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family glitch

What is the family glitch?

The “family glitch” refers to the rules that are used to determine whether a person is eligible for a premium tax credit (subsidy) in the exchange / marketplace if they’re also eligible for employer-sponsored coverage.

Under ACA implementation rules that are in effect at least through the 2022 plan year, a marketplace subsidy is not available if the person has an offer of employer-sponsored coverage that’s considered affordable and that provides minimum value. The current rules use just the cost of employee-only coverage when determining whether an employer’s offer of coverage is considered affordable – regardless of whether the employee adds family members to the plan.

So if an employer offers reasonably-priced and fairly comprehensive coverage to employees and allows family members to also enroll in the plan, nobody in the family will be eligible for premium subsidies in the marketplace. This is true even if the entire cost of covering the family members is payroll deducted, without any employer contributions. (Most employers do cover the majority of the cost of family coverage, but some do not, especially among smaller employers.)

As a result of this “glitch,” an estimated 5.1 million Americans do not have access to affordable health coverage. It’s too expensive for them to add family members to the employer-sponsored plan, and it’s also too expensive for them to pay full-price for coverage in the marketplace.

Fortunately, the Biden administration has proposed regulatory action in 2022 that would fix the family glitch. Here are the specifics of exactly what’s been proposed by the IRS to fix the family glitch. The proposed rule change would take effect with the 2023 plan year, and would allow family members to potentially access premium subsidies in the marketplace if the cost of family coverage under the employer-sponsored plan didn’t meet the affordability guidelines. However, the proposed rule change does still call for affordability to be determined separately for the employee and for their family. If the employee’s coverage is deemed affordable, the employee would not be eligible for subsidies in the marketplace (even if their family is subsidy-eligible).

This article explains the family glitch in more detail, including the history of how it came to be, the people who are affected by it, and how coverage affordability would (and would not) change if the family glitch were to be fixed.

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Somewhere between 2 and 6 million Americans are impacted by the family glitch – ineligible for premium subsidies in the marketplace, because they have access to an employer-sponsored plan that's considered "affordable."
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You cannot qualify for a health insurance premium subsidy unless the insurance your employer offers would force you to kick in more than 9.83% of your income to cover your share of the premium in 2021 – or is so skimpy that it pays for less than 60% of the average employee’s covered benefits.