Benefits for Employees: Removing the Affordable Care Act’s Family Glitch
Late last year, the Biden Administration addressed a significant issue within the Affordable Care Act (ACA) known as the “family glitch.” This IRS rule had previously prevented families from qualifying for ACA subsidies when a family member had employer-provided health coverage deemed “affordable,” even if family coverage costs were unaffordable. This primarily affected lower-income workers, who couldn’t access subsidies to purchase affordable healthcare through the ACA marketplace.
Key Changes and Implications:
1. Expanded Subsidy Eligibility:
The closure of the family glitch now allows more families to qualify for premium tax credits, leading to increased ACA enrollment. This change is expected to stabilize individual market rates and reduce adverse selection.
2. Impact on Employers:
Employers need to reassess their contribution strategies for family coverage. The previous glitch may have forced employees to enroll their families in employer plans despite high costs. Now, employees can opt for subsidized exchange plans, potentially indicating that employer-provided family coverage is too expensive.
3. Potential Enrollment Decrease:
While some employers might welcome reduced enrollments, they should be cautious. Lower enrollments could lead to adverse selection, where healthier individuals leave employer plans, leaving a higher proportion of high-claim enrollees.
4. Planning for Future Enrollment:
Employers should evaluate their family coverage contributions, ensuring affordability for average employees. Conducting benefits surveys can help gauge employee satisfaction and identify areas for improvement.
5. Alignment with Company Culture:
Employers should ensure that family premiums align with their overall benefits strategy, including parental leave policies and talent acquisition efforts. High family premiums can send mixed messages and impact job offer acceptance rates.
Strategic Considerations:
As organizations plan for future enrollment periods, they should think holistically about their benefits packages. Balancing affordable family premiums with other employee benefits can enhance overall satisfaction and reduce turnover. Additionally, monitoring the risk profile of the health plan is crucial to avoid long-term adverse selection and maintain sustainable plan performance.
Conclusion:
Closing the family glitch is a significant development for both employees and employers. By reevaluating contribution strategies and aligning benefits with company culture, employers can better support their workforce and navigate the evolving healthcare landscape. For detailed guidance, employers should consult with benefits brokers or legal advisors to tailor their plans effectively.