The premium tax credit family glitch

The premium tax credit family glitch

The premium tax credit is a tax credit that offsets your annual health insurance premiums. It’s a way for the government to pay for some or all of your private health insurance costs. 

Unfortunately, many Americans with incomes that qualify them for premium tax credits cannot access them because their employers offer them affordable coverage. 

In 2021, your employer coverage is affordable as long as you’re not required to pay more than 9.83 percent of your income to cover yourself. This calculation is unfair to households of two or more because it does not consider affordability for the entire family. Policy advocates refer to this issue as the family glitch, and I’m in favor of correcting it. 

The family glitch applies to affordability tests for group coverage provided by an employer via a group plan. It also applies to individual and family coverage reimbursed by an employer via special health reimbursement arrangements (HRAs).

Worst of all, the family glitch disproportionately affects low-income working families because the premium tax credits increase as incomes go down. 

Note: This is why I started LegUp Benefits to help companies offer taxable benefits stipends. Stipends don’t disqualify employees and their families from premium tax credits.

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