Biden administration proposes fix for ACA’s ‘family glitch’

Federal agencies on Tuesday proposed a rule to fix the so-called “family glitch” that can make it expensive for dependents to obtain coverage under the Affordable Care Act.

Currently, people who do not have access to “affordable” health insurance through their jobs may qualify for a premium tax credit to purchase affordable, high-quality coverage on the ACA’s health insurance marketplaces. Current regulations consider employer-based health insurance affordable if the coverage solely for the employee, and not for family members, is affordable, making family members ineligible for a premium tax credit even though they need it to afford high-quality coverage through the marketplace.

For family members of an employee offered health coverage through an employer, the cost of that family coverage sometimes can be expensive and make health insurance out of reach. The family glitch affects about five million people and has made it impossible for many families to use the premium tax credit to purchase an affordable, high-quality marketplace plan.

If the proposed rule is finalized, family members of workers who are offered affordable self-only coverage but unaffordable family coverage may qualify for premium tax credits to buy ACA coverage. If implemented, an estimated 200,000 uninsured people would gain coverage, and nearly one million Americans would see their coverage become more affordable. Many families would be able to save hundreds of dollars a month because of lower premiums.

The proposed rule would represent the most significant administrative action to improve the implementation of the ACA since its enactment, according to the Biden administration. However, the proposal has its critics.

Rep. Virginia Fox, R-N.C., the top-ranking Republican on the House Education and Labor Committee, said “the vast majority of the 5.1 million Americans who fall into the family glitch are already insured” and that the changes “would weaken the firewall between the ACA and employer-sponsored insurance.”

If finalized, she added, the proposed change would “push millions off their employer-sponsored plans and onto taxpayer-subsidized plans unnecessarily chip away at employer health coverage, which has been the backbone of health insurance for decades.”

The proposal does not address funding for expanded marketplace subsidies. If the rule is finalized, the expanded financial assistance would be available for ACA plan coverage starting on Jan. 1, 2023.

The proposed rule and an IRS fact sheet will be published in the Federal Register on Thursday.