IRS Resolves ‘Family Glitch’ in Affordable Care Act

By Jonathan Springston, Editor, Relias Media

The Internal Revenue Service (IRS) has finalized a rule that fixes the so-called “family glitch,” a long-standing flaw in the Affordable Care Act (ACA) that left certain Americans ineligible for subsidies to purchase health insurance through the ACA marketplace.

In 2013, the IRS said it considered a health insurance plan affordable for a family if the plan cost an employee alone no more than 9.5% of household income. However, this interpretation did not include the coverage for an employee’s entire family into that percentage. This created a loophole that forced certain families to pay high premiums, without any help from subsidies, or remain uninsured.

Now, family members of employees will be eligible for ACA subsidies if the family premium under employer coverage exceeds about 9% of the family’s total income. By closing this loophole, the Department of Health and Human Services (HHS) estimates about 1 million more Americans will be able to buy coverage or see their existing plans become more affordable.

“Protecting and strengthening implementation of the Affordable Care Act is key to increasing access to quality, affordable healthcare,” HHS Secretary Xavier Becerra said. “Our goal is simple: leave no one behind and give everyone the peace of mind that comes with health insurance.”

The Biden administration proposed fixing this glitch in April. When the IRS opened the proposed rule change to public comment in May, the American Hospital Association commended the administration for addressing “two critical issues that undermine the comprehensiveness of coverage: substandard coverage and unaffordable and confusing cost-sharing structures.”

“As we have seen through the improved premium subsidies offered during the COVID-19 pandemic, our patients want to have comprehensive insurance coverage, they just need to be able to afford it, American College of Physicians President Ryan D. Mire, MD, MACP, said after the IRS finalized the rule.

“Affordability and lack of insurance coverage are major barriers to patients being able to access needed healthcare services, including preventive care that can diagnose disease when it is most treatable.”

For more information on this and related subjects, be sure to read the latest issues of Hospital Case Management.