The Biden administration recently proposed a rule change to fix an expensive “family glitch” that makes it difficult for families of those with job-based health insurance to qualify for tax credits in the marketplace.
Families currently affected by this glitch could save hundreds of dollars per person per year on health insurance premiums if the change is finalized.
Here’s the glitch: If one family member is eligible for an affordable individual plan through their job, the rest of the family isn’t eligible for tax credits that would help them buy more affordable insurance on HealthCare.gov or any state insurance marketplace.
According to The New York Times, an affordable workplace plan is defined as having a premium for the individual employee that’s less than 10% of the family’s income.
Family premiums are generally higher and can exceed this threshold.
As a result, the definition of affordability doesn’t include the cost of insuring the entire family.
According to the Kaiser Family Foundation, the average premium paid by a covered worker in 2021 was $108 a month, compared to $497 for family coverage.
The regulation change would mean the cost of job-based coverage would be deemed “affordable” for the whole family, not just the individual worker.
If it wasn’t affordable, the rest of the family would then be able to use tax credits when shopping for their own insurance.
One affected couple’s story spread across the nation when they got divorced just to afford health care.
The Affordable Care Act loophole meant that insurance would cost the couple more than $16,000 a year in premiums.
To solve the issue, the couple decided to get individual plans: One through work and one through Obamacare. However, the individual work plan now disqualified the non-working spouse from federal assistance.
As a result, the spouse’s premiums went from $40 a month to more than $400 a month without the tax credits.
The couple decided to divorce, so they could both have affordable insurance coverage.
According to the Urban Institute, nearly 5 million people are ineligible for federally subsidized health insurance due to the glitch — and it’s mostly women and children.
Many families affected by the glitch are either going without health coverage or getting it only for their kids.
The IRS is currently seeking comments on the proposal until June 6, which can be submitted online.
Some critics argue that the proposed fix is far from perfect and that a family plan could actually be cheaper than navigating two premiums or two deductibles.
But experts say many families are unaware of their options anyway, and more education and resources are needed for these families.
It’s up in the air whether the fix would be put in place before the next open enrollment period, which begins on Nov. 1 for 2023 coverage.
Photo by Eduardo Dutra