Biden administration releases proposed rule to fix longtime ACA 'family glitch'

The Biden administration has proposed fixing a longtime “family glitch” in the Affordable Care Act (ACA) that has led to an estimated more than 5 million people not getting vital cost assistance.

The Treasury Department and the Internal Revenue Service issued a proposed rule Tuesday that creates a minimum value for family members of employees who are eligible for tax credits under the ACA. The rule aims to repair a longtime problem; advocates have said the glitch ensures coverage is out of reach for some low-income families.

The “family glitch” refers to a provision in the ACA that ensures individuals can get premium assistance for coverage on the law’s exchanges if the employer requires them to spend more than 9.5% of their household income on a premium. 

However, this threshold only affects the cost for the employee’s individual coverage and not the premium required to cover dependents, according to an analysis from the Kaiser Family Foundation

An individual and their family could meet the 9.5% threshold if the law counts the care for the entire family. However, since the law only applies to the individual's costs, the family may not be eligible for coverage assistance.

Kaiser has estimated that 5.1 million people fall into this category, with most of them being women and children. 

The Treasury rule, released Tuesday, would instead create a separate minimum threshold for an entire family.

Under the proposed rule, the new threshold is whether a plan’s contribution does not exceed 9.5% of total household and family income. 

“Family coverage means all employer plans that cover any related individual other than the employee, including a self plus-one plan for an employee enrolling one other family member in the coverage,” the rule said. “An employee’s required contribution for family coverage is the portion of the annual premium the employee must pay for coverage of the employee and all other individuals included in the employee’s coverage who are offered the coverage.”

The proposed rule, which is open for comment for 60 days after publication in the Federal Register, is part of a larger effort by the Biden administration to expand ACA coverage. 

The Department of Health and Human Services recently touted a record 14.5 million signups during the latest ACA open enrollment. However, a key driver of that open enrollment was enhanced subsidies passed as part of the American Rescue Plan Act, but those subsidies will go away after this year if Congress does not act