Treasury Releases Proposal To Address 'Family Glitch' As Biden Administration Touts Coverage Gains

• Published date: 11 April 2022
• Subject Matter: Food, Drugs, Healthcare, Life Sciences, Tax, Tax Authorities
• Law Firm: Manatt, Phelps & Phillips LLP
• Author: Ms Tara R. Straw, Joel S. Ario and Michael S. Kolber

On April 5, President Biden held an event at the White House celebrating coverage gains since the enactment of the Affordable Care Act (ACA). Joined by Vice President Harris and former President Obama, President Biden highlighted actions that the Administration has taken to advance access to and affordability of comprehensive health care coverage. One of the actions touted at the event was a proposed fix to the 'family glitch,' announced earlier that day and described in more detail below.

In addition, the President signed an executive order (EO) on Continuing to Strengthen Americans' Access to Affordable, Quality Health Coverage, directing federal agencies to identify ways to 'expand the availability of affordable health coverage, to improve the quality of coverage, to strengthen benefits, and to help more Americans enroll in quality health coverage' across ACA Marketplaces, Medicare, Medicaid and other programs. This latest order builds upon the President's January 2021 EO, Strengthening Medicaid and the Affordable Care Act, which ordered a federal governmentwide review of policies or practices that impact access to coverage through Medicaid and the ACA.

Overview

The Department of the Treasury (Treasury) notice of proposed rulemaking on the 'family glitch' would extend eligibility for the ACA's premium tax credit to more employees' families when their share of their employer-sponsored premium is unaffordable. This would reverse Treasury's prior determination that the employee's premium alone, not the family's, dictates whether the entire family is barred from financial assistance. The current regulation makes spouses and children ineligible for a premium tax credit if an employee's access to employer-sponsored coverage is deemed 'affordable' based solely on the cost of individual coverage rather than the cost of a family plan.¹ This is often called the 'family glitch.' Consistent with the treatment of employee-only coverage today, the proposed rule also allows families to become eligible for a premium tax credit if the family coverage fails to meet the minimum value standard. Comments on the proposed rule are due by June 6, and a public hearing will be held on June 27. If finalized, the provision would take effect on January 1, 2023.

Fixing the Family Glitch

Under the ACA, an individual with an affordable offer of minimum-value employer-sponsored coverage is ineligible for a premium tax credit to reduce the cost of Marketplace coverage. (In 2022, the...