An IRS proposal that would allow more family members to get Obamacare subsidies shouldn’t result in fines on companies that don’t provide affordable family coverage, large employers are telling the agency.
It’s “extremely important to our members that the changes to PTC [premium tax credit] eligibility for family members not directly or indirectly change in any way the obligations or liability for employers under the employer mandate or the employer reporting requirements,” the American Benefits Council said in its comment letter on the Internal Revenue Service’s proposed rule (RIN 1545-BQ16). The council represents large employers that provide health and retirement benefits to employees.
The proposal would change eligibility for Affordable Care Act premium tax credit subsidies to include family members of employees who have employer coverage that meets ACA requirements. About 5 million people are affected by this “family glitch,” but the number of uninsured people who would gain coverage through the proposed rule is only 200,000, according to the White House.
The employers’ concerns center on the ACA’s shared responsibility provision, under which employers with at least 50 full-time employees are liable for large penalties if they don’t provide coverage that meets standards for affordability and minimum coverage for individual workers. But companies aren’t liable for providing affordable, minimum coverage for family members.
Employer-sponsored insurance is the biggest source of health coverage for Americans under 65, covering about 155 million people.
Many families are covered by employer plans, but premiums are often very high. In 2021, average annual premiums for employer-sponsored health insurance were $7,739 for single coverage and $22,221 for family coverage, according to the most recent report from Kaiser Family Foundation.
The White House said that if finalized the rule would “save hundreds of thousands of families hundreds of dollars a month.”
James Gelfand, executive vice president of public affairs for the ERISA Industry Committee (ERIC), said his organization has a “positive impression” of the rule but is wary of administrative changes that might come with it.
ERIC also represents large companies that provide employee benefit plans, and its comment letter emphasized that the final rule should avoid changes that “would negatively impact the employer-sponsored health system or cause new administrative burdens relating to additional notice or reporting requirements.”
New requirements on employers that would expand information notices they must send to employees about health plans “would be a terrible idea,” Gelfand said in an interview. “We send our employees and our plan beneficiaries hundreds of pages of documents per year. And the more we send to them, the less they read.”
Both ERIC and the American Benefits Council also said in their comments that they believe that in most cases employer-sponsored plans will be the most affordable and comprehensive option for employee families.
The ABC suggested that if the rule is finalized, the Department of Health and Human Services, the Treasury Department, and the IRS should provide information on whether families should enroll in ACA exchange coverage instead of employer coverage.
For some families splitting coverage could lower their premiums. For others, the cost could be higher, with two sets of annual deductibles and out-of-pocket limits.
Moving family members from employer-sponsored coverage to exchange coverage could also mean lower health reimbursement arrangement (HRA) or health savings account contributions from employers, the ABC said. Those are tax-advantaged accounts used to pay medical expenses that employers can contribute to.
The HRA Council, which represents administrators of health reimbursement arrangements, said the rule should specify that employees that have access to affordable HRAs should be allowed to buy family policies in the exchanges by combining the employee’s HRA with premium tax credits available for dependents.
That would help families get a plan with one provider network and cost-sharing structure “rather than having to navigate multiple insurance plans with different networks and different cost-sharing structures.”
`Irregular Regulatory Revision’
The US Chamber of Commerce raised concerns about the “highly irregular regulatory revision” of the ACA under the proposal.
“Based on the ACA’s statutory provisions, the Obama Administration promulgated regulations nearly a decade ago that family members of employees offered coverage under an affordable (based on self-only coverage) minimum value plan are ineligible for premium tax credits,” the Chamber said. “Now, the Biden administration has ‘preliminary concluded’ that an alternative reading ‘is better.’”
But groups representing the health-care industry, such as AHIP, which represents health insurers, praised the proposal: “The proposed rule strikes an appropriate balance that will preserve the integrity of the employer market while expanding access to affordable coverage through the ACA marketplaces for those that need coverage.”
The American Hospital Association said the proposal “reflects the best reading of the Affordable Care Act,” and the IRS’s earlier rule, which didn’t allow family members of employees with company plans, doesn’t “correctly interpret” the ACA.