AHIP calls for federal agencies to issue extensive guidance to implement ACA 'family glitch' rule

Insurers support a Biden administration rule to fix a “family glitch” in the Affordable Care Act but stress that plans must get quick guidance on the requirements they have to meet. 

Payers and providers submitted comments Monday on a proposed rule from the Treasury Department and the IRS that would create a minimum value for family members of employees that can get ACA tax credits. Estimates have shown this glitch has prevented more than 5 million Americans from getting access to coverage.

Insurer groups were supportive of the rule issued in April.

“The approach proposed by Treasury and IRS would make affordable coverage options available to families without jeopardizing coverage through employer-sponsored group health plans,” said insurance group AHIP in comments. 

The rule tackles a provision commonly known as the “family glitch” in the ACA, referring to a provision that enables a person to get tax credits that lower premiums if their employer requires that individuals spend more than 9.5% of their household income on premiums, an analysis from the Kaiser Family Foundation said. 

However, the glitch is that the threshold only applies to the person’s individual coverage and not the premium required to also cover dependents. Even if someone meets the 9.5% threshold, the family won’t be able to get any assistance.

The Biden administration’s proposal would create a new threshold that determines whether a plan’s contribution doesn’t exceed 9.5% of a total household and family income. 

AHIP was pleased that the rule’s new affordability threshold doesn’t undermine the employer-sponsored insurance market.

“Under the approach, an employee may have an affordable offer of employer-sponsored coverage while the employee’s spouse and dependents may not have an affordable offer of family coverage through the employer,” the group commented. “This crucial approach ensures employees cannot forego an affordable offer of employer-sponsored coverage to enroll with their family in subsidized marketplace coverage.”

But AHIP cautioned that additional guidance will be needed from federal agencies on how plans can properly implement the change. 

“After finalizing the rule, Treasury and IRS should issue a Request for Information to better understand the recordkeeping and compliance needs of stakeholders who will be affected by the final rule,” the comments said. “It will be critical that Treasury and IRS issue guidance that clearly details how plan sponsors and administrators, as well as individual taxpayers, are to satisfy requirements that ensure proper eligibility calculations for [premium tax credits].”

The group also wanted the agencies to address minimum value calculations for family plans. The ACA requires plans to provide a minimum value of at least 60% of the total allowed costs of benefits expected to be used.

“It is our experience that most plans offered by employers do not feature different benefit designs for employees and for related family members,” AHIP said. “Therefore, we recommend the minimum value calculator continue to be based on a standard population that includes both employees and dependents to calculate a single, composite minimum value for employee and dependents unless the plan’s benefit design for employees is different from its design for related individuals.”

AHIP wasn’t the only group concerned over the calculation of minimum value standards. 

The American Hospital Association (AHA) said in its comments that the IRS should keep its policy that employer health plans must provide “substantial coverage for inpatient hospitalizations and physician services.”

AHA also issued strong support for the proposed rule. 

“We recognize that this regulation is just one piece of a much broader plan to increase access to affordable, comprehensive coverage through the marketplace,” the AHA said.