IRS Fixes “Family Glitch” for ACA Subsidies

Affordable Care Act rules previously based family members’ eligibility for health insurance premium subsidies on whether any member of the family had affordable employer-sponsored health coverage – and affordability was based on the cost of employee-only coverage, not the cost of coverage for employees plus dependents. This so-called “family glitch” resulted in many families being unable to afford coverage.


The IRS issued a final rule this week fixing this family glitch, starting in 2023.

Under the final rule, family members who are offered employer-sponsored health coverage that is unaffordable at the family level (i.e., employee plus dependents) will be eligible for subsidies if they purchase coverage from state marketplaces.


This is welcome news to family members who previously were unable to afford coverage. Federal officials estimate that an additional 1 million individuals will obtain subsidized coverage due to these rules. State insurance marketplaces will take these new rules into account starting November 1, 2022, for open enrollment for 2023.


The IRS clarified that these new rules will not affect the employer-shared responsibility provisions of the ACA, which are still based on the affordability of employee-only coverage and are triggered when the employee (not a family member) obtains a premium tax credit. Employers’ liability for any shared responsibility penalties and reporting obligations will not be impacted by the new rules.


If you have any questions about the new regulations, contact a Boutwell Fay attorney.