 2022. As long as what the employee has to cover is “affordable”, the cost for the family could reach 25% or even more of their household income, still without access to premium subsides.
The family is left with two options: Either pay full price in the individual market or pay what the employer-sponsored plan requires to cover them. Both options have been described as financially senseless.
A 2023 Rule Change Could Be Coming
As of March 2022, the federal government has proposed regulatory changes to fix the glitch, and details were recently published.
The gist of the change is simple: Instead of basing affordability for a family’s employer-sponsored health plan on only the employee’s cost for coverage, the employee’s family members, if any, would also be taken into consideration when determining affordability to provide subsidies to family members.
The Key Takeaways of the Proposal
The glitch fix is expected to be in effect in 2023. If a family would pay more than a certain percentage of their household income (currently 9.61%), for their employer-sponsored plan, they may be eligible for premium tax credits.
The affordability determination would be separated between just the employee (self-only coverage) and then for the family members (based on their whole cost). Depending on how an employer subsidizes the cost of covering the family, it’s possible family members could be eligible for a premium tax credit, but not the employee, if affordability is only determined for the employee.
Large employers would still have to provide affordable, minimum value coverage to their full-time employees, and offer coverage to those employees’ dependents (offering coverage to spouses is optional).
Another thing to note: a family’s total premium costs could be unaffordable to them if some members are on a marketplace plan and others are covered by one or more employer-sponsored plan and/or Medicare. Also, the cost to cover non-dependent family members would not be taken into consideration. For example, young adults can remain on a parent’s health plan until they turn 26 but are generally not considered a tax dependent for the last few years of that window.
In April, the White House published a statement indicating that they expect about 200,000 uninsured people to gain coverage as a result of the proposed family glitch fix. And they anticipate that “nearly 1 million Americans would see their coverage become more affordable” under the new rules.
Lastly, it’s important to note fixing the glitch will not result in subsidies for everyone who is currently caught by the family glitch; some will still find coverage to be unaffordable.
One Last Thing on the “Fix”
We want to emphasize one truth: there is not a one-size-fits-all solution here. While the ACA “family glitch” fix would be good news to our agents and the industry, as with all aspects of health care reform and law, it’s complicated.
If you have any questions pertaining to this news or what you might expect concerning your clients, if you’re an agent with Carolina Senior Marketing, please feel free to reach out to us. Our Health Insurance Specialist focuses on the Under-65 market and can assist you. Just call us at (919) 460-6073 and follow the prompts.
As your North Carolina Medicare FMO, Carolina Senior Marketing is committed to serving you, the Independent Insurance Agent. If you’re not an agent with us, we’re still glad to meet a new face and answer any of your questions you may have. Please email us at firstname.lastname@example.org to reach out.