By Christy Abend
“The Affordable Care Act (ACA) is now embedded in our healthcare system. There are many improvements that can be made, but I do not foresee Congress repealing it altogether.” Sen. Susan Collins (R-Maine) told the Washington Post. As the ACA continues to move toward being a permanent fixture in the American healthcare system, repealing it appears to largely no longer be a part of the current election discussion.
Instead of a repeal, the focus has shifted to closing loopholes and making improvements to ensure the ACA improves healthcare quality and access for as many Americans as possible. As such, employers should increase their focus on meeting ACA requirements to help ensure they don’t face costly penalties.
Most recently, the Department of the Treasury and the Internal Revenue Service (IRS) have issued a final rule to close the loophole known as the “family glitch” within the Affordable Care Act (ACA).
For the 2023 tax year, affordability and eligibility for Premium Subsidies (tax credits to offset the amount one pays in premiums) will be calculated not only by an individual’s premium cost, but also the cost of their dependents’ coverage. Changes to federal and state marketplaces can be implemented prior to the 2023 open enrollment period, which begins November 1, 2022.
Marketplace healthcare premium subsidies are provided to individuals based on their income or when their employer’s insurance is deemed unaffordable or does not meet the definition of Minimum Essential Coverage or Minimum Value. If an Applicable Large Employer (ALE) requires an employee to spend more than 9.12% (for tax year 2023) of their household income in the “self-only” tier of an employer’s lowest cost health plan, the plan is considered unaffordable under the ACA.
While affordability determinations are based on self-only coverage, the cost to cover premiums for family members is typically much higher than the self-only tier. Employees attempting to secure health insurance for their family may not qualify for a premium subsidy from the exchange. Instead, they may need to pay more for family healthcare – this was the “family glitch.” The Biden Administration proposed a rule to eliminate the “family glitch” as it was inconsistent with the ACA’s intent to expand affordable health coverage to as many U.S. citizens and nationals as possible.
The new rule will require additional collection and reporting of data for coverage offered to dependents beginning tax year 2023. How exactly this information is to be collected has yet to be determined, but as part of the final rule, the IRS and the Department of Treasury have clarified that there will not be additional requirements imposed on employers through 1094/5-B/C reporting.
The final rule doesn’t mean employers will face additional 4980H(a) and (b) penalty risk. Those penalties will continue to be based on whether employers are offering coverage to 95 percent of qualifying employees, as well as self-only coverage meeting affordability and minimum essential coverage rules. The new rule will make Premium Tax Credits available to family members of employees who have an offer of self-only coverage that meets the affordability threshold, but are not offered affordable employer-sponsored dependent or family coverage.
Requirements around the ACA are seemingly ever-changing and keeping up to date can be a challenge. Equifax Workforce Solutions can help you better manage your ACA efforts, including helping calculate affordability, employee eligibility, tracking offers of coverage, reporting, and more. Learn more by reading our free guide, ACA Penalties and What They Could Mean for Your Company and visit our ACA Management page for more information.
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