How changes to the ‘family glitch’ affect workplace health plans

The IRS finalized new rules that change eligibility requirements for the premium tax credit (PTC) created under the Affordable Care Act (ACA). It’s now easier for an employee’s family members to enroll in subsidized health insurance through an exchange. Related guidance creates a new mid-year cafeteria plan election change event to help family members move to subsidized exchange coverage.

Background

The PTC was created to subsidize health insurance obtained through an exchange. Generally, household income must be between 100-400% of the federal poverty line to qualify for a PTC. But, if an employee is eligible for a workplace health plan that offers “affordable” self-only coverage and provides minimum value, no family members are eligible for a PTC. Coverage is affordable if the employee premium for self-only coverage doesn’t exceed 9.12% of household income in 2023.

Put simply, the cost of family coverage isn’t considered to determine whether a workplace health plan is affordable. If the cost of employee-only coverage is affordable, the entire family is ineligible for a PTC. Industry insiders informally termed this the “family glitch.”

New regulations

Now, solely for purposes of claiming the PTC, if the employee cost for family coverage isn’t affordable, the employee may claim a PTC to subsidize insurance obtained through an exchange for family members.