The Kaiser Family Foundation estimates that the “family glitch” currently affects more than 5.1 million Americans. Due to the narrow way that the IRS interpreted the affordability of health coverage as outlined in the Affordable Care Act (ACA), many people who haven’t been eligible to get ACA tax credits and affordable insurance through the Healthcare.gov marketplace, will now be able to get coverage. The new rule to fix the family glitch is expected to go into effect before the end of 2022.
Imagine this scenario. Tom gets great insurance through his company and his boss pays 100% of his insurance premium because he wants to be sure all his employees are covered.
Tom’s wife Amanda, and their two kids, also need coverage under Tom’s insurance. Here’s the problem. The cost to add Amanda and the kids to Tom’s plan is $1,100 per month. This is unfeasible for the couple since their combined income is around $5,500 per month.
One would think that Amanda and the kids could just go through the Healthcare.gov marketplace and get an affordable health plan. But the fact is, she and the kids have not been eligible to receive Affordable Care Act tax credits to get insurance through the marketplace since they are technically eligible to get coverage on Tom’s plan — at a mind-numbing cost of $1,100 per month.
Under the ACA’s affordability test, Amanda and the kids could have gotten affordable coverage through the healthcare marketplace, if the cost of Tom’s portion of his insurance premium exceeded 9.61% of the entire household income. But since the amount that Tom has to pay for insurance coverage each month is zero (remember his generous boss?), and $0 is definitely not more than 9.61% of $5,500, Amanda and the kids are out of luck.
Now you might be asking, “wouldn’t the high cost to add Amanda and the kids to Tom’s plan be used for the affordability test? $1,100 is definitely more than 9.61% of their monthly household income.”
Well that’s the “family glitch.” When the act was written, it didn’t take into account the affordability of health insurance for dependents, only the employee’s cost of health insurance — measured against the entire family’s income. Very glitchy.
So here’s what’s changing. With the Biden Administration’s final rule on the “Family Glitch Fix”, families will get a break. When the new rule takes effect, the affordability of insurance premiums will be based on the cost of premiums to get all dependents covered, not just the employee’s cost for his/her/their own coverage.
This means that many more people will be able to get ACA Tax Credits and get insurance through the Healthcare.gov marketplace. The “Family Glitch Fix” will take effect on January 1, 2023 which means that individuals and families can sign up for more affordable plans during the upcoming Health Insurance Open Enrollment which runs between Nov. 1, 2022 and Jan. 15, 2023.
To find out what the Family Glitch Fix might mean for you and your family, make an appointment with an Ark Insurance agent today. Get an appointment on our calendar to avoid the rush.Navigating the complex world of health insurance can be daunting. The Ark Insurance Solutions team has the skill and experience to guide you. We’ll help you compare health plans to make the best decision based on your unique circumstances and budget. Give us a call at 801-901-7800 or click here to schedule an appointment with us.