New Affordable Option For Family Health Insurance Coverage
Changes to Affordability Rules May Impact Employee Benefit Elections
EMPLOYEES MAY QUALIFY
FOR A SUBSIDY
REIMBURSEMENT
What is the “family glitch”?
The family glitch refers to the Affordable Care Act (ACA) provision that has identified employer health plans for families (eligible spouse and dependents) as affordable. An employee-based family health plan is deemed affordable only if the family (eligible spouse and dependents) plan costs less than a specified household income (Modified Adjusted Gross Income – MAGI)– typically less than 10%. For 2024, the threshold is 8.39 percent. This provision is for families only and does not impact the employee coverage.
What does Affordable mean?
The IRS has modified how affordability is determined for an employee’s family member under employer-sponsored health plans. Under the new rules, affordability for family members is based on the cost of family coverage. For 2024, family plans that are more than 8.39% of the household’s 2023 MAGI are deemed unaffordable for the family.
HOW IT WORKS
How does this impact you as an employer?
This change in affordable coverage means some employees may find obtaining coverage for their family more affordable through public health insurance exchanges (“marketplace”), where their family may qualify for subsidies. As an employer, you are not required to subsidize the cost of family coverage and will not face penalties for offering unaffordable family coverage.
You may see benefits election changes as employees explore other options for insuring their families. To assist employees in making informed choices, employers like you should consider the following:
- Providing educational resources explaining the new affordability rules
- Sharing details on the cost of coverage for employee-only vs. family
- Communicate with employees about coverage eligibility, cost, and minimum value
Families may opt to remain on the employer’s employer-sponsored health plan, regardless of affordability.
Employee Subsidy Qualifying Examples
Review the examples below to get a better understanding on the qualifications.
Meet John
John is offered employer-sponsored healthcare. His family (spouse and dependents) can join for an additional monthly expense.
John will need his company’s lowest affordable plan rates for employees, spouses, and dependents to calculate affordability.
In this case, the following monthly rates apply:
Employee– $200
Family MAGI– $50,000
Family– $700 (modified adjusted income)
Calculations
John can do the simple calculation:
(Family Prem.- Employee Prem.)*12
Divided by
Modified Adjusted Gross Income
or
(700-200)*12/$50,000 = 12.0%
Affordability Check
Since the calculations are above 8.39% in 2024, the coverage is deemed UNAFFORDABLE for the family (spouse and dependents) and the family can seek coverage on the Marketplace and may be eligible for subsidies
Meet Jane
Jane is offered employer-sponsored healthcare. Her family (spouse and dependents) can join for an additional monthly expense.
Jane will need her company’s lowest affordable plan rates for employees, spouses, and dependents to calculate affordability.
In this case, the following monthly rates apply:
Employee– $300
Family MAGI– $80,000
Family– $800 (modified adjusted income)
Calculations
Jane can do the simple calculation –
(Family Prem.- Employee Prem.)*12
Divided by
Modified Adjusted Gross Income
or
(800-300)*12/$80,000 = 7.5%
Affordability Check
Since the calculations are below 8.39% in 2024, the coverage is deemed AFFORDABLE for the family (spouse and dependents) and the family can seek coverage on the Marketplace and may be eligible for subsidies.
SAVINGS CALCULATOR
Try our savings calculator to learn more about potential savings
For assistance please contact a Health Plan Advisor at 833-974-2553 or schedule and appointment here.
Disclaimer: Materials are solely for informational purposes as an educational resource. Please contact counsel to obtain advice with respect to any specific issue.
