On October 13, 2022, the IRS published 87 FR 61979, titled “Affordability of Coverage for Family Members of Employees”. This IRS Final Rule provides important changes to how affordability and minimum value are calculated for family members/beneficiaries under the ACA.

What Does the Publication Say Regarding Affordability?

The most important information contained in the Publication is the updated affordability calculation for family members of employees enrolled in an ACA-qualifying health plan. A health plan is now considered “Affordable” to a family member/beneficiary of an employee if the cost is no greater than 9.12% (for 2023, adjusted annually) of the employee’s contribution to family coverage. The new rules have removed the standard practice of looking only at self-only coverage when determining affordability.

Does the Final Rule Alter the Affordability Calculation for Employees?

No. Affordability calculations for employees remain the same as before the Final Rule was announced: an offer of coverage is considered “Affordable” to an employee if the employee’s required premium contribution for self-only coverage is no more than 9.12% (for 2023, adjusted annually) of that employee’s annual income.

What Does the Publication Say Regarding Minimum Value?

The Publication also addresses Minimum Value for family members. It creates a separate Minimum Value calculation for family member/beneficiaries. A plan is considered to be of “Minimum Value” to a family member/beneficiary if the plan’s share of the total allowed costs of benefits provided to that family member/beneficiary is at least 60%.

Does the Publication Alter the Minimum Value Rule for Employees?

No. Minimum Value calculations for employees remains the same as it did before the final rule was announced: a plan is considered to be of “Minimum Value” if the plan’s share of the total allowed costs of benefits provided is at least 60%.

What are the Penalties for Failure to Comply?

 If the employer does not offer affordable or minimum value health coverage to the family member beneficiary under the terms of the new Final Rules, then that beneficiary will be entitled to a Premium Tax Credit (PTC) from the federal government to purchase health insurance on the individual market. This, in turn, would mean that the employer is liable for the ACA penalties that flow from an unaffordable offer of health insurance coverage or from failure to provide ACA-qualifying health coverage (just like with an employee).

When Do the Provisions of the Publication Take Effect?

These affordability regulations take effect beginning 12/12/2022. You can read the entire Final Rule HERE.