A new hurdle has emerged among the numerous challenges families face today—the family glitch. This glitch refers to the inequities associated with the affordability test for employer-sponsored health coverage. However, there is good news: the family glitch has finally been addressed with a fix. Let’s explore the family glitch, how it’s been rectified and what it means for employees and businesses. 

 The Affordable Care Act (ACA) stipulates that individuals with access to “affordable” employer-sponsored coverage are not eligible for premium tax credits (PTCs) when purchasing marketplace insurance.  

As the ACA’s “firewall” provision stipulates, affordable employer-sponsored plans require employees to contribute no more than 9.5% of their income (adjusted for inflation) toward premiums.¹  

The problem lies in the interpretation of affordability, which solely considers the cost of employee-only coverage, disregarding the additional expenses and costs for family coverage. As a result, family members have been denied financial assistance for marketplace coverage, creating a significant issue for families and impacting businesses. 

Nearly six million people have been affected by the family glitch, mostly lower-income employees. While higher-income workers often benefit from companies that heavily subsidize family coverage, lower-wage workers bear a more significant burden when paying for health insurance. Although the Children’s Health Insurance Program (CHIP) offers some relief, it falls short of covering most of those affected by the glitch.²

Furthermore, employees who cannot afford employer coverage offerings for their families often turn to marketplace plans, which can lead to financial strain and higher premiums. In some cases, families may even forego necessary healthcare, potentially leading to long-term health complications.  

The family glitch also has ramifications for businesses, particularly regarding productivity and employee retention. Healthcare coverage and affordability are huge issues for many employees and can be a significant source of stress and distraction. Higher healthcare costs or limited coverage options can also drive employees to seek alternative employment with more affordable health insurance benefits. This is particularly challenging for small businesses that may struggle to provide comprehensive coverage due to resource constraints. 

The fix for the ACA family glitch is straightforward but crucial. Instead of basing affordability solely on the cost of employee coverage, it now considers the cost of covering the employee’s family members as well. This new rule ensures affordability if the employee’s contribution requirements for family coverage are at most 9.12% of household income. The fix also allows related individuals to decline employer-offered coverage if it is unaffordable and receive premium tax credits to acquire coverage on the exchange.³ 

Under the final rule, group health plans must provide a minimum value of at least 60 percent for related individuals, including benefits such as inpatient hospital and physician services.  

In most cases, if a group health plan provides minimum value to an employee, it will also provide minimum value for related individuals, assuming the scope of benefits is the same for the employee and related individuals based on tier selection.  

Employers should take note of a few key implications resulting from the family glitch fix. There will be no impact on penalties for not meeting ACA requirements, as the penalty only applies when the employee receives a premium tax credit for exchange coverage, not their family members. Information reporting and affordability safe harbors remain unaffected, ensuring compliance with reporting requirements.⁴

With the family glitch fix, more families will be eligible for premium tax credits to purchase affordable options on the exchange. The PTCs available on the exchanges will increase through 2025; this may make the difference between employer-family coverage and exchange coverage more significant. Ultimately, the fix ensures that more employees have access to affordable health insurance coverage for their families, providing financial relief and peace of mind.  

The family glitch fix is a significant step forward in promoting equitable access to healthcare for families. It addresses the flaws in the affordability test for employer-sponsored coverage, benefiting both employees and businesses.  

However, it is essential for employees to be aware of their options and for employers to communicate the coverage choices available to them effectively. By doing so, the advantages and opportunities presented by the family glitch fix can be fully realized, leading to improved healthcare outcomes and increased employee satisfaction. 

To learn more about the family glitch fix and strategies for effective communication, we invite you to explore our webinar on The Family Glitch Fix. Together, we can navigate this new era of affordable healthcare and create a brighter future for families and businesses alike.