What is the family glitch? Under the ACA if you are offered group health insurance through your employer, you’re generally not eligible for a premium tax credit. UNLESS, your costs with your group health insurance are deemed “unaffordable” (if they exceed a certain percentage of your income).
The family glitch refers to the “glitch” wherein monthly affordability for family members’ premiums wasn’t taken into consideration. In other words, it didn’t matter how much the employee would have had to pay to purchase family coverage. The family members were not eligible for exchange subsidies if the employee could get insurance for less than 9.61% of the household’s income in 2022.
A plan may be deemed affordable for an individual but sometimes premiums can skyrocket when dependents are added. Without the option for a premium tax credit for a marketplace plan, many families are left with no affordable option. And, of course, although employers are required to extend group coverage to dependents, this does not apply to spouses. So, employees’ spouses can often be left out in the cold!
In 2022, employer-sponsored coverage is deemed “affordable” if the cost for employee-only coverage would be less than 9.61% of household income. The IRS reassesses this threshold annually. In 2023, it will drop to 9.12%.
The family glitch fix will be in effect as of 2023.- So when families apply for 2023 coverage during the open enrollment period in the fall of 2022, the new rules will be used to determine whether anyone in the household qualifies for a premium subsidy.
In 2023, if a family has to pay more than a 9.12% of household income, they could be eligible for premium tax credits in the marketplace.
There will be a separate affordability determination for the employees and their families. So it depends how an employer subsidizes the cost of family coverage. It’s possible that coverage could be considered affordable for the employee but not for family members. In that case, family members would potentially be eligible for a premium tax credit in the marketplace. Still, the employee would not.
Who Will This Affect?
Somewhere between two million and six million people are impacted by the family glitch. Fortunately many have been able to use the Children’s Health Insurance Program for dependents. But it’s likely that at least half of those affected had no other option available.
Not a Perfect Fix…
If a family has multiple different forms of insurance (employer sponsored plans, Medicare, Marketplace, etc…) the family’s total premium costs could still be somewhat “unaffordable”.
However, the extended and expanded premium tax credits under the American Rescue Plan Act have been extended through 2025. It is likely that you will be able to enroll in a plan with a much lower premium than in years past.
In most states, open enrollment begins Nov 1. And runs through January 15th. However, for states that use their own sites as opposed to healthcare.gov, dates may be slightly different. If you are unsure whether to use healthcare.gov or a separate site, when you enter your information into healthcare.gov you may be redirected, if appropriate.
Jesse Smedley is the Principal Broker for iHealthBrokers and the founder, president, and CEO of Smedley Insurance Group, Inc. and iHealthBrokers.com. Since the inception of SIG in 2007, Jesse has been dedicated to helping people save money on their health insurance by providing them with resources to educate themselves on all their health insurance options, both under age 65 and Medicare beneficiaries. He is featured in many publications as well as writes regularly for expert columns regarding health insurance and Medicare.