Compliance Connection

Newly Released: IRS Changed Affordability Rules for Families

Submitted by Ginger Huff, Arkansas State Manager, American Fidelity Assurance Co.

Employee Impacts

Marketplace affordability calculation to change

When family members apply for financial help to purchase Marketplace coverage, the affordability determination will now be based on the total cost the employee pays to cover both the employee and their family. Previously, it was based only on the cost for an employee’s own coverage. This change is effective for 2023 tax years and beyond.

Increased access to affordable family coverage options

This, together with the increased subsidies through 2025 under the Inflation Reduction Act, will increase access to affordable family health insurance on the Marketplace.

More choice brings more complexity

Employees who choose to drop employer-based family coverage in favor of Marketplace options will need to track costs under each policy separately. For example, deductibles and out-of-pocket maximums apply on a per-policy basis and will not coordinate. This leads to new deductibles and out-of-pocket maximums at the time of coverage change. Provider networks may be different, too.

Employer Impacts

ACA reporting stays the same for now

The final regulations promise that employer reporting using Forms 1095-C and 1094-C will not change. In addition, the safe harbors used to report the affordability of the lowest premium single coverage offered to employees remain the same. Employers should continue to diligently plan and prepare for 2022 ACA reporting, due in early 2023. A separate rule also recently adopted clarifies minimum value coverage must include hospital and physician services.

Expect more Marketplace employer notices

The White House estimates that nearly one million Americans may now see their coverage become more affordable. If Marketplace applications increase overall, employers should prepare for the possibility of an increase in the volume of eligibility determination notices and related administrative hassle.

Read the full article on the American Fidelity Blog