Business Group on Health Submits Comments on Proposal to Fix ACA Family Glitch

Business Group on Health submits public comments to Treasury and IRS on proposal to fix the so-called ACA “family glitch.”

July 19, 2022

On April 5, 2022, the Internal Revenue Service (IRS) issued a proposed rule to revise the current interpretation on how eligibility for premium tax credits is determined for family members of employees offered employer-sponsored health coverage. If finalized, the rule – formally titled “Affordability of Employer Coverage for Family Members of Employees” – would fix what has become known as the Affordable Care Act’s (ACA) “family glitch” by extending premium tax credits to potentially millions of people who are currently ineligible for subsidies on the ACA marketplaces.

The proposed rule closing the “family glitch” would not impact the ACA employer shared responsibility requirements (i.e., employer mandate). Applicable large employers (with 50 or more full-time and full-time equivalent employees) must continue to offer minimum essential coverage (MEC) that is affordable and meets minimum value to full-time employees and their dependents. The proposed rule does not change the affordability and minimum value tests for full-time employees – nor their associated employer mandate penalties (under IRC Section 4980H(b)) – maintaining their basis on employee-only, not family, coverage. Business Group on Health summarized the proposed rule, including an overview of the employer implications, in a recent article.

The Business Group submitted comments to the IRS during the public comment period advocating that the Service consider the practical implementation considerations for employers that may be driven as the rule is finalized. In particular, the Business Group urged the IRS to recognize the investments employers have made in administrative tools and services related to the ACA’s employer shared responsibility provisions and reporting requirements. A copy of the Business Group’s comment letter is available here.

What’s Next?

Employers should review the impacts of the proposed rule with legal counsel, consultants, third-party administrators, and eligibility vendors to discuss potential implications should the IRS finalize the proposed rules for plan years beginning January 1, 2023 (as they suggest in the preamble to the proposed rules). Business Group on Health will monitor and keep members informed of regulatory developments.

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If you have questions, comments, or concerns about these or other regulatory and compliance issues, please contact us.

We provide this material for informational purposes only; it is not a substitute for legal advice.

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