NAHU received clarification from CMS/CCIIO late last week regarding the implementation of the family-glitch final rule as it related to the upcoming open enrollment period that runs from November 1 through January 15.
As a reminder, an employer’s plan is not considered affordable if the employee must contribute more than 9.5 percent (9.61 percent in 2022 and 9.12 percent in 2023) of household income toward premiums. Regulations previously defined employer-based health insurance as “affordable” if the coverage solely for the employee (not for family members) is affordable – making family members ineligible for a premium tax credit. The interpretation of the ACA that created the family glitch stems from a final rule issued in 2011, in which the IRS cited a 2011 analysis from the Joint Committee on Taxation that interpreted the affordability test to be based on employee-only coverage.
The final regulation issued on October 13 clarifies that the affordability test for family members is to be based on the cost of family coverage rather than employee-only coverage. More specifically, an offer of job-based coverage will now be considered affordable for family members if the portion of the annual premium (such as the employee’s required contribution toward family coverage) is less than 9.5 percent (or 9.12 percent in 2023) of household income. From there it will be determined whether the employee has an offer of affordable employee-only coverage, whether the family members have an offer of affordable family coverage, and whether any of those family members have an offer of affordable coverage from another employer. The final rule does not affect the affordability test for employees or the employer mandate itself.
The regulation also clarifies the minimum-value rule for family coverage. Under the ACA, an employer’s plan is not considered “minimum value” if it fails to cover at least 60 percent of “total allowed costs.” Additionally, the rule clarifies the treatment of rebates for purposes of premium tax credit eligibility. It is important to note that the minimum-value test will be changed only as it relates to family coverage, not employee-only coverage.
In conversations with CCIIO, NAHU has clarified that, although this final rule technically has an implementation date of December 12, the regulation does apply to enrollments made during the 2023 plan year OEP. This means that the new affordability calculation for family coverage will be in effect for all individuals enrolling through both HealthCare.gov and state-based exchanges during the upcoming OEP, and those previously ineligible for the tax credits will be able to take advantage of those beginning November 1.
We also received many questions regarding how to calculate affordability and whether consumers meet the newly established criteria for premium tax credits. The Marketplace will have a tool that consumers can utilize to check their eligibility, and CMS has asked licensed agents and brokers to assist their clients in putting accurate information into this tool.
Source: National Association of Health Underwriters – NAHU