ACA Health Insurance Family Glitch Addressed



The intention of the Affordable Care Act was to increase the affordability of health care and reduce the number of people who had no health care coverage due to cost. Like all large pieces of legislation, however, the ACA had gaps and oversights that prevented it from fully accomplishing its goals. One of these issues has come to be called the “family glitch,” and the current administration is proposing a new rule to finally fix it.

The Existing Problem

The problem that experts call the “family glitch” is caused by the current means of determining affordability under the Affordable Care Act. This fault has resulted in many family members doing without health care coverage even when they have the opportunity to be covered under a spouse or parent’s group health insurance through work. This is because the determination of whether affordable coverage is offered has been based on how much you would pay under your employer’s plan to cover only yourself. The affordability criteria has not included accounting for how expensive it might be to add your family to your group plan.

Basing affordability only on the cost of covering the employee alone overlooked how most employer-sponsored healthcare plans work in the real world. Likely, the main thing that makes your health insurance affordable for you is the amount your employer contributes toward your premiums. However, your employer probably does not provide the same level of contribution to the premiums of your dependents, as the law does not require this. Therefore, having to cover the total cost of dependent coverage without your employer’s contribution can make adding your spouse or kids too expensive.

Affordability is one of the key requirements under the Affordable Care Act to determine whether someone shopping on the Health Insurance Marketplace has access to qualified non-Marketplace health care plans. If your employer’s plan was judged “affordable” when covering just yourself, that could prevent your dependents from getting subsidized Marketplace coverage, even if adding them to your employer’s plan would make your premiums unaffordable.

The Proposed Solution

The answer to this problem is making affordable Marketplace health plans, including those supported by federal subsidies, available to families who have been affected by the so-called glitch. The way the government is trying to do this is through a
newly proposed IRS rule.

What the suggested rule would do is extend the tax credits that were created by the ACA to allow people to buy an affordable health plan through the Health Insurance Marketplace. The availability of these credits has been based on whether you had access to a plan that offered “affordable” coverage for the employee only; with the new guidance, the cost of insuring your dependents will factor into whether an available plan is considered affordable.

Who Could Benefit and How

The intent of the new rule is to allow your dependents to qualify for Marketplace plans in cases where they are technically eligible for coverage under your company health plan but where covering them would not be affordable. If the suggested rule is put in place, it has the potential to help more uninsured people obtain health care coverage. At the same time, it may reduce the cost of insurance for your family if you’ve had to rely on expensive dependent coverage through your employer’s plan.

The rule would apply only to any dependents who are actually related to you. Therefore, the changes would primarily apply to your spouse and children. If you have an uninsured spouse, you could be able to shop for federally subsidized coverage for them on the Marketplace, even if your employer offers coverage for dependents. This could be especially helpful for families whose household income makes them ineligible for state benefits or assistance of any kind.

Maybe your family has been paying huge premiums to include your dependents on your company’s health care plan; if the proposed rule is approved, you may be able to move them to a more affordable Marketplace plan, potentially saving you a lot of money. The administration is estimating that nearly 1 million people may be able to reduce their health insurance costs this way. Keep in mind that only health care premiums for dependents would qualify for potential tax credits if this new rule takes effect; if your employer’s plan meets the minimum requirements of coverage and affordability for you, the cost of your premiums for self-coverage would not qualify.

Even your employer may benefit from the proposed rule eventually. The rule could make it less likely that you and your co-workers will add your dependents to the work-based healthcare plan. What this will mean in the long run for group health plans is unclear, but it could ultimately allow a
health insurance broker to offer employers lower-cost plan options if their employees don’t need dependent coverage. The rule would not require employers to contribute to dependent coverage or change how the required “affordability” of coverage is determined. So at the very least, the rule places no additional burdens on your employer.

For more information on how the “family glitch” may be affecting you and what your options are, contact us today.

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