Fixing the “Family Glitch”: Enabling Families to Pay Less for Health Insurance Premiums

Key Takeaways:

• The federal government issued a regulation that took effect on December 12, 2022. It resolved the “family glitch”.
• This rule prevented the family members of millions of workers from purchasing affordable health insurance through the marketplace.
• Millions of Americans may now qualify for ACA coverage and financial help.
• Almost half of those eligible are low-income workers’ families.

What is ACA’s “family glitch?” 

The “Family Glitch” is a provision in the Affordable Care Act (ACA). It can prevent some families from buying affordable health insurance. ACA defines “affordable” health insurance and determines who is eligible for premium tax credits.

Under the ACA, an employee can get “affordable” coverage through their employer. Then the employee and their family members are not eligible for premium tax credits. This can lead to a situation where an employee’s coverage through their employer is “affordable.” But coverage for the employee’s family members is not. 

This is the “Family Glitch.”

Fixing the “family glitch.”

The American Rescue Plan Act of 2021 was recently signed into law. It includes a provision that would address the “Family Glitch” by allowing more families to be eligible to receive premium tax credits. ‘

The proposal would change the definition of “affordable” health insurance. It considers the cost of coverage for family members rather than the cost for the employee.

Here are the key points to remember about this:

• Individuals and families offered employer coverage that does not meet the minimum value criteria are eligible for premium tax credits. That is even if the coverage offered is reasonable.
• Large businesses are not penalized if family coverage is not of minimum value. Still, they must provide employees with lesser-value self-only coverage to avoid employer mandate penalties.
• The employee’s plan cost and that of family members will be determined separately.  As a result, it may be considered reasonable for the employee but not for family members. In that case, family members might be eligible for a premium tax credit even though the employee wouldn’t.
• Does this affect a company’s responsibility under the ACA’s employer mandate? No. The ACA’s employer mandate does not change due to the new rule. These new guidelines do not require employers to provide affordable coverage to dependents of ACA full-time employees.

• For example, a family has some members on a marketplace coverage or covered by other policies and Medicare. The total premium payments for the family may be relatively expensive. Currently, premium tax credits guarantee that households cannot spend more than 8.5% of their income on the benchmark plan. But they are only valid for premiums paid on the marketplace.
• The ACA mandates group medical plans that provide coverage to employees’ children until the child’s 26th birthday. That is regardless of the child’s dependent status. Rules do not consider the cost of covering a non-dependent child when determining the cost of the employer coverage.
• Many of these families will now be eligible for plans with zero premiums. All thanks to the regulation of PTC subsidies under the Inflation Reduction Act. It leads to significant household savings when costs for other essentials are growing.

How will families benefit from fixing the “family glitch”? 

Suppose the employee’s share of the premium for self-only coverage is less than 9.83% of their household income. Then the employer plan is deemed affordable. And neither the employee nor the family members of an employee are eligible for premium tax credits on the marketplace.

The proposed rule will change this. If the cost of family coverage through the employer plan exceeds 8.5% of the employee’s household income. Then the employee and their family members will be eligible for premium tax credits on the marketplace.

• This change in the law would enable more families to pay less for health insurance premiums. It also provides substantial coverage of physician and inpatient hospital services. It allows more families to be eligible for premium tax credits. So, the provision would help make health insurance more affordable for millions of Americans.
• Additionally, the American Rescue Plan Act also established a new employer mandate. It will require certain large employers to provide affordable health insurance to their employees or pay the penalty. It further encourages the employer to provide fair coverage to employees and their family members.
• More families can access affordable health insurance through employer plans or the marketplace. All thanks to the proposed rule change and the new employer mandate in place.
• It’s worth noting that this change in law affects only coverage purchased during an open enrollment period. Suppose an employee signs up for coverage outside open enrollment, and the employer’s plan is deemed not affordable. In that case, the family will not be eligible for a tax credit to purchase coverage on the marketplace.

Overall, the “Family Glitch” fix would help make health insurance more affordable for millions of Americans. It allows more families to be eligible for premium tax credits. This would help families access the coverage they need to pay for physician and inpatient hospital services. And it would help reduce the overall cost of health care for millions of people.

FAQS:

Q: What is the ACA Family Glitch?

A: The ACA Family Glitch refers to a flaw in the Affordable Care Act (ACA) that affects some families who are offered health insurance through their employer. The glitch occurs when the cost of the employer’s insurance plan for the employee is deemed affordable, but the cost of coverage for the employee’s family is not affordable. This can leave some families without access to affordable health insurance.

Q: How does the ACA Family Glitch work?

A: Under the ACA, employers with 50 or more full-time employees are required to offer affordable health insurance to their employees and their dependents. However, the affordability calculation only takes into account the cost of coverage for the employee, not the cost of coverage for the employee’s family. This means that even if the employee’s insurance plan is deemed affordable, the cost of coverage for their family may not be, leaving the family without access to affordable health insurance.

Q: Who is affected by the ACA Family Glitch?

A: The ACA Family Glitch affects families who are offered health insurance through their employer and who cannot afford the cost of coverage for their family. This is most likely to affect families with low to moderate incomes.

Want to Learn More? Health Plans in Oregon is here to help you. Call us at 503-928-6918. Our assistance is at no cost to you.