How the “Family Glitch” increases your opportunity for a premium tax credit

You may be eligible for Marketplace subsidies even if you’re offered an employer-based insurance plan.

The definition of “affordable” group coverage has been problematic since the arrival of the Affordable Care Act (ACA) in 2013. Known as the “family glitch,” it has barred millions of employees from receiving subsidized health insurance through the Marketplace. 

In 2023, the IRS fixed the “family glitch.” This means that you might be eligible for Marketplace subsidies.  Here’s what you need to know. 

Exactly what is the “family glitch?” 

The ACA Marketplace is generally available to individuals and families who do not have access to employer group coverage. However, individuals whose group coverage is unaffordable do have access to the Marketplace and subsidies. 

The “family glitch” refers to a 2013 ACA rule that based eligibility for a family’s premium subsidies on whether their employer group’s insurance was affordable. Up until 2023, only the cost of single (employee) coverage was evaluated. The plan had to cost no more than 9.12% of the family household income. (The cost is the amount the employee pays for the insurance, not the plan’s total premium.)

Beginning in 2023, what had been known as the “family glitch”was corrected. This means that in order to establish affordability, the cost of the family coverage was considered for employees selecting that type of coverage. 

Put simply, instead of looking at the premium for single coverage, the family premium is considered as well. 

For calendar year 2024, the IRS decreased the affordability baseline from 9.12% in 2023 to 8.39%. This means that amount the employee pays for the insurance has to cost no more than 8.39% or less of the employee’s family household income to be considered affordable.

Why do I need to know about the family glitch?

As a result of this change, there is a greater chance that you may be eligible for premium tax credits if you select coverage for an individual, employee+spouse, employee+child(ren) or family.

What’s should I do about it? 

You may be newly eligible for subsidies based on the new rules. To determine if you might fall into that category, visit bcbsks.com/cares or contact us at 866-285-2158.   Or, you can use a marketplace calculator to see if you might qualify. (Remember: If you’re using an online calculator, you’ll want to use the family’s total income to test affordability.) Be sure to talk with your employer if you are considering moving to a Marketplace insurance plan.  

Take action now. 

If you believe you will now be eligible for Marketplace subsidies, you should review your options now. To find a BlueCare plan through the Marketplace and determine your actual premium tax credit visit http://healthcare.gov.

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Consider this example of how the family glitch worked before and after 2023: 

BEFORE THE 2023 “FIX”: 

• An employer group has a plan where the single coverage is $700 per month and the family coverage is $2,000 per month.  
• This group contributes $400 per month for each employee’s coverage. So, the single plan costs the employee $300 per month. 
• Before the fix to the family glitch, the math looks like this: ($300 / 9.12%) X 12 months = $39,473. 
• That means only employees making an annual salary of $39,473 or less would be eligible for a Marketplace subsidy. That’s because the single premium would not be more than 9.12% of the family’s household income.  

In the past, only single coverage was considered. As a result, few people who were offered group coverage were eligible for Marketplace subsidies. 

AFTER THE 2023 “FIX,” and with the 2024 adjustment:

• Let’s consider the same employer group and the same contributions. For an employee who plans to cover a family, the cost will be $1,600 per month.  
• With the fix to the family glitch, the math looks like this: ($1,600 / 8.39%) X 12 months = $228,843. 
• This means employees whose household income is less than $228,843 a year would be eligible for a Marketplace subsidy. That’s because the family premium would be more than 8.39% of the family’s household income.  

Let’s look at another after-the-fix example: 

• An employer group has a plan where the single coverage is $600 a month and family coverage is $1,800 a month.  
• This group contributes $600 a month for single coverage and $1,000 a month for family coverage.  
• So, the cost of a single plan, for an employee, is $0 a month. The cost of the family plan would be $800 a month.  
• With the fix to the family glitch, the math looks like this: ($800 / 8.39%) X 12 months = $114,421.
• In this case, any employee who selects family coverage and whose family income is below $114,421 would be eligible for the Marketplace subsidies.