Biden administration announces finalized rule to fix “family glitch” in ACA
"Now, the Treasury Department is finalizing that fix so that the law works the way Congress intended and the cost of coverage comes down for families all over the country,” President Joe Biden says in statement.
The Biden administration on Tuesday finalized a rule intended to fix the so-called family glitch in the Affordable Care Act. The U.S. Treasury Department and the IRS first proposed the fix in April.
“Now, the Treasury Department is finalizing that fix so that the law works the way Congress intended and the cost of coverage comes down for families all over the country,” President Joe Biden says in statement. “Starting next month, Americans can sign up to take advantage of this change. About one million Americans will either gain coverage or see their insurance become more affordable as a result of the new rule.”
The new interpretation focuses on the part of the act that determines a family’s eligibility for tax credits based on the cost of an individual’s work-sponsored health insurance plan rather than the cost of the plan for the whole family. Since the law was enacted more than a decade ago, people who have access to health insurance plans through their employers are supposed to get price breaks on the ACA marketplace if they pay more than 9.5% of their income toward monthly premiums.
But for years, the IRS arrived at that calculation based on the cost of a work-sponsored health insurance plan for a single individual instead of a more expensive family plan. That meant many families didn’t qualify for the tax breaks offered through the ACA.
The average annual premium for a single worker was just over $7,700 in 2021 but topped $22,000 for a family, according to the Kaiser Family Foundation. Some 5.1 million Americans, a majority of them children, are affected by the family glitch, according to Kaiser. In addition to affordability of job-based coverage, the final rule specifies that family members must be offered policies that meet minimum value requirements and have substantial coverage of hospitalizations and physician services, says Karen Pollitz, a senior fellow at Kaiser.
Read more: ACA rates expected to substantially increase in 2023
Republicans say the remedy contradicts the text of the law and that it will significantly increase spending on Obamacare plans. They also say it would lead to a major shifting of people out of employer-based plans and into government-subsidized ones.
However, the fix is expected to provide more affordable coverage to about one million Americans, says Xavier Becerra, secretary of Health and Human Services. “Our goal is simple: leave no one behind and give everyone the peace of mind that comes with health insurance,” he says.