By now, every broker is familiar with the Affordable Care Act’s “family glitch” – the rule that says that if a person is eligible to enroll in affordable employer-sponsored coverage, either as an employee or as a dependent, then he or she is blocked from receiving a government subsidy in the individual market. The problem is that the definition of “affordable” is based on the cost of employee-only, not family, coverage. So even if an employer contributes nothing to the cost of dependent coverage, the fact that the cost of single coverage after the employer contribution is less than 9.5% of the household income blocks the entire family from a premium tax credit.
Unfortunately, a lot of employers still aren’t aware of the family glitch. They’ve focused on the law’s impact on their premiums and on the potential penalties they would pay if they failed to offer coverage but haven’t paid as much attention to the law’s impact on the company’s employees and their family members. And most employees are also unaware of the glitch, so there hasn’t yet been a big backlash against employers who continue to offer coverage and block people from subsidies.
For brokers who are trying to sell individual policies through a private exchange website, this can be a problem. It’s important for employers and employees to understand the impact of a company’s decision to offer health coverage on a family’s eligibility for government subsidies. There’s a great new article in the Health Affairs Blog that can help people understand. If you’re still a little unclear about the glitch, it does a great job of explaining the issue. And if you have clients or prospects who still don’t understand, it’s definitely worth sharing.