IRS Proposed Rule: Fixing the 'Family Coverage' Loophole

The IRS issued a proposed rule on April 7th that, if finalized, will shift the way family members are considered for ACA Marketplace subsidies in 2023 and beyond. The text of the proposed rule summarizes the issues at hand:

“The current regulations provide that if self-only employer coverage is affordable for an employee, then the coverage is also affordable for a spouse with whom the employee is filing a joint return and any dependents of the employee who may be eligible to enroll in the employer coverage, regardless of the amount the employee must pay to cover the spouse and dependents.”

Because of this so-called ‘family glitch’, dependents have been denied Marketplace subsidies even if the employer plan they are offered costs them 100% of the premium difference between single and family coverage. The proposed rule will permit dependents to qualify for Marketplace subsidies when they are offered ‘unaffordable’ family tier employer coverage, with no consequence to the employer.

The comment period will run until June 6, at which time we may expect to see a finalized version of the IRS rule.