Biden Proposes Rule to Fix ACA ‘Family Glitch’
On April 5, 2022, President Biden issued an executive order designed to fix a flaw in Affordable Care Act (ACA) regulations known as the “family glitch,” which excludes some families from health insurance premium subsidies based on how income thresholds are calculated.
The Internal Revenue Service (IRS) followed up April 7, 2022, with a proposed rule to amend ACA regulations and eliminate the exclusion of those families, a move the White House estimates would make 1.2 million people eligible for less expensive health insurance. The change would take place in 2023 following a public comment period that ends June 6, 2022.
- The Biden Administration is moving forward with plans to eliminate the so-called “family glitch” in ACA regulations.
- The glitch prevents some families from receiving Premium Tax Credits (PTCs) when purchasing health insurance based on the cost of coverage for the employee only.
- Fixing the glitch does not require Congressional action, only an executive order.
- The White House says 200,000 people will gain coverage and 1.2 million will see lower rates.
- Changes will be effective beginning in 2023.
The ‘Family Glitch’
ACA regulations provide that anyone who does not have access to “affordable” health insurance through their employer may qualify for a premium tax credit (PTC) to help offset the cost of the insurance. “Affordable” is defined as costing no more than 9.5% of household income, adjusted for inflation (currently 9.61%). The glitch stems from the fact that the IRS interprets this to refer to the cost of coverage for the employee without including the employee’s family.
It’s possible, then, that single coverage for the employee alone would not exceed 9.61% but coverage that includes the family would. Under current rules, the employee would not qualify for a premium tax credit even when the cost of family coverage might far exceed 9.6% of household income.
Fixing the Glitch
To eliminate the glitch, the Treasury Department and IRS propose changing the rules so family members of workers who are offered affordable self-only coverage but unaffordable family coverage may qualify for premium tax credits in order to buy ACA coverage.
This change to IRS rules does not involve a legislative change but rather a change in the interpretation of existing regulations. This does not require action by Congress.
The original 2011 proposed regulations stated that affordability for related individuals (family members) was based on the amount an employee must pay for self-only coverage. At that time, the Treasury Department indicated that future regulations would address the glitch since it was known in 2011 that the regulations did not specify how the language was intended to apply to family members.
Recognizing that regulation language could also be interpreted to mean the cost to insure related individuals (family members) should be considered separately from the cost of self-only coverage, the Treasury Department and IRS have concluded the latter interpretation is “the better reading of these provisions.”
In addition to fixing the family glitch, the president’s April 5 executive order further instructs agencies to “review agency actions to identify ways to continue to expand the availability of affordable health coverage, to improve the quality of coverage, to strengthen benefits, and to help more Americans enroll in quality health coverage” including:
- Making it easier for people to enroll in and keep their coverage.
- Helping people better understand their coverage options so they can pick the best one for them.
- Strengthening and improving the generosity of benefits and improving access to health care providers.
- Improving the comprehensiveness of coverage and protecting Americans from low-quality coverage.
- Continuing to make health coverage more accessible and affordable by expanding eligibility and lowering costs for Americans with ACA, Medicare, or Medicaid coverage.
- Connecting people to health care services by improving access to health care providers and linkages between the health care system and communities to help Americans with health-related needs.
- Taking steps to help reduce the burden of medical debt that far too many Americans experience.