On October 11, 2022, the Biden Administration issued final regulations which fixed the “family glitch” which has existed for the past nine years. The “glitch” began when the Obama Administration’s Treasury Department interpreted the Affordable Care Act (ACA) in the following way:
The only way an employee and their dependents may be eligible for a premium subsidy on an ACA exchange is if the employee’s cost of the lowest-cost self-only plan offered by their employer exceeds the threshold of 9.5 percent of the employee’s household income. (For 2023, this percentage has been lowered to 9.12%.)
In other words, even if the cost of a family plan exceeded the income threshold, an employee-only employer-sponsored plan was below the threshold, the entire family becomes ineligible to receive premium tax credits on the health insurance exchanges.
Over time, the realization that millions of low- to middle-income families would not be able to afford family coverage became a significant concern to ACA supporters, consumer groups, and consumers. This concern eventually made its way to Congressional leaders, and we started to see the introduction of legislative proposals to amend the statute.
So now, if an employee and their dependents are offered a family plan by the employer – and if the cost of the lowest-cost employer-sponsored family exceeds 9.12 percent (for 2023) of the employee’s household income – the employee’s dependents will be eligible for a premium subsidy through an ACA Exchange. However, if an employee is still offered a self-only plan in which the cost of the plan does not exceed 9.12 percent of the employee’s household income in 2023, the employee is still not eligible for a premium subsidy, even though the employee’s spouse and dependents may be eligible.
- An individual and their family are currently enrolled in an employer health plan with coverage effective dates of July 1, 2022 – June 30, 2023. The family has a projected income of $80,000 annually. The employee pays $7,500 annually for their self-only employer sponsored plan (7,500/80,000 = 9.4%). The self-only employee coverage is considered unaffordable and therefore the individual will be eligible for subsidies on the Exchange.
- The cost to cover the family on the employer sponsored coverage is $9,500 annually (9,500/80,000 = 11.9%). The family coverage is also considered to be unaffordable and therefore the family members are eligible for subsidies on the Exchange.
While the rule has been finalized, GetInsured was able to quickly deploy the updated logic to state exchange clients to enable accurate eligibility determinations. As a result, consumers applying for 2023 coverage during the open enrollment period in GetInsured client states will receive proper eligibility determination for subsidies, including subsidies for those previously falling into the ‘family glitch’ category.