Finalized Family Glitch Fix To Help Families

Signed into law in 2010, the Affordable Care Act was meant to open affordable healthcare access to all Americans. As with any law, the optimism surrounding it was short-lived, especially as people realized it was not as accessible as initially thought. People still need a health insurance broker to decipher many of the benefits and plans. Also, so-called "safeguards" resulted in one of the most significant hiccups of ACA, the family glitch.



Due to ACA's "firewall" provision, people with access to affordable health plans from an employer could not qualify for premium subsidies. Unfortunately, the provision forced many families to spend exorbitant amounts on individual health insurance.

While the family glitch was a consequence of the final law and provisions of 2014, it hasn't received a proper solution until now, almost a decade later. Still, the solution is not perfect and will not resolve every issue, but it is a step in the right direction.

A Health Insurance Broker Defines the Family Glitch

The family glitch made people ineligible for premium subsidies through the healthcare marketplace if they had access to employer-sponsored health insurance providing minimal value at an affordable rate. The provision looked at only the cost to the initial employee and not the additional costs of adding family members.

The "firewall" provision deemed family members ineligible for premium subsidies if they could join another family member's employer-sponsored plan. The adjustment to ACA meant that many families were paying well over 10% of household income for health insurance, which should have qualified them for subsidies. In many cases, families were forced to pay 25% or more of their household income, creating significant financial strain.

The family glitch began in 2014, and the IRS hopes it ends in 2022. With the proposed and approved solution, many families should see some reprieve from astronomical healthcare costs in 2023.

The IRS Solution or "Fix" 

The finalized IRS solution will significantly affect the health coverage of American families. Official estimates suggest that between 600,000 and 2.3 million people will become eligible for premium subsidies, and the IRS projects that between 80,000 and 700,000 uninsured people will now get insurance.

While using a health insurance broker can help ensure families don't continue to fall through the cracks of ACA's affordability provisions, only time will tell how effective the IRS solution is for the existing family glitch.

Estimates place nearly 5 million Americans as victims of the family glitch. Even the best projections do not resolve the crisis for all Americans. The new rule only opens the door for family members to apply for premium subsidies. It is possible with access to a family member's employer-sponsored insurance, the rule change may not really change anything, should the employer-sponsored plan be deemed affordable.

Examples and Possible Scenarios

While touted as a solution, any health insurance broker will explain the IRS fix is primarily a bandage; it will help some people but not all. For example, consider a family of four — mother, father, and two children. The household income is over $50,000, potentially providing a substantial marketplace subsidy. Mom's employer offers health coverage at about 5% of the family's household income, which is considered affordable.

The dad's job, unfortunately, does not offer health coverage, meaning he either needs to purchase from the marketplace or become an addition to the mom's employer-sponsored plan. To add the dad and children to the plan would increase the insurance expense to more than 25% of the family's household income.

Despite the astronomical cost, pre-fix, the family was ineligible for subsidies. As of 2023, they will save because the law will consider the expense of adding members to an employer-sponsored plan.

Other families still have a problem when their income is just above cutoff levels. For example, a family with a household income of 60,000 may have one person with an employer-sponsored plan that only costs $200 per month. The lowest marketplace plan for the second individual cost about $250 in 2022. As subsidies are based on the second-lowest-cost silver plan, the overall cost to this family is 5.8%, meaning they are ineligible for premium subsidies. It doesn't matter that together the family actually spends about 10% of its household income on health insurance.

The Solution Isn't Perfect

The solution to the family glitch is far from perfect, but it will make a difference for many families. The best thing you can do is work with a licensed health insurance broker to take advantage of the parts of the solution that may help. As with any insurance investment, you must weigh the pros and cons to find what works best for you.

A Health Insurance Broker Can Help

The health insurance marketplace is somewhat confusing, especially for people unfamiliar with the process. Hiring a knowledgeable and licensed health insurance broker can make all the difference. Contact for Sackett & Associates Insurance Services more information.