The family glitch is fixed - now what? Part two

Due to a curiously structured calculation by the IRS, employees and their families have been faced with difficult choices for their healthcare. But as of October 2022, that calculation glitch has been fixed. Now, with coverage affordability redefined, Americans previously affected by this problem can enjoy fairer pricing with updated plans.

If they were able to jump on the opportunity, you may have already helped some of your clients take advantage. For those who did not, under 65 open enrollment remains active through January 15, plus a special enrollment period just for those affected runs for the entirety of 2023.

Ready to help your clients craft an affordable, comprehensive plan to achieve better coverage? Let’s look at their updated options, and discuss a few scenarios.

What options do families have?

Topline, here are your clients’ options under the updated structure:

Option #1 – The whole family takes the employee’s employer-sponsored coverage

Option #2 – The employee takes their employer coverage while the family goes to the Marketplace

Option #3 – The whole family passes on employer coverage and goes to the Marketplace

While, in general, these changes have put the 5 million plus families affected by the old rule into a better situation, there are specific benefits and drawbacks to each scenario.

How does each option stack up?

Let’s say the family takes option #1. There’s a simplicity and symmetry to the choice: the entire family enjoys uniform coverage with the same carrier, and maybe even shared deductibles. Plus, they’ll likely also enjoy the employer’s contribution to the premium for the employee.

However, even under the new standard, option #1 may remain cost-prohibitive as the employer may choose not to contribute toward dependent coverage.

This brings us to option #2, a split decision. In this scenario, an employee in the household opts for their employer-sponsored plan, but the family looks to the Marketplace for coverage. While this may require a bit more effort to sort out the details, there’s a lot to like. The whole family is covered; the employee takes advantage of employer premium contributions as part of an affordable plan; and the family’s Marketplace plan provides not only lower premiums, but also the benefit of premium tax credits.

Again, the logistics of extra paperwork resulting from a grab bag of potentially mismatched benefits, differing networks, and separate deductibles might be a bit of a headache. Additionally, despite helpful tax credits, the family’s out-of-pocket exposure might end up being more with the need to satisfy multiple deductibles.

And then there’s option #3—a family trip to the Marketplace. As in option #1, everyone gets coverage and that coverage will likely be the same. But with a full family Marketplace plan, tax credits may again be in play for the family’s dependents.

Unfortunately, the employee won’t be eligible for those same subsidies. There could also still be a drawback of differing plans, depending on the family’s choice.

How can you support transitioning families?

Now that you’re armed with details on the new affordability calculation and your clients’ options, how can you put it to good use? Well, it starts by gathering a bit more info to determine which direction they might choose.

First, you’ll need to discover if a client’s employer-sponsored plan meets minimum value, or if it covers at least 60% of the benefit cost. If so, your client can then explore the above options; if not, which is rare, it’s worth noting that your client could be eligible for premium tax credits.

In the event they decide to modify existing employer-sponsored coverage by removing either themselves or dependents from that plan, they’ll need to be granted permission to disenroll. (This is also a new wrinkle allowed by the updated structure.) At that point, you can help them move forward with a plan that includes Marketplace coverage and the tax credits that may come with it.

The “family glitch” has been a real thorn in the side of many Americans, preventing them from getting the coverage they need at costs they can afford. Now that it’s been fixed, be sure your clients know their options and how they can take advantage.

Read part one here.