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Under the Affordable Care Act, federal financial assistance to buy health insurance on the Marketplace is available to individuals who do not have access to insurance through a public program or their employment, or who only have access to unaffordable employer coverage. Currently, employer coverage is considered affordable if the premium of the lowest-cost, self-only coverage option does not exceed roughly 10% of an employee's household income.
What is known as the “family glitch” occurs because this analysis solely considers the cost of self-only coverage, not family coverage. If self-only coverage is considered affordable, the employee and his or her family members are disqualified from receiving financial assistance on the Marketplace, even if the cost of adding dependents to the employer coverage would exceed the 10% threshold of the family’s income.
The IRS has proposed rules that will fix this glitch. The proposed rules would require a separate determination of affordability for family coverage. Even if self-only coverage is affordable for the employee, the remaining family members could still receive financial assistance if the cost of family coverage compared to the household income was unaffordable. The White House estimates that fixing this glitch will result in 200,000 uninsured people gaining coverage and nearly 1 million receiving financial assistance.
Formal comments on the proposed rule are due on June 6, 2022. If finalized, qualifying families would be eligible for financial help beginning in 2023.