New proposed health care reform rules issued by the IRS may leave employees struggling to afford coverage for their families, even if their coverage is deemed “affordable.”
As we reported in January, earlier IRS’ guidance on the “shared responsibility” provision of the health care reform law stated that while large employers (those with at least 50 full-time employees) are required to offer family coverage, they aren’t required to make it affordable.
The agency said the meaning of “affordable” hinged entirely on the cost of an employee’s self-only coverage.
Under IRS rules, if an employee’s coverage is deemed unaffordable — i.e., it costs more than 9.5% of the individual’s household income — he or she will receive a government subsidy to help purchase insurance.
What about the children?
Still, this left many wondering how the rule applied to purchasing insurance to cover children. After all, family policies are much more expensive than individual policies. And a family plan would be almost guaranteed to cost more than 9.5% of an individual’s income.
Surely, the IRS would create a caveat to allow employees receiving affordable self-only coverage the opportunity to receive health care subsidies to help insure their families, thought many industry experts and child advocacy groups.
Nope. The IRS’ new proposed rules reaffirm that it’s sticking to a strict interpretation of the reform law — at least for now.
So what does that mean? As long as an employee’s share of his/her self-only premiums equal 9.5% or less of his/her salary, there will be no available health care subsidies for the person’s family coverage.
Many will be exempt from penalties
On the other hand, the proposed rules also explain the eligibility rules for receiving an exemption from the law’s individual coverage mandate — and those who qualify for an exemption aren’t penalized for not having coverage.
Many children who’d fall into the scenario described above would not be subject to the penalty, according to the IRS.
Also exempt will be individuals who make less than 100% of the federal poverty level and can’t qualify for Medicaid because live they in states that decided not to expand the low-income program (due to the Supreme Court’s ruling that the feds couldn’t force states to loosen their Medicaid rules).