What Is The Family Glitch? How Can I Qualify?
In early 2023, a recently implemented regulation from the IRS came into effect, presenting countless families with an opportunity to obtain affordable health insurance and make significant decisions regarding their healthcare coverage. This new rule proved timely as it coincided with the 2023 Open Enrollment Period (OEP), resulting in a remarkable enrollment figure of 16.3 million individuals who secured plans through the Affordable Care Act Marketplaces. Moreover, families may now also benefit from a Special Enrollment Period (SEP) if their employer-provided coverage undergoes changes outside of the annual Open Enrollment Period.
According to the Affordable Care Act (ACA), individuals are ineligible for premium tax subsidies for Marketplace insurance if their employer offers health coverage deemed "affordable." To qualify as affordable, the employee's contribution towards insurance premiums must not exceed 9.5% of their income (adjusted for inflation). This provision is commonly referred to as the ACA's "firewall." However, the "family glitch" arose due to the IRS's interpretation in 2013, which determined affordability based solely on the cost of individual coverage, disregarding the additional expenses associated with family coverage. Consequently, even if family coverage was unaffordable, if the employee's coverage was considered affordable, other family members were not eligible for financial assistance in acquiring marketplace coverage. This glitch impacted an estimated 5 million individuals, predominantly low-income families. The 2013 interpretation faced substantial criticism from various stakeholders, including policymakers and advocates.
To rectify this issue, the IRS introduced a new rule that revises the 2013 interpretation and eliminates the family glitch. Under the revised rule, the affordability test for an employee's family members is now based on the cost of family coverage rather than individual coverage. This change has far-reaching implications, enabling millions of family members, employees many types of occupations, to receive federal financial assistance towards premiums and deductibles. Most importantly, the new rule empowers families to make informed choices by providing them with a range of affordable and comprehensive health coverage options.
