Under the current Affordable Care Act (ACA) regulations, employer-based health insurance is deemed “affordable” if the employee’s contribution for self-only coverage does not exceed the affordability threshold in a given year (9.61% in 2022). Those who do not have access to affordable employer-based coverage may qualify for a premium tax credit through the healthcare marketplace. As a result of the current definition of affordability, an estimated 5 million people fall into what is known as the “family glitch,” which prevents them from receiving a subsidy through the marketplace as the determination of whether the coverage meets the affordability threshold is focused on the employee’s coverage, not the family member’s.
On April 5, 2022, the Treasury Department and Internal Revenue Service (IRS), released a proposed rule that, if enacted, would address this policy loophole in the ACA. This proposed rule is a result of an Executive Order President Biden signed in January 2021 which directed federal agencies to take action and make efforts to strengthen the Affordable Care Act and Medicaid. The proposed rule would update the current definition to allow family members to qualify for premium tax credits in the marketplace if the employer-based coverage is unaffordable on the family level, rather than strictly at the employee-only level. If enacted, the changes would go into effect beginning January 1, 2023.
Prior to adopting the proposed rules as final, the regulations will undergo a public commenting period. Timely submitted comments will be reviewed by the Treasury Department and the IRS, with a public hearing on the matter currently scheduled for June 27, 2022. The proposed rules are scheduled to be published April 7, 2022, but the unpublished version can be found here. We will continue to monitor the ongoing developments and provide updates as they become available.
