What Hilgers is referring to is the fact that offering coverage that is affordable for the employee blocks all “related individuals” — generally, the spouse and tax dependent children — from accessing a government subsidy. And the bar hasn’t been set very high: if the employee would not have to pay more than 9.5% of his household income for his portion of the single (employee-only) premium on the employer’s plan, his entire family is firewalled off from getting the subsidy.
It really doesn’t make any sense. The IRS has concluded that congressional intent was to block these individuals from obtaining the tax credits. Instead of basing the affordability determination on the cost of the family premium, they’re basing it only on what the employee would pay, which means that coverage will be considered affordable for most employees and their family members will be locked into the employer’s plan, even if it’s significantly more expensive and the employer isn’t contributing to the dependent premiums.
Many experts believe that, as employees learn how the tax credits work, they may ask their employers to stop offering health insurance altogether so that they can afford coverage for their families. And a lot of employers won’t have to be asked twice.
This analysis — which is relevant to large employers with large numbers of low wage employees — suggests the delay in enforcement of the employer mandate combined with the so-called “kid glitch” will spur enrollments in the individual health benefit exchange marketplace for plan year 2014.
Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email