FEBRUARY 2023HR TECH OUTLOOK8Cory Jorbin, Chief Compliance Officer, HUB InternationalByACA AFFORDABILITY TO EXTEND BEYOND EMPLOYEE-ONLYCory JorbinSince it was enacted the Affordable Care Act ("ACA") has measured whether coverage is affordable based on the cost of employee-only coverage. This has led to the creation of the "family glitch", which has meant that spouses and dependent children of employees who are offered affordable, minimum value coverage have not been eligible for federal tax credits to purchase coverage through the exchange. As a result, spouses and dependent children might not receive any employer contribution towards health coverage, yet also not be eligible to receive a tax credit to purchase coverage. Effectively this has led many families to choose between paying more than they reasonably can afford for employer coverage, or going without coverage entirely. Recently issued proposed regulations from the Internal Revenue Service ("IRS") may change this. Current Rule The ACA requires Applicable Large Employers ("ALEs") to offer health insurance to their full-time employees. This health coverage must meet the Minimum Essential Coverage ("MEC") and Minimum Value ("MV") requirements, and also be affordable. MEC must also be offered to dependent children ­ but this coverage does not need to be MV. This may come as a surprise, but the ACA does not require coverage to be offered to spouses. Employers who don't meet these requirements could be penalized. In order for employers to ensure coverage is affordable, they must often contribute to that cost. However, since the affordability requirement only applies to coverage offered to the employee, employers are not required (at least by the ACA) to contribute towards the cost of coverage for spouses or dependents. Note that employers offering insured health plans must still comply with any minimum contributions required by their insurance carriers. Proposed RuleThe proposed change would extend the ACA's affordability measure from being based solely on employee-only coverage, to being based on all tiers of coverage. So, while employers now show affordable coverage if the employee's contribution towards the lowest cost, employee-only coverage does not exceed 9.5% (as adjusted) of the employee's household income; under the proposed rule, the employee's contribution towards the lowest cost plan, for all other tiers of coverage, could also not exceed 9.5% (as adjusted) of household income. Employees who are offered affordable, minimum value, employee-only coverage remain ineligible for federal subsidy assistance. However, if the other tiers of coverage that cover the employee's spouse and/or dependent children are not also offered affordable coverage, those family members could now potentially become eligible for federal subsidy assistance, depending on overall household earnings. To avoid creating another potential family glitch, the proposed regulations address minimum value coverage for an employee's family members. As mentioned above,
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