A proposed rule was released by the IRS on April 5, 2022, to change the existing eligibility standards for the premium tax credit (PTC). The PTC is available to eligible individuals who purchased health insurance through the Exchange. However, the PTC is not available to employees with affordable, minimum value employer-sponsored coverage.
Under the current rule, approximately 5 million Americans, mostly children and low-income workers, are prevented from receiving PTCs for marketplace coverage. These individuals would otherwise qualify for PTC based on household income. If the proposed rule is finalized, about 4.8 million individuals will be newly eligible for a premium tax credit through health coverage purchased through the Exchange.
Currently, family coverage cost is not taken into account when determining family member affordability for employer-sponsored coverage. Instead, affordability is determined based on the lowest-cost self-only coverage available to the employee. These rules affect an individual’s PTC eligibility and are also used to determine affordability in relation to the employer shared responsibility rules.
Proposed Rule
Under the proposed rule, an employer-sponsored plan would be considered affordable for family members if the portion of the annual premium the employee must pay for family coverage does not exceed 9.5% of the household income. For the purpose of this rule, family coverage would be defined as all employer plans that cover any related individual other than the employee. Based on the benefits provided to the family members, a minimum value rule would be added.
Employers should be aware that the rule has not been finalized. Whether the rule change would affect the affordability calculation for the employer shared responsibility rules has not been addressed. On June 27, the IRS will hold a hearing on the proposed rule, and if finalized, individuals with a November enrollment in 2023 will see the new rule in effect.
This information is subject to change. As more information becomes available, Creative Benefits, Inc. will provide updates. If you have any questions, please contact your dedicated Creative Benefits, Inc. team member.