The ACA Family Glitch and Affordability of Employer Coverage
Below is an excerpt from a recent article by the Kaiser Family Foundation (kff.org) regarding the family glitch under the Affordable Care Act (ACA). This is unchanged since the inception of the law, but we still see families applying for (and often receiving) subsidies when they have no actual legal right to those subsidies. If their action is found out, they will owe the entire subsidy back. We have seen several cases where this amounted to them owing well over $10,000 for a single year.
Financial assistance to buy health insurance on the Affordable Care Act (ACA) Marketplaces is primarily available for people who cannot get coverage through a public program or their employer. Some exceptions are made, however, including for people whose employer coverage offer is deemed unaffordable or of insufficient value. For example, people may mistakenly think they qualify for ACA Marketplace subsidies if their employer requires them to spend more than 9.83% of his household income on the company’s health plan premium for him and his dependents.
However, this affordability threshold of household income is based on the cost of the employee’s self-only coverage, not the premium required to cover any dependents! In other words, an employee whose contribution for self-only coverage is less than 9.83% of household income is deemed to have an affordable offer, which means that the employee and his or her family members are ineligible for financial assistance on the Marketplace, even if the cost of adding dependents to the employer-sponsored plan would far exceed 9.83% of the family’s income. This definition of “affordable” employer coverage has come to be known as the “family glitch.”
In our experience it is quite rare that employer “self only” coverage fails to meet the affordability test, so most families are likely not eligible for the ACA subsidy. If you have employees that you know are in this situation, please take a moment to forward this information on to them.
As always, if you have any questions or if we can help in any way, please reach out!
Call us at (805) 687 - 3225, or send us an email at info@petersmilam.com. We can't wait to hear from you!
-Dave Peters & Steve Milam
