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In this video (18:23), Blue Cross and Blue Shield of Louisiana Health Care Economist Mike Bertaut explains in detail the fix for the family glitch, who might benefit from it and what producers need to know about it.

“The IRS has fixed a long-standing issue with Healthcare.gov known as the ‘Family Glitch.’ This will help many more Louisiana families save money on their 2023 health insurance plans,” said Health Care Economist Mike Bertaut. Bertaut explained the Family Glitch fix in a recent Straight Talk post.

This year, thanks to recent federal changes, more Louisianians are now eligible to shop for individual health plans and use financial credits they qualify for to pay their premiums for plans on Healthcare.gov.

If an individual is employed and has insurance available through an employer, financial assistance is available if the employer’s insurance is considered unaffordable. There is no penalty for employers who do not offer affordable family coverage.

What Changed
The original IRS regulations to determine “affordability” only looked at the premium the employee family member would pay, not at the dependents’ premium cost to cover the entire family. As a result, many families found the cost of coverage unaffordable. This unaffordability problem for families under the original IRS rules has been called the Family Glitch. 

The IRS has made changes for 2023 to address the Family Glitch. For all health plan coverage effective Jan. 1, 2023 and beyond, if an employer makes an offer of health insurance coverage to an employee’s spouse or dependents that is deemed unaffordable by the federal standard of costing 9.12% or more of total household income, they can shop for individual plans on Healthcare.gov. And, they can use any advanced premium tax credits they qualify for to help pay for that coverage.

Why This Matters
A Kaiser Family Foundation analysis of 2021 employer-based health insurance rates showed Louisiana ranked 49th nationally in the amount employers contribute to spouse and dependent coverage.

“That means Louisianians on average pay a lot more than employees in other states for their dependents’ health coverage,” Bertaut said. “But no matter how expensive it was for the family, the mere existence of that dependent coverage offer disqualified them getting advanced tax credits on Healthcare.gov to pay for an individual health plan – until now.” 

Plus, the Inflation Reduction Act extended enhanced tax credits passed under the American Rescue Plan Act, and the financial aid on Healthcare.gov is richer than it’s ever been, with more people qualifying.

How to calculate whether employer-based family plan is unaffordable:
Before guiding a member to shop for individual family plans, they may want to determine whether an offered employer-based family plan is affordable or not. Employees should go to Healthcare.gov to calculate. They will need to create an account first.

Note that the premium tested must be the lowest priced premium from any employer that offers health coverage (so if both spouses receive an offer, the lowest priced premium that covers the entire family is the one to be tested) and the test is based on household income, not just the income of the employee whose employer is offering coverage.