Proposed changes to the ACA premium-tax credits could offer relief to families hurt by the “ACA Glitch”
By Ashley Snodgrass, Employee Benefits Analyst
When the Affordable Care Act (ACA) passed to become a law, premium tax credits or subsidies were created to allow the government to pay a portion of individual marketplace premiums for those enrolling in the marketplace. The purpose is to fulfil the mission of the Affordable Care Act by making insurance more affordable and accessible.
What is the “ACA Glitch”? Employer-sponsored coverage plays an important role here. When employers are determining how much employees will pay for their insurance, large employers are required to make coverage Affordable by Federal standards, or potentially face a penalty. When an employer offers Affordable coverage to employees, those employees are not able to receive a subsidy for individual coverage (in theory, because the employee already has an Affordable offer of coverage available to them).
However, what happens with individuals with family members? Herein lies the crux of the “ACA Glitch”. Let’s say an employer allows employees to enroll their spouses/domestic partners and children in a group health plan. What if the cost of the coverage offered to dependents is really high? There are no requirements surrounding how much of family insurance costs employers are required to pay vs. how much of the cost is passed on to employees and their dependents. By allowing employees to enroll their spouse/domestic partner and children in the health plan, those dependents are now ineligible for subsidies, even if the employer-sponsored coverage it is not affordable. In order to qualify for a subsidy, an individual must not have an employer plan available to them.
Proposed changes aim to fix this glitch by making family members of employees who are offered affordable employee-only coverage, but unaffordable family coverage, able to receive premium tax credits to afford coverage on the individual market.
We have yet to see if and how employers will be impacted by this change. The Treasury Department and Internal Revenue Service are working on finalizing rules.
IRS & Treasury Rule: https://public-inspection.federalregister.gov/2022-07158.pdf
About the Family Glitch (2021): https://www.healthaffairs.org/do/10.1377/forefront.20210520.564880/
About the Family Glitch (2022): https://www.fiercehealthcare.com/payers/biden-administration-releases-proposed-rule-fix-longtime-aca-family-glitch