Fixing the "Family Glitch" in the ACA

Final Regulations Released

Are we surprised by this?

Fixing the Family Glitch

Key Employer Takeaways

There is a lot in here . . . What do I really need to know as an employer? The good news is that there is little that is newly actionable for employers in these proposed regulations. It impacts access to premium tax credits for dependents who may have been previously disqualified. The following are the key takeaways for employers:

No Impact to Employer Shared Responsibility Penalties: The proposed rule will not affect Shared Responsibility liability under the employer mandate. Why? The employer mandate requires certain ALEs to offer coverage to employees and dependents. However, penalties for violating the mandate are triggered only when an employee receives premium tax credits through the marketplace. Therefore, extending marketplace tax credits to family members of employees (who are not offered affordable employer-sponsored family coverage) would not impact the eligibility of employees and thus would not trigger a shared responsibility payment.

No Impact to 1095 Reporting: These regulations have no impact on 1095 reporting. It is important to remember that affordability and minimum value for premium tax credit eligibility is different than for purposes of potential employer shared responsibility penalties. No doubt the new proposed rule will create some confusion given the similar terminology. However, the regulations do not change the affordability calculation or minimum value determination as it relates to annual ACA reporting or assessment of penalties.

Conforming Cafeteria Plan Change: A change was also made to allow an employee to make a mid-year election change to their health insurance coverage (not FSA coverage) when a dependent becomes newly eligible for a premium subsidy under the Exchange.

Marketplace Notice: Employers can expect that the standard Marketplace Notice to be revised to reflect these changes and should plan on updating the version that is distributed to employees once a new version has been released.

Two Nitty Gritty Clarifications

The regulations also addressed two additional items as follows:

1. Minimum Value Rule: The minimum value rule is extended to dependent coverage. This means that employers must provide an offer of minimum value coverage to dependent children as well as to employees (to avoid Shared Responsibility penalties). The definition of minimum value coverage retains the requirement that plans provide 60% of the total allowed cost of benefits and newly adds the clarification that plan benefits must include substantial coverage of inpatient hospital and physician services. To the extent that minimum value coverage is not being offered to dependent children, employers will need to address this issue.
2. Marketplace Responsibilities: The marketplace would be required to assess:

• Whether an employee has an offer of affordable employee-only coverage,
• Whether family members have an offer of affordable family coverage, and
• Whether any of those family members have an offer of affordable coverage from more than one employer (either as an employee or a dependent).

What is the Effective Date?

The new rule becomes effective for tax years beginning in 2023. This means that dependents who are offered unaffordable employer-sponsored family coverage would be eligible for premium tax credits beginning in 2023 (with enrollment to begin in November 2022).