In early April, the Biden administration proposed a solution to the “family glitch” in the Affordable Care Act, a problem that Democrats and ACA advocates have complained about for years.
Currently, people who do not have access to affordable health insurance through their jobs may qualify for a premium tax credit to purchase coverage on the ACA’s health insurance marketplaces. However, current regulations define employer-based insurance as “affordable” if coverage only for the employee and not for family members is affordable, making family members ineligible for the premium tax credit.
The “family glitch” affects about 5 million people and has made it impossible for many families to use the premium tax credit to purchase an affordable, high-quality Marketplace plan.
Should the proposed rule be finalized, family members of workers with affordable self-only coverage but unaffordable family coverage may qualify for premium tax credits to buy an ACA plan, according to a statement from the White House. The proposed rule would extend marketplace tax credits to only the family members of workers who are not offered affordable job-based family coverage.
“Most people thought it would be up to Congress to remedy the family glitch. But since getting modifications through Congress has proved nearly impossible, advocates have pushed for executive action,” said Julie Rovner of Kaiser Health News. “That is not as foolproof as passing a law and is subject to a challenge through lawsuits.” 2
Julie Rovner on KHN’s ‘What the Health?’
It is not uncommon where employee-only coverage is affordable but family coverage is not. Most employers offer family coverage, but many do not subsidize it for family members, which keeps the cost high for workers and their families.
The Kaiser Family Foundation’s 2021 Employer Health Benefits Survey shows that average premiums and employee contributions have increased significantly. In 2021, average premiums for employee-only coverage were $7,739, compared to $22,221 for family coverage. The change is expected to be especially beneficial to small business owners and their workers. Surveys of small businesses show that the cost of healthcare is a top concern and that alleviating the burden of high costs will help them grow.3
The IRS will hold a hearing on the proposed rule on June 27. Assuming the rule is finalized as proposed, the family glitch would no longer exist, and dependents offered unaffordable job-based family coverage could be eligible for more affordable marketplace coverage beginning in 2023.
