The Department of Treasury published a final regulation on October 13, 2022 which eliminates the so-called “family glitch” starting on January 1, 2023.

Under previous interpretations of the Affordable Care Act (ACA) provisions related to Advanced Premium Tax Credits (APTCs), an employee and their family members could not qualify for APTCs on a Health Insurance Marketplace plan if the employee had access to affordable coverage from their employer.

When determining if coverage was affordable, the previous interpretation looked at the cost of coverage using the employee-only premium rate. If an employee had to pay 9.5% (adjusted) or less of their income towards a health insurance plan that covered just themself, then the employee along with their spouse and children lost eligibility for APTCs. The cost to cover spouses and children was disregarded when determining eligibility for APTCs (hence the name family glitch).

Under the newly published regulations, the cost of the family premium will be taken into consideration when determining eligibility of APTCs for spouses and children of employees. Some employers cover a significant portion of the premium for employees but pay little to nothing towards the coverage of spouses and children.

It is quite possible (and very likely in many situations) that an employee will be considered to have access to an affordable plan but their spouses and/or children will be considered to have access to an unaffordable plan. That would mean the employee wouldn’t qualify for APTCs, but his/her family members still could qualify for APTCs.

Due to the timing, it may be a challenge for Health Insurance Marketplaces to have this change operationalized for the upcoming annual enrollment period which begins on November 1, 2022. This may be something that will have to be applied retroactively should Health Insurance Marketplaces find the change time consuming to implement. That will be something we’ll have to wait and see.

Various sources are reporting that as many as 5.1 million people will benefit from this new way of determining if an employer-sponsored plan is affordable for spouses and children. Some people will see their individual health insurance premium reduced because of becoming newly eligible for an APTC while others are expected to transition from a group health plan to a Health Insurance Marketplace plan.