Quick look: Expensive healthcare costs have been a lingering cause for concern for millions of Americans. However, with the recent Affordable Care Act (ACA) ruling, the hope is to have more people insured in the coming year. These recent changes give brokers the added task of navigating through the latest information as they guide clients in selecting their healthcare plans.
On October 13, 2022, the IRS issued its ACA “family glitch” ruling. Formally known as the Affordability of Employer Coverage for Family Members of Employees, this rule applies to the 2023 plan coverage year. The underlying goal is to make it less expensive for uninsured individuals, as well as spouses and dependents covered under employer-sponsored family health plans, to purchase coverage through the ACA marketplace.
The final effective regulations, which go into effect December 12, 2022, expand premium tax credit (PTC) eligibility for employees’ family members. Under the ruling, employer-sponsored coverage affordability for family members will be determined based on the employer’s share of the cost. This share includes coverage for employees and their family members (rather than only the cost of employees). As a result, many feel it may cause a decline in family coverage requests for employer health plan benefits in 2023.
The ruling also adds a minimum value rule for coverage available to an employee’s family members. With the current “family glitch” in ACA affordability, individuals aren’t eligible for marketplace PTCs if offered health insurance as part of an employer-sponsored group plan which is deemed affordable. Employees paying for self-only coverage aren’t required to pay beyond 9.5% (indexed for 2021) of their household income. Meanwhile, coverage for their family members is considered affordable despite how much the employee pays to cover them under their employer’s group health plan.
The employer mandate is not affected by the affordability determination for ACA eligibility. Although, this latest ruling may affect employer plans as more family members may qualify for PTCs by enrolling for coverage through the ACA marketplace. Keeping current with the most accurate information can quickly become overwhelming for SMBs and their employees. Fortunately, PEO brokers have the benefit of connecting with their expert network to ensure clients feel confident in their healthcare coverage decisions heading into 2023.
Evaluating employer-sponsored health plan affordability
When assessing the affordability of employer-sponsored health plans, an employee’s self-only coverage may be deemed affordable, although the extension to the family may not. Under the “family glitch” ruling, if coverage for the family as a whole costs more than 9.12% (in 2023) of household income under the lowest-cost employer-sponsored option, then the non-employee family members will be eligible for financial assistance in the ACA marketplace.
Therefore, more employees may choose self-only coverage during open enrollment rather than adding their spouses and dependents to the group health plan. Some analysts believe those who switch to the ACA market will likely opt for low or no-cost premiums. Whereas, those staying with employer-sponsored coverage will receive greater health benefits to cover serious health conditions. Consequently, premiums for employer-sponsored plans may increase. Though this prediction remains to be seen, it’s likely employees will begin to closely evaluate their options for family members for this enrollment period and those in the future.
The IRS and Department of Health and Human Services will update forms and revise the marketplace application process prior to the 2023 marketplace annual enrollment period. These will include questions about employer coverage extended to family members and the agencies will work with each state marketplace to ensure all are taking active steps in educating the public.
Mandates for providing “minimum value”
As small- and medium-sized businesses (SMBs) expand, it’s important they understand the mandates in place regarding affordable coverage as instituted by ACA. SMB employers with 50 or more employees must still provide minimum-value coverage to full-time employees. They must also offer coverage to employees’ dependents, though spouses are not required.
However, the new ruling upholds a long-standing regulation regarding minimum value requirements for related individuals. If the offer of employer coverage does not provide minimum value for the related individual, they are deemed ineligible for coverage, yet may be allowed a PTC through the ACA marketplace.
The minimum value under the ACA affordability regulation is defined as at least 60% of an employer-sponsored plan’s share of the total allowed costs of benefits provided to an employee. Additionally, benefits under this plan must include “substantial coverage of inpatient hospital services and physician services.” No penalty is applied unless the employee’s coverage is considered unaffordable and they receive a PTC in the marketplace.
How PEO brokers can help
Guiding SMB clients toward affordable health plan coverage is always a top priority. In addition to public information shared, this year’s open enrollment will likely have employers asking for specifics of how the ruling will affect their options. Furthermore, as the workforce continues to shift, diverse employee needs are pushing employers to evaluate what benefits to offer to stay competitive.
To handle this rapidly evolving industry, PEO brokers can extend their resources to a trusted team dedicated to tailoring HR solutions. A PEO like ExtensisHR provides the experience and expertise necessary to navigate new laws and guide broker clients toward success. ExtensisHR handles all HR responsibilities, including recruiting and benefits management, plus risk and compliance services, which allows SMB leaders to focus on their business growth.
The ACA ruling is intended to make health insurance more affordable for a greater number of people. Yet, not everyone will be affected the same. Our team of HR experts supports brokers as they address unique client challenges and demands. Empower your clients by giving them the tools and services they need to adapt. Contact ExtensisHR today.