On April 5, 2022, the Treasury Department and Internal Revenue Service (IRS) issued proposed regulations aimed at correcting the “family glitch” in the Affordable Care Act (ACA) affordability calculation method. This change was made in order to enable dependents in low-income families to more easily qualify for an exchange subsidy.

Background

• Under the ACA, certain low-income individuals are eligible for premium subsidies for medical insurance purchased on an exchange. However, the ACA’s current method of calculating a plan’s affordability is based on the cost of employee-only coverage and does not account for the cost of adding family members to the employer-sponsored plan.
• The current calculation method can create situations in which families cannot afford the expense of adding a spouse and/or children to an employee’s medical coverage, and also cannot afford to purchase coverage for the spouse/children on an exchange without a premium subsidy.

Proposed Changes

Impact to Employers

• While the proposed regulations do not change calculations for the purpose of compliance with the ACA employer mandate, there is a possibility that the proposed changes may have an indirect impact on plans as family members who newly qualify for premium subsidies may choose to drop their employer-sponsored coverage.
• Additionally, the regulations may cause shifts in the risk pools for employer and exchange plans, which may impact overall costs.
• The public has until June 6 to submit comments on the proposed regulations, which are expected to be finalized before the end of 2022 and implemented in 2023.