October 25th, 2022 – Thanks to a new federal rule, the “Family Glitch” issue that plagued the Affordable Care Act since 2014 is finally fixed.
The family glitch was a situation where tax credits were based upon affordability of employee-only premiums. However, while employers are often generous with how much they pay for employee premiums, many employers pay substantially less for spouse and dependents. Even if a company paid nothing for spouse and/or children, those family members were not be eligible for any federal tax credits that reduce the premiums on individual health insurance plans sourced through Connect for Health Colorado.
For many lower and middle income families, this often meant that families could not afford to insure their non-employee family members through the employees work OR through the marketplace.
In 2022, affordable coverage was defined as employee only coverage costing no more than 9.61% of household income.
In 2023, affordable coverage is defined as coverage for employee and family members costing no more than 9.12% of household income. Additionally, there will be a separate affordability determination for the employee (based on self-only coverage), and for family members (based on the total cost of family coverage).
So, depending on how an employer subsidizes the cost of family coverage, it’s possible that coverage could be considered affordable for the employee, but not for family members. In that case, the family members would potentially be eligible for a premium tax credit in the marketplace, but the employee would not.
However, the cost to cover non-dependent family members will not be taken into consideration. So for example, young adults can remain on a parent’s health plan until they turn 26, but are generally not considered a tax dependent for the last few years of that window.