A Fix to the Family Glitch

President Jospeh Biden has issued an executive order instructing the Department of Treasury (DOT) to review regulations that pertain to subsidy eligibility on the Health Insurance Marketplace (Marketplace). The primary purpose of the executive order is to determine if regulatory changes can be made to fix the so-called “family glitch.”

In part, eligibility for subsidies on the Marketplace is based on whether a person has access to affordable health insurance coverage through an employer. In 2022, coverage is considered affordable if a person has to pay no more than 9.61% of their income for the lowest-priced group health plan available to them. If coverage is affordable from the employer, then that generally eliminates access to subsidies for a Marketplace plan.

This is where the family glitch comes into play. When determining if coverage is affordable, the employee-only premium rate is utilized. If coverage is affordable to the employee, then the employee, their spouse, and their children are ineligible for subsidized coverage on the Marketplace.

The family premium is not used to determine affordability of coverage, hence the terminology “family glitch.” An employer may contribute very little or nothing towards coverage for a spouse or child, and that spouse or child may lose eligibility for subsidies because coverage is affordable at the employee-only premium rate.

The executive order “directs the Secretary of the Treasury to review all existing regulations and other agency actions to determine whether the actions are consistent with the policy to protect and strengthen the ACA and, in particular, review policies or practices that may reduce the affordability of coverage or financial assistance for coverage, including for dependents.”

According to some estimates, as many as 5.1 million people could gain access to coverage if the family glitch is closed. It is believed by many experts that changing the rules for determining how coverage is affordable to family members of an employee is the most significant change to the Affordable Care Act (ACA) that the Biden administration can make without requiring action from Congress.