Proposed Expansion of Affordable Coverage for Family Members of Employees 

Federal Government Proposes Expansion of Affordable Coverage Premium/Tax Credits to Individual Family Members of Employees Who Are Offered Affordable Coverage. No New Aca Employer Mandate — For Now.

Background

The Affordable Care Act (ACA) requires large employers (50 employees in the prior calendar year) to offer affordable health coverage to their full-time (30 hours per week) employees. The affordability of the health coverage for the employee, even for employees enrolling in family coverage, is determined on an individual health policy/coverage basis by utilizing an annual medical inflation index (9.61% for 2022) established by the IRS and one of three safe harbors: W-2, Rate of Pay, and Federal Poverty Level.

Proposed Action / Regulation

The IRS, under the current Biden administration, recognizes that some employees may not choose family coverage because of its cost, even though their employer offered the employee affordable coverage by utilizing the individual coverage requirements referenced above. In order to increase the likelihood that an individual family member could purchase health insurance through an exchange or Healthcare.gov, the IRS is proposing a new affordability measurement for family members. Specifically, an employer-sponsored plan would be affordable for “related individuals” only if the employee’s required contribution percentage is less than 9.61% of the household income subject to one of the three safe harbors previously referenced. If the employer’s group health plan expense for family coverage (including employee + spouse and employee + dependents) does not fall within the 9.61%, then such coverage is deemed to not be “affordable” for those related family individuals. As a result, those related individuals will become eligible for a premium tax credit.

The IRS has asked for public comment on the proposed regulation ,which can be found at the following link below. The public has until June 6, 2022, to submit its comments to the IRS. The proposed regulation would take effect as of January 1, 2023.

FAQs

Q: Does this proposed regulation require employers subject to the ACA to contribute more dollars toward an employee’s health insurance premium?

A: No.

Q: What do you have to do as an employer at this time?

A: Nothing.

Q: What possible new action could be required of employers in the future?

A: The federal government may amend the ACA Marketplace Notices to alert employees that their family members may be eligible for tax credits/subsidies to purchase their own individual coverage if the employee cannot afford to purchase family coverage sponsored by the employer. Employers are responsible for distributing the notice. This new regulation may also lead to the need to create new 1095-C codes and filing responsibilities. Time will tell.

Link to Proposed Regulation: https://www.federalregister.gov/documents/2022/04/07/2022-07158/affordability-of-employer-coverage-for-family-members-of-employees

Questions? Feel free to contact George Thompson, senior counsel, VP of compliance here.