What’s Considered Affordable Coverage?
The ACA defines “affordable” coverage in relation to an individual employee, not to their family. If an employer offers coverage to an employee but not to their family, the family may not be eligible for subsidies even if the coverage offered to the employee is unaffordable for the family. This can create a financial hardship for families in this situation, who may have to pay the full cost of health insurance on their own.
New IRS Rule for 2023 Enrollment
A new IRS rule that goes into effect during Open Enrollment for 2023 addresses this “glitch”. The rule change is simple and straightforward: Instead of basing the affordability determination for just the cost to cover the employee, the determination will now be made based on the cost to cover the employee plus any family members, if applicable.
- If a family must pay more than a certain percentage of household income (9.12% in 2023) for the employer coverage, they may be eligible for premium tax credits in the marketplace.
- There will be a separate affordability determination for the employee, and for family members, based on the total cost of family coverage. Depending on how an employer contributes to the cost of family coverage, it’s possible that coverage could be considered affordable for the employee but not for family members. In that case, the family members would potentially be eligible for a premium tax credit in the marketplace, but the employee would not.
- Nothing will change about the ACA’s employer mandate. Large employers will still have to provide affordable, minimum-value coverage to their full-time employees, and offer coverage to those employees’ dependents (offering coverage to spouses is optional). But there will still be no affordability requirements as far as the coverage that’s offered to dependents. The employer mandate penalty is only triggered if an employee’s coverage is unaffordable, and they receive a premium tax credit in the marketplace.
We hope this helps explains the “family glitch” and how this new IRS rule may affect you and your family. For more information contact you employer’s HR department, Insurance Agent or your Health Insurance Carrier.