Client Alert
from
The McCart 
Group
 
February 22, 2013
Final Rule on Affordability of Family Health Coverage/Health Insurance Premium Tax Credit  

 

Employees' family members who are eligible to enroll in the employees' group health plan will be ineligible for federal subsidies under the Exchanges if the employees are offered affordable self-only healthcare coverage, according to the IRS's final rule published on Feb. 1.

 

The final rule retains the provision in the IRS's proposed rule basing the Affordable Care Act's (ACA) affordability test on the cost of self-only coverage, rather than family coverage. Thus, an employee's contribution toward the premium for family coverage is not taken into account when determining whether an employer is subject to penalties for not offering affordable coverage that satisfies the ACA's minimum value standard. The IRS's final rule may result in limiting federal healthcare premium subsidies for employees' family members who purchase insurance from the Exchanges beginning in 2014.

 

Under the ACA, employees eligible for an employer-sponsored health plan that is deemed "not affordable" can opt out of the coverage and receive a federal subsidy to help them purchase insurance in the Exchanges. They are eligible for a federal health insurance premium tax credit, which is based on income as a percentage of the Federal Poverty Level, if their employer-sponsored plan is deemed "not affordable," i.e., if their share of the premium is more than 9.5% of household income. In addition, the ACA subjects employers to a $3,000 penalty for each full-time employee whose premium share exceeds the 9.5% of household income threshold and who receives the subsidy to purchase Exchange coverage.

 

In a related proposed rule also published Feb. 1, the IRS said that family members of an employee who is offered affordable, self-only coverage will not be subject to the ACA individual mandate penalty applicable to individuals who do not obtain insurance if the employee's premium share for family coverage exceeds 8% of household income and the family members do not enroll in the coverage. This proposed rule cannot be relied upon at this time.
Employers should review their employee contribution and eligibility strategy for all employees to avoid unnecessarily limiting premium tax credit options under the Exchanges for employees and their dependents.

Milliman Benefits Alert 13-4, February 21, 2013 

 

 

The McCart Group will continue to update you on the regulations as they are released.

 
Please contact your McCart Group representative with any questions you may have.
McCart Assurex & RM logo
 
While every effort has been taken in compiling this information to ensure that its contents are totally accurate, neither the publisher nor the author can accept  liability  for any inaccuracies or changed circumstances of any information herein or for the consequences of any reliance placed upon it. This publication is distributed on the understanding that the publisher is not engaged in rendering legal, accounting or other professional advice or services. Readers should always seek professional advice before entering into any commitments.
 
The McCart Group * 2405 Satellite Blvd. Suite 200 * Duluth, GA  30096 * 770-232-0202 
© 2013  The McCart Group. All rights reserved.
The McCart Group keeps its contact database strictly confidential.