A Proposed Change to ACA Affordability Could Close the “Family Glitch”
Earlier this month, the Biden Administration released a proposed rule that would change the existing eligibility requirements for the premium tax credit (PTC). The PTC is available to eligible individuals who purchase health insurance coverage on the marketplace. Employees who have access to affordable, minimum value employer-sponsored coverage are not eligible to receive the PTC.
Currently, to determine if coverage is deemed affordable under an employer’s group health-plan we review the lowest-cost self-only coverage available to the employee. The cost of family coverage is not considered. These rules apply for determining an employee’s eligibility for the PTC and have also been specifically incorporated for use in determining affordability for purposes of the employer shared responsibility rules.
Summary of the Proposed Change
The proposed rule would provide that an employer’s group health plan is affordable for family members if the portion of the annual premium the employee must pay for family coverage (the employee’s required contribution) does not exceed 9.5% (as adjusted annually) of household income. For this purpose, family coverage means all employer plans that cover any related individual other than the employee. The proposed rule would also add a minimum value rule for family members based on the benefits provided to the family members. Supposedly this proposal will close the family glitch and bring families relief as of 2023.
If the rule becomes final, it could mean more employees will be newly eligible for a PTC for marketplace coverage. Also noteworthy is this proposal does not address if this change will impact the employer shared responsibility rules when it comes to affordability calculations.
Employer Take Away
Again, this proposed rule is not final so the affordability calculation of employee contributions should continue as is. We will provide more updates as they become available.
The full context of the proposed rule can be found at: https://www.federalregister.gov/documents/2022/04/07/2022-07158/affordability-of-employer-coverage-for-family-members-of-employees
Please reach out to your Account Management Team or our Benefits Compliance Team at The Capital Group to discuss more.