Jan. 20, 2023

Family Glitch Final Rule
Applies to all groups

The Internal Revenue Service (IRS) released a Final Rule that changes the premium tax credit (subsidy) eligibility standards around the affordability of employer coverage for employees’ family members. Beginning with 2023 health coverage, family members who don’t qualify for premium tax credits today may become eligible for them when purchasing coverage through the Health Insurance Marketplace.

What you need to know:
Individuals are generally ineligible for premium tax credits to purchase subsidized health insurance on the Marketplace if they receive an offer of affordable employer-sponsored coverage. Employees and their family members only qualify for premium tax credits if the cost of employer-sponsored coverage is unaffordable based on IRS limits or if the coverage doesn’t meet federal minimum value standards.

• Previously, the affordability of employer-sponsored coverage for a family member was determined based on self-only coverage, not family coverage. This became known as the “family glitch.”
   
• The Final Rule fixes the “family glitch” by basing the affordability of employer-sponsored coverage for a family member on the cost of family coverage, instead of self-only coverage. Eligibility for employees will continue to be determined by the cost of employee-only coverage.

What does this mean for group health plans?
Some dependents, who have or are eligible for group health plan coverage, may now be eligible for premium tax credits to purchase a subsidized Marketplace plan, and they may switch their coverage as a result, if permitted to do so by plan rules.

When does this go into effect?
The Final Rule is effective beginning with the 2023 tax year.

Does the Final Rule affect the employer mandate penalty?
The Final Rule does not affect the employer mandate penalty because the Final Rule does not change the affordability rules for employees themselves. The employer mandate is triggered when an employee, not a family member, receives a premium tax credit.

What information can we provide to members who may want to sign up for coverage on the Marketplace?
First, check with your group’s agent or broker. They may be able to help members who may be newly eligible for premium tax credits, or they may refer them to another agent/broker qualified to sell health insurance plans through the Marketplace for more assistance.

Members who don’t have an agent or broker or would like to learn more about Marketplace premium tax credit eligibility and coverage options can visit healthcare.gov. 

More information on coverage options from BCBSTX are also available.