Addressing the Affordable Care Act’s ‘Family Glitch’

April 8, 2022


Elizabeth (Izzy) Montgomery, MPA
Policy Analyst

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On Tuesday (April 5), President Joe Biden announced plans for administrative action to expand access to premium subsidies offered by the Affordable Care Act (ACA), unveiling a proposed rule change to address the “family glitch,” a loophole that has left many Americans unable to afford health insurance.

Through the health insurance marketplace, the ACA provides an avenue for financial assistance to individuals who are unable to obtain coverage through their employer or public coverage through Medicare or Medicaid. An individual may be unable to obtain coverage through his or her employer if the employer does not provide health insurance as a benefit or if the insurance coverage is unaffordable.

Employer-sponsored insurance coverage is deemed unaffordable if the employee has to spend more than 9.83% of his or her household income toward the premium.

However, this threshold is based on an individual employee’s premium cost – not the cost of care when dependents are also included in the health plan – hence the term “family glitch.” This Obama administration interpretation of affordability meant that many dependents were ineligible for premium subsidies to purchase insurance through the health insurance marketplace.

The Kaiser Family Foundation estimates that 5.1 million Americans are impacted by the family glitch, lacking affordable health insurance from their employers while simultaneously being ineligible for premium subsidies. As of 2019, about 52,000 Arkansans were estimated to be affected by the family glitch.

A temporary fix was enacted through the American Rescue Plan of 2021. Although the law did not directly address the family glitch, it included provisions that enhanced marketplace premium subsidies beyond 400% of the federal poverty level in 2021 and 2022. The administration has called on Congress to make these enhanced premium subsidies permanent.

Once finalized, the proposed rule would modify the affordability threshold to be based on the cost of family coverage rather than individual coverage. The proposed rule was published Thursday.