ObamaCare’s family affordability glitch means family members with access to employer coverage costing less than roughly 9.5% of household income per member can’t get subsidies on the Health Insurance Marketplace. It is a glitch because this can leave family members and families who would have qualified for cost assistance without access to the employer-sponsored plan in a gap where they can’t afford coverage but can’t get cost assistance.
Luckily for some families, those with a low enough income and children of the right age may still qualify for Medicaid / CHIP. Also, luckily a fix was proposed in 2022 to fix the family glitch.
UPDATE 2022: President Biden has proposed a fix to the family glitch. Instead of individual income being counted, family income will be counted and tax credits will be offered if a family’s coverage costs more than 10% of their income.
The exemption amounts started at 8% and 9.5% respectively, and have gone up slightly each year. Consider this when reading the information below, and make sure to use the current numbers in practice (they can be found in the instructions for form 8965 each year).
We have offered the 2017 numbers as an example below. See Affordability Exemptions and the Family Affordability Glitch for 2017 Plans.
- If the cheapest employer plan costs more than 8.16% for self-only or family-member-only coverage, that family member qualifies for an exemption from the fee.
- If the cheapest employer plan costs more than 9.69% for self-only or family-member-only coverage, then that family member can use marketplace cost assistance (but must be approved from HealthCare.Gov first).
FACT: If two or more family members’ aggregate cost of self-only employer-sponsored coverage is more than 8% of household income, as is the cost of any available employer-sponsored coverage for the entire family. This grants a hardship exemption, but not eligibility for cost assistance.
Who has to be Offered Coverage?
Spouses don’t have to be offered coverage from an employer, but the employee and dependents do. If the spouse is offered coverage, or if a dependent is offered coverage, then the rules below apply to them.
Rules for Affordability
Under the ACA for insurance to be considered affordable it must meet the following criteria:
- For individuals without access to employer-based insurance. Coverage must cost no more than 8% of household income (for the cheapest marketplace bronze plan after subsidies).
- For families with access to employer-based insurance. Coverage can’t cost more than 8% of aggregate household income (for the cheapest marketplace bronze plan after subsidies). If it does they qualify for a hardship exemption.
- For employer-sponsored insurance. The cheapest employee-only coverage offered must cost no more than 9.5% of household income after employer contributions (for the equivalent of the cheapest marketplace bronze plan after subsidies). Typically employers use employee-only income as a safe harbor.
If insurance is not considered affordable a person may qualify for an exemption, and/or for catastrophic coverage through the marketplace.
Rules for Minimum Value
The coverage also must provide at least the cost-sharing of a Bronze plan sold on the Marketplace, meaning it must have at least a 60% Actuarial Value.
There are No Affordability Rules for Dependents of Employee
Even though an employee’s coverage has to meet minimum affordability guidelines, the coverage for other family members on the employees employer-sponsored plan don’t.
How The Family Glitch Affects Marketplace Coverage
If an Employer Offers Affordable Coverage Then Whoever Has Access Can’t Get Cost Assistance Through ObamaCare’s Marketplace.
Dependents Can Still Qualify For CHIP and Spouses Can Still Qualify For Medicaid
In a household with a low enough income a child and parents may still qualify for CHIP. CHIP eligibility levels are different for each state and depend age and income. In states that expanded Medicaid adults making less than 138% of the Federal Poverty Level may qualify for Medicaid. This is all true even if a spouse has employer coverage that is offered to the family.
The Result of the Family Affordability Glitch
As a result of the “glitch” a family member may have access to coverage through a household members employer that is only technically affordable by these guidelines, but costs much more than 8% of their household income for coverage.
If the plan costs 8% or more of household income for any family member it will exempt them from the fee for not having coverage and may qualify them for a catastrophic marketplace plan, but the law does little else to make the employer plan actually affordable to the family since the family loses access to cost assistance through the Health Insurance Marketplace by being offered coverage.
No Subsidies Can Mean Unaffordable Coverage
The main issue here lays in the fact that affordability in the workplace is determined by employee-only, where affordability for individuals and families is determined for each household member. The marketplace includes subsidies to curb the cost down below the 9.5% mark, while employer plans include only employer contributions and no additional rules for family affordability.