Getting health insurance for your family or employees is a complicated undertaking. Understanding which laws apply to you and figuring out which plan is right for your company, your needs, or your family can require hours of analysis.
In case it wasn’t complicated enough to navigate eligibility and enrollment requirements, the family glitch rule made healthcare laws a bit more difficult to understand.
What is the Family Glitch Law?
Some people are eligible for premium tax credits in the marketplace based on their household income and whether they have an offer of “affordable” employer-sponsored coverage. The “Family Glitch” law is an IRS rule that was issued in 2013 that based the affordability of a healthcare plan on the cost of employee-only coverage, rather than the cost of family coverage.
Basically, if one member of a family received coverage from their employer that was considered affordable – even if the cost of covering the entire family was unaffordable – the family did not qualify for Affordable Care Act subsidized health insurance.
This means that millions of family members of workers were ineligible to receive premium and cost-sharing subsidies to buy marketplace coverage.
For example, in 2022 the average cost of self-only coverage was $7,911 as compared to a premium of $22,463 for employee-sponsored family health insurance. That’s a difference of over $14,000 that was not taken into consideration for families needing affordable coverage.
Spouses and families were not receiving any employer contribution nor were they eligible to receive a tax credit to purchase coverage. This resulted in many families paying more than they could afford (ACA affordability threshold for employer coverage in 2023 was 9.12% of income) or going without coverage entirely.
Everything has changed just in time for the 2023 open enrollment period.
Family Glitch Fix
At the beginning of 2023, the IRS issued a new rule that gives families the option to purchase affordable health insurance. It took ten years, but the new rule revises the 2013 interpretation and eliminates the family glitch by basing the affordability test for an employee’s family members on the premium cost for family coverage, not the employee only.
This change means that millions of family members can receive federal financial assistance toward the cost of premiums.
While the rules changed for 2023 enrollment, not everyone is aware of the impact of the new regulation, whether for employers or individuals.
What Does the Family Glitch Fix Mean for Employers?
The new IRS regulations do not change employer mandate obligations or penalty risks. However, it may complicate your annual ACA reporting and raise the risk of potential errors within reporting that could lead to penalties. It is always important to work with a reputable benefits administrator who understands how rules like the family glitch law evolve and impact your processes as an employer.
Employers may also need to revise their processes and communications to allow employees to revoke dependent coverage in order to take advantage of the glitch fix for their family.
In addition, employers may need to provide more details and specific information to employees and their families so they can evaluate their options regarding coverage eligibility, cost, and minimum value.
How Does the Family Glitch Fix Impact Individuals?
As an individual consumer, it’s important to gather all of the information about your coverage options. In addition to considering cost comparisons and enrollment timing, you should pay attention to differences in plan provider networks as marketplace coverage may not be as broad as a typical employer plan, and differences in deductibles and out-of-pocket maximums. Marketplace plans may offer higher per-person deductibles.
As an employer, you don’t have to stay on top of all the changing regulations alone. An experienced benefits broker like Advanced Benefit Solutions can do all the hard work for you.
Communication to employees? Finding lower rates? Enrolling and disenrolling employees or their family members? We handle it all.
For individuals, we can shop the available healthcare plans. Marketplace is not your only option, even if your spouse has an employer-sponsored plan. Let us do all the figuring and analyzing for your situation and present you with affordable options at no cost to you.
It’s what we love to do. Get in touch with Advanced Benefit Solutions today for a free quote on your health insurance as an individual or for your employees.