This year, with the help of enhanced subsidies, states saw record enrollment into individual health insurance plans through exchanges. Lawmakers and the Biden Administration are now seeking ways to not only maintain enrollment levels but to continue to grow them. Current efforts include working to extend enhanced subsidies, looking at solutions on how to best handle the end of the public health emergency, and the potential loss of Medicaid coverage that may come with it. At the same time, the Office of Management and Budget (OMB) is reviewing a proposal that would correct what is known as the ‘family glitch’.
The family glitch was created by the IRS’ interpretation of the ACA’s affordability provision. The ACA set up the implementation of tax credits to keep insurance “affordable” for those that qualify and offset high premium costs. If an individual had the option of employer-sponsored coverage, and it was deemed “affordable,” the individual could not shop on the exchanges and/or receive tax credits. The glitch comes in because this rule also affects the employee’s family. Family members of individuals with “affordable” employer-sponsored coverage could also not shop on the exchange or receive tax credits.
Employers typically do not cover the same share of health insurance costs for family members as they do for employees, so when shopping for family plans, coverage can quickly become unaffordable. Fixing the family glitch would allow for the family coverage cost, not just the individual, to be considered for subsidy eligibility on the Exchange instead of being made to purchase coverage through an employer.
There are approximately 5.1 million people impacted by the family glitch.1 These people are either faced with the difficult decision to forego purchasing insurance for their whole family or purchasing it and facing other financial hardships. Fixing the family glitch is not only beneficial for families to have access to affordable coverage, but also will allow for access to more plan options. If passed, fixing the family glitch will likely drive more enrollments on the individual exchanges. Per the Commonwealth Fund, the current proposed timeline for the family glitch rule (fall 2021) has passed but it could come soon.2 The section 1557 rule is anticipated in April 2022, and the short-term plan rule is slated for August 2022.