On average, employees contribute 17 percent of the premium for employee-only coverage compared to 27 percent of the premium for family coverage. In 2020, average premiums for employee-only coverage were $7,470 compared to $21,342 for family coverage. Most employers offer family coverage, but data from the Kaiser Family Foundation’s 2020 Employer Health Benefits Survey shows that average premiums and employee contributions have increased significantly over time. This situation-where employee-only coverage is affordable, but family coverage is not-is not uncommon. This is true even if the cost of employer-sponsored family coverage would otherwise be unaffordable (i.e., the employee’s contribution towards premiums for family coverage would exceed 9.83% of household income). This means that an employee and their family members are ineligible for premium tax credits when the employee is offered affordable employee-only coverage. The so-called “family glitch” stems from a 2013 interpretation by the Treasury Department and Internal Revenue Service (IRS) that an employer’s offer of coverage is “affordable” based on the cost of employee-only (rather than family) coverage. (This percentage was initially set at 9.5 percent and is adjusted annually.) If an employer’s plan is not “affordable,” an employee may qualify for premium tax credits through the marketplace, and the employer may face penalties under the employer mandate. There is an exception, however, if an employer-sponsored plan is not “affordable” or of “minimum value.” An employer’s plan is not “affordable,” as defined under the ACA, if the employee must contribute more than 9.83 percent of household income towards premiums. Under Section 36B of the Internal Revenue Code, individuals generally do not qualify for premium tax credits if they are eligible for another source of minimum essential coverage, including employer-sponsored plans. The Biden administration would have more than sufficient grounds to adopt a reasonable alternative interpretation of the ACA, as the Trump administration did in numerous instances. An alternate interpretation that would “fix” the family glitch is supported by the ACA’s text and legislative intent. This post discusses the history of the family glitch, recent data on its impact, and why a new interpretation based on the affordability of family coverage would be legally sound. Indeed, President Biden hinted at the possibility of fixing the family glitch in an executive order on the ACA and Medicaid that directed federal officials to examine “policies or practices that may reduce the affordability of coverage or financial assistance for coverage, including for dependents.” And legal experts such as Tim Jost have argued that the Biden administration should fix this Obama-era mistake. An analysis for The Commonwealth Fund of recommendations from diverse health care stakeholders to the Biden-Harris presidential transition team showed that a majority recommended fixing the family glitch. There is also broad support among a range of health care stakeholders to fix the family glitch.
Personal stories of those affected by the family glitch can be found in media outlets, Reddit threads, and even comments from readers on prior Health Affairs Blog posts.Ĭritics have argued that the family glitch is inconsistent with the goals of the Affordable Care Act (ACA) and unfairly penalizes family members of lower-income workers. Many of these families go on to purchase health insurance (either through a family member’s job or the marketplace) but pay high portions of their income towards premiums. An estimated 5.1 million people-mostly children of low-income workers-fall into the family glitch and are thus barred from enrolling in subsidized marketplace coverage.
This post focuses on one of those long-standing gaps known as the “family glitch” this renders not only an employee but also his or her family members ineligible for subsidized marketplace coverage if self-only coverage for the employee is affordable as defined by the ACA, even if family coverage is not. As a result, gaps remain in who can access subsidized marketplace coverage, leaving some without relief even with the changes made by the ARP. The ARP did not, however, change other subsidy eligibility rules, or federal interpretations of those rules. Millions of lower- and middle-income Americans are eligible for financial help under the ARP, including many who did not previously qualify based on income.
Enrollment through continues to climb during the COVID-19 special enrollment period, bolstered by enhanced marketplace subsidies under the American Rescue Plan Act (ARP) through 2022.
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