Important Update on the Family Glitch

From Beyond the Basics

Since 2013, the “family glitch” has prevented millions of otherwise eligible people from getting financial help to enroll in a marketplace plan. This week, the Administration issued a proposed rule that would fix the family glitch

 

What is the family glitch?

Under the ACA, if a person is offered insurance through their employer that is both affordable and meets minimum value standards, they are not eligible for a premium tax credit (PTC). Employer-sponsored coverage is considered affordable the employee self-only plan costs less than a certain percentage of the person’s household income (the percentage is updated annually; in 2022 it is 9.61%). Due to the way affordability of employer-sponsored insurance is defined by the IRS, if the person’s employer offers family coverage, then the person’s family is also not eligible for a PTC, even if the family coverage costs more than 9.61% of their household income. This is known as the family glitch.
 

What does the proposed rule do?

The proposed rule would change the way affordability of employer plans is determined for family members. Instead of being based on the cost of self-only coverage, it would be based on the cost of family coverage. If the cost of family coverage does not meet the marketplace affordability standard, family members could get a marketplace plan with a PTC, if otherwise eligible.
 
This change could help millions of people—more than half of whom are children—gain access to coverage or more affordable coverage. If the proposed rule is finalized, it would start during the next open enrollment period, which begins on November 1, 2022, for the 2023 plan year.