End of the ACA “Family Glitch”
A critical aspect of of employer-sponsored health insurance plans that has long baffled families is the "Family Glitch" which emerged from the Affordable Care Act (ACA) and significantly influenced the affordability of health coverage for many American households. This glitch, embedded in the health insurance framework, has limited the accessibility of affordable health care for families across the nation, but has recently been overturned.
The "Family Glitch"
The "Family Glitch" primarily revolved around the way the affordability of employer-sponsored health insurance was assessed. Under the original ACA guidelines, the affordability of a health plan for an entire family was determined solely based on the cost of covering the family member who is the employee. This meant that if the cost of the employee’s individual coverage was deemed affordable, then the entire plan, including costs for family members, was also considered affordable, regardless of the total cost. This interpretation often left families in a bind, where the employee could afford their individual coverage, but not the additional cost to cover family members. However, because the employee-only coverage was affordable, these families were ineligible for Premium Tax Credits (PTC).
In October 2022, a new Treasury regulation redefined the affordability standard for employer-sponsored coverage, taking into account the cost of covering the entire family. This amendment extends the reach of health insurance affordability, allowing more families to qualify for PTC. This change addresses a critical gap in the ACA and opens the door for many to access more affordable family health coverage.
What is Premium Tax Credit (PTC)?
Premium Tax Credit is a tax credit claimable by filing Form 8962 with your income tax return that reduces the burden of monthly premiums for health plans purchased through the ACA marketplace.
Eligibility for PTC is not universal; it hinges on several criteria including income level, which must be between 100% and 400% of the federal poverty line, citizenship or lawful presence in the U.S., and not being incarcerated. Additionally, individuals must not be able to afford health insurance through an employer or a government program like Medicare. The introduction of PTC was a game-changer in health insurance, offering financial relief to millions who who could not afford coverage.
Determining Affordability and Eligibility
For the 2023 plan year, if the cost of the employee’s family coverage exceeds 8.39% of the household's income the family members can be eligible for PTC.
This change expands the eligibility for PTC to many families who were previously caught in the "Family Glitch." By considering the actual cost burden of family coverage, the new standard aims to make health insurance more accessible and affordable for a broader segment of the population. This adjustment in the affordability calculation is a significant step towards ensuring that more families can benefit from the financial support offered by PTC and secure comprehensive health coverage.
Options for Mixed Eligibility Households
Households where some members are eligible for PTC while others are not are increasingly common with the recent changes to the "Family Glitch." In such cases, families have several options. One possibility is to enroll eligible family members in a marketplace plan claiming PTC, while others remain on the employer-sponsored plan without claiming PTC. This can optimize the overall cost and coverage benefits for the family. Alternatively, the entire family can choose to enroll in the employer-sponsored plan if it offers better coverage or is more cost-effective overall, even for those eligible for PTC. It's important for families to carefully evaluate their specific needs, comparing the coverage and costs of marketplace plans with PTC against the employer’s plan, to make the most informed decision for their health care and financial well-being.
Applicability and Enrollment Options
The changes to the "Family Glitch" apply uniformly across all states, whether they use the federal HealthCare.gov platform or have their own state-run marketplaces like Covered California. This ensures a consistent approach to health insurance affordability and PTC eligibility across the country.
As these changes take effect, it's important for families to explore their enrollment options. Those newly eligible for PTC due to the revised affordability standard can enroll in a marketplace plan during the annual open enrollment period. Additionally, qualifying for a Special Enrollment Period (SEP) allows for plan changes outside the usual enrollment window, triggered by specific life events like changes in income or family size.
The policy shift addressing the "Family Glitch" is a significant stride towards making health insurance more accessible and affordable for American families. It's a reminder of the dynamic nature of health insurance policies and the importance of staying informed. We are committed to guiding our clients and community through these changes. We encourage you to reach out to our licensed insurance agents for personalized guidance for Medicare, Covered California, and any other health insurance.
