On October 11, 2022, the Biden administration finalized a rule that fixes the “family glitch” in the Affordable Care Act.
This change will allow many people under the age of 65 access to affordable health care coverage, just in time for this year’s Open Enrollment Period (OEP).
If you have clients who were looking to enroll in a subsidized Affordable Care Act (ACA) plan but weren’t able to due to the previous eligibility calculations, they may now qualify!
What Is the Family Glitch?
Since 2013, eligibility for the ACA’s premium tax credit (PTC) for families was calculated based off of an individual’s income and the cost to cover the individual. An employee has been eligible for a PTC if they spent more than a certain percent of their income (9.12 percent in 2023) on their employee health coverage. However, these calculations did not take into consideration the premiums for a group/family plan. A family plan could cost more than that percentage of the employee’s income, but because the individual health care plan cost less than it, they were not eligible to enroll in subsidized coverage (regardless of the number of dependents on the plan). This gap in coverage has been referred to as the “family glitch.”
A family plan could cost more than that percentage of the employee’s income, but because the individual health care plan cost less than it, they were not eligible to enroll in subsidized coverage.
The New ACA Family Thresholds for 2023
The U.S. Treasury Department and Internal Revenue Service (IRS)’s finalized rule fixes the family glitch by creating a separate affordability test for family members that is based on the employee’s contribution toward family coverage and the family’s household income. This new, separate value threshold gives family members access to subsidized coverage if the employee’s contribution toward coverage exceeds a certain percentage (9.61 percent in 2022 or 9.12 percent in 2023) of the household’s income. This rule goes into effect in 2023, just in time for the OEP on November 1.
Family members involved in the affordability calculation will only include those in the employee’s tax family — the employee, a spouse filing jointly, and any dependents. Additionally, the marketplace will assess:
- If the employee has an offer of affordable employee-only coverage
- If family members have an offer of affordable family coverage
- If those family members have an offer of affordable coverage from another employer
The new legislation also creates a separate minimum value test for family members that states:
- The plan’s share of total allowed costs of benefits provided to the family member must be at least 60 percent
- The plan must provide substantial coverage of inpatient hospital services and physician services
These updated requirements will be relevant for those enrolling in coverage for the 2023 plan year. Be sure to notify your clients about these changes before the OEP!
Providing Relief for Families
Based on an analysis by the Kaiser Family Foundation (KFF), an estimated 5.1 million individuals fall into the family glitch. Most of these individuals are women and children. Upon the rule’s finalization, President Biden stated, “About one million Americans will either gain coverage or see their insurance become more affordable.”
This is a major improvement to the ACA because some families need premium assistance for coverage. Coverage costs can account for up to 16 percent of the income of someone in the family glitch.
New thresholds will allow more families to properly account for and reduce their health care spending starting in 2023.
Historically, low-income and low-wage workers have been disproportionally affected by the family glitch because they tend to spend more on health insurance if they are unable to access cost-sharing reductions such as PTCs. Low-wage workers also typically do not have access to employment options with subsidized health care. New thresholds will allow more families to properly account for and reduce their health care spending starting in 2023.
With this news, we encourage you to get in touch with your clients under age 65 who may be looking for marketplace coverage. If they were ineligible for subsidies in the past, review the new guidelines with them. Double-check if they may be eligible for cost-sharing reductions following this update.
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The resolution of the family glitch is monumental for those whom depend on the ACA for access to affordable health care options. Those who may have been uninsured or spending a significant amount of their income on health care should begin to see some relief from this financial stress.
The health care market is constantly changing, and at Ritter we are dedicated to staying on top of all the updates that could affect your clients! Partner with Ritter today to have access to a committed under-65 sales staff, a library of tools and resources, and top-of-the-line technology that could help you be the best agent you can be for your clients.