We’re hearing rumors from industry insiders that the OMB is set to issue regulations which aim to fix the so-called ACA “Family Glitch” as soon as this coming week. The new rules could take effect as early as November 1, 2022 - just in time for Open Enrollment 2023.
ACA FAMILY GLITCH EXPLAINED
Employer-sponsored coverage must be deemed affordable in order for employers to avoid potential tax liability. Affordability is defined looking only at an employee’s cost of coverage, it does not take into account the cost an employee may pay to add their spouse and/or children to their health plan. Thus, if the employee-only cost of coverage is less than 9.5% of the employee’s wages, it passes the test, even if the cost of adding their family pushes the premium upwards of this limit. The issue here is that now the spouse and children are prevented from accessing financial aid to purchase their own health insurance through the federal marketplaces. This poses a significant financial burden on working Americans who may find themselves spending upwards of 20% of their household income just on health insurance premium - and that’s before paying for deductibles and copays.
NEW RULES & POTENTIAL IMPACT
The proposed rules would allow certain households to access premium assistance on the marketplace for their spouses and children. Employers will need to determine if they should contribute more towards covered family members to make coverage affordable or decrease their contributions, enabling a churn of family members onto the federal marketplaces. Decreasing family contributions while maintaining affordable Employee-Only coverage will continue to shield employers from any tax liabilities. Employers will want to consider if enabling spouses and children to leave their health plan would harm their current risk pool.
We expect more information in the coming days. Stay tuned.
