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Proposed Changes to Fix the ACA “Family Glitch”

The Biden Administration announced a proposed rule released on April 5 to fix the Affordable Care Act (ACA) “family glitch”. If this proposed rule is finalized, it would mean more individuals will be newly eligible for a premium tax credit (PTC) in 2023 for coverage purchased through the ACA marketplace/Exchange. The proposed rule does not appear to affect the affordability calculation for an employer under the employer shared responsibility (ESR) rules.

Under the ACA, people who do not have access to “affordable” health insurance through their employers may qualify for a PTC to purchase affordable coverage on the ACA’s marketplaces. Current regulations define employer-based health insurance as “affordable” if the coverage solely for the employee, and not for family members, is affordable, making family members ineligible for a PTC. The cost of family members is not taken into account. The new proposed rule is intended to eliminate this “family glitch.” The proposed rule would generally provide that a qualified employer-sponsored plan will be considered affordable for family members (for PTC determination purposes) if the employee’s required contribution for family coverage does not exceed 9.5% (as adjusted annually) of household income.

If the proposed rule is finalized, family members of employees who are offered affordable self-only employer coverage, but unaffordable family coverage, may qualify for PTCs to buy ACA marketplace coverage. It’s important to note that the proposal does not appear to affect the employer mandate or change the affordability calculation under the ESR rules. Thus, the proposal would not allow an employee to access a PTC if the employee’s offer of coverage from the employer is deemed “affordable” under the current ESR standards.

Under the proposal, the rule is expected to be finalized no later than the end of the year, meaning the changes would be enacted January 1, 2023. Conner Strong & Buckelew will provide alerts and updates as new information becomes available. Please contact your Conner Strong & Buckelew account representative toll-free at 1-877-861-3220 with any questions. For a complete list of Legislative Updates issued by Conner Strong & Buckelew, visit our online Resource Center.

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