We have received many inquiries during the Open Enrollment Period for family health quotes into Obamacare / Affordable Care Act / ACA coverage, particularly by those who are shopping to find lower cost coverage compared with what is offered by their employer. Often we find that families are surprised to discover that their family does not qualify for the Premium Tax Credits offered by the ACA Marketplace. This is a result one of the regulation provisions built into the Affordable Care Act; we call the “Family Glitch”.

An individual or family’s Premium Tax Credit Subsidies eligibility is not solely determined by income alone. Typically, an individual or family household’s Modified Adjusted Gross Income between 100% and 400% of the Federal Poverty level will qualify them for subsidy. However, it is also subject to whether a family has access to “affordable” employer-sponsored insurance commonly known as group health insurance. The problem is that the definition of “affordable”–for both an individual employee and a family–is based only on the cost of individual-only coverage and does not take into consideration the often significantly higher cost of a family plan.

According to IRS regulations in the Affordable Care Act, Employer sponsored coverage is deemed affordable when the Employee Only cost of the plan is less than 9.56% of the household income. The regulation does not account for the additional spouse, or dependent cost. That is why we call this scenario the “Family Glitch”. Currently, employers are mandated to contribute at least 50% to the total cost of employee only rates for their employees. Employers are not mandated to contribute to the dependent cost for coverage, and as a result many businesses don’t.

As an example, many local school board employees pay less than $50 per month for their employer sponsored plan. However when they add a spouse, a child, or the entire family the group rates sky rocket because the school board does not contribute heavily to the dependent’s cost of the health plan. Ironically, when this school board member, seek coverage and assistance through the ACA marketplace for their spouse or children, they are often denied subsidy because the employee only cost is far less than 9.56% household gross income.

This shortcoming is a trouble spot in how the ACA is being implemented and it’s continued support. As its name clearly conveys, the law was intended to make coverage more affordable, and for millions of Americans, who are not offered employer health benefits, it has. Families caught up in this glitch, however, cannot qualify for premium tax credits to reduce the cost of a Marketplace plans or for cost-sharing reductions to lower their out-of-pocket payments for health services, even if the family cannot afford coverage otherwise.

As your insurance agent, we can evaluate your current family’s health coverage, recommend solutions to the “Family Glitch”, and do our best to come up with the most cost effective plan options in the ACA market.