Rule2022-22184
Affordability of Employer Coverage for Family Members of Employees
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
October 13, 2022
Effective
December 12, 2022
Issuing agencies
Treasury DepartmentInternal Revenue Service
Abstract
This document contains final regulations under section 36B of the Internal Revenue Code (Code) that amend the regulations regarding eligibility for the premium tax credit (PTC) to provide that affordability of employer-sponsored minimum essential coverage (employer coverage) for family members of an employee is determined based on the employee's share of the cost of covering the employee and those family members, not the cost of covering only the employee. The final regulations also add a minimum value rule for family members of employees based on the benefits provided to the family members. The final regulations affect taxpayers who enroll, or enroll a family member, in individual health insurance coverage through a Health Insurance Exchange (Exchange) and who may be allowed a PTC for the coverage.
Full Text
<html>
<head>
<title>Federal Register, Volume 87 Issue 197 (Thursday, October 13, 2022)</title>
</head>
<body><pre>
[Federal Register Volume 87, Number 197 (Thursday, October 13, 2022)]
[Rules and Regulations]
[Pages 61979-62003]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-22184]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 9968]
RIN 1545-BQ16
Affordability of Employer Coverage for Family Members of
Employees
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final regulations.
-----------------------------------------------------------------------
SUMMARY: This document contains final regulations under section 36B of
the Internal Revenue Code (Code) that amend the regulations regarding
eligibility for the premium tax credit (PTC) to provide that
affordability of employer-sponsored minimum essential coverage
(employer coverage) for family members of an employee is determined
based on the employee's share of the cost of covering the employee and
those family members, not the cost of covering only the employee. The
final regulations also add a minimum value rule for family members of
employees based on the benefits provided to the family members. The
final regulations affect taxpayers who enroll, or enroll a family
member, in individual health insurance coverage through a Health
Insurance Exchange (Exchange) and who may be allowed a PTC for the
coverage.
DATES: These final regulations are effective on December 12, 2022.
FOR FURTHER INFORMATION CONTACT: Clara Raymond at (202) 317-4718 (not a
toll-free number).
SUPPLEMENTARY INFORMATION:
Background
I. Overview
This document amends the Income Tax Regulations (26 CFR part 1)
under section 36B of the Code. On April 7, 2022, the Department of the
Treasury (Treasury Department) and the IRS published a notice of
proposed rulemaking (REG-114339-21) in the Federal Register (87 FR
20354) under section 36B (proposed regulations). A public hearing was
held on June 27, 2022. The Treasury Department and the IRS also
received written comments on the proposed regulations. After
consideration of the testimony heard at the public hearing and the
comments received, the proposed regulations are adopted as amended by
this Treasury decision (final regulations).
These final regulations provide that, for purposes of determining
eligibility for PTC, affordability of employer coverage for individuals
eligible to enroll in the coverage because of their relationship to an
employee of the employer (related individuals) is determined based on
the employee's share of the cost of covering the employee and the
related individuals. As further explained in the Summary of Comments
and Explanation of Revisions, the affordability rule for related
individuals in these final regulations represents the better reading of
the relevant statutes and is consistent with Congress's purpose in the
Affordable Care Act (ACA) \1\ to expand access to affordable health
care coverage. The final regulations also include amendments to the
rules relating to the determination of whether employer coverage
provides a minimum level of benefits, referred to as minimum value;
conforming amendments to the current regulations; and clarification of
the treatment of premium refunds.
---------------------------------------------------------------------------
\1\ The term ACA in this preamble means the Patient Protection
and Affordable Care Act, Pub. L. 111-148, 124 Stat. 119 (2010), as
amended by the Health Care and Education Reconciliation Act of 2010,
Pub. L. 111-152, 124 Stat. 1029 (2010).
---------------------------------------------------------------------------
II. Eligibility for Employer Coverage Under Section 36B
Section 36B provides a PTC for applicable taxpayers who meet
certain eligibility requirements, including that a member of the
taxpayer's family enrolls in a qualified health plan through an
Exchange (QHP or Exchange coverage) for one or more ``coverage
months.'' Under Sec. 1.36B-1(d) of the Income Tax Regulations, a
taxpayer's family consists of the taxpayer, the taxpayer's spouse if
filing jointly, and any dependents of the taxpayer.
Section 1.36B-3(d)(1) provides that the PTC for a coverage month is
the lesser of: (i) the premiums for the month, reduced by any amounts
that were refunded, for one or more QHPs in which a taxpayer or a
member of the taxpayer's family enrolls (enrollment premiums); or (ii)
the excess of the adjusted monthly premium for the applicable benchmark
plan over 1/12 of the product of a taxpayer's household income and the
applicable percentage for the taxable year (taxpayer's contribution
amount).
Under section 36B(c)(2)(B) and Sec. 1.36B-3(c), a month is a
coverage month for an individual only if the individual is not eligible
for minimum essential coverage (MEC) for that full calendar month
(other than coverage under a health care plan offered in the individual
market within a state). Under section 5000A(f)(1)(B) of the Code, the
term MEC includes employer coverage. If an individual is eligible for
employer coverage for a given month, no PTC is allowed for the
individual for that month.
Section 36B(c)(2)(C) generally provides that an individual is not
treated as eligible for employer coverage if the coverage offered is
unaffordable or does not provide minimum value. However, if the
individual enrolls in employer coverage, the individual is eligible for
MEC, irrespective of whether the employer coverage is affordable or
provides minimum value. See section 36B(c)(2)(C)(iii) and Sec. 1.36B-
2(c)(3)(vii).
Under the affordability test in section 36B(c)(2)(C)(i)(II), an
employee who does not enroll in employer coverage is not treated as
eligible for the coverage if ``the employee's required contribution
(within the meaning of section 5000A(e)(1)(B)) with respect to the plan
exceeds 9.5 percent of the applicable taxpayer's household income.''
\2\ The flush language following this provision provides that ``[t]his
clause shall also apply to an individual who is eligible to enroll in
the plan by reason of a relationship the individual bears to the
employee.''
---------------------------------------------------------------------------
\2\ This required contribution percentage of 9.5 is indexed
annually under section 36B(c)(2)(C)(iv). For simplicity, this
preamble refers to 9.5 percent as the required contribution
percentage.
---------------------------------------------------------------------------
Section 5000A generally requires applicable individuals \3\ to make
an individual shared responsibility payment \4\ with their tax return
if they
[[Page 61980]]
do not maintain minimum essential coverage for themselves and any
dependents. Section 5000A(e)(1) establishes exemptions from the
individual shared responsibility payment that would otherwise apply for
``individuals who cannot afford coverage,'' which the statute defines
in section 5000A(e)(1)(A) to be applicable individuals whose required
contribution for coverage exceeds a specified percentage of their
household income. Section 5000A(e)(1)(B)(i) provides that, for an
employee eligible to purchase employer coverage, the term ``required
contribution'' means ``the portion of the annual premium which would be
paid by the individual . . . for self-only coverage.'' For related
individuals, the definition of ``required contribution'' in section
5000A(e)(1)(B)(i) is modified by a ``special rule'' in section
5000A(e)(1)(C). Section 5000A(e)(1)(C) provides that ``[f]or purposes
of [section 5000A(e)(1)](B)(i), if an applicable individual is eligible
for minimum essential coverage through an employer by reason of a
relationship to an employee, the determination [of affordability] under
subparagraph (A) shall be made by reference to [the] required
contribution of the employee.'' The regulations under section 5000A
interpret section 5000A(e)(1)(C) as modifying the required contribution
rule in section 5000A(e)(1)(B)(i) regarding coverage for related
individuals to take into account the cost of covering the employee and
the related individuals, not just the employee. Specifically, for
related individuals, Sec. 1.5000A-3(e)(3)(ii)(B) provides that the
required contribution is the amount an employee must pay to cover the
employee and the related individuals who are included in the employee's
family.\5\ Thus, under Sec. 1.5000A-3(e)(3)(ii)(B), employer coverage
is affordable for those related individuals if the share of the annual
premium the employee must pay to cover the employee and the related
individuals is not greater than the required contribution percentage of
household income.
---------------------------------------------------------------------------
\3\ Section 5000A(d)(1) defines an applicable individual as any
individual other than an individual with a religious conscience
exemption, an individual who is not lawfully present or an
individual who is incarcerated.
\4\ Public Law 115-97 (2017), commonly referred to as the Tax
Cuts and Jobs Act, reduced the individual shared responsibility
payment amount to zero for months beginning after December 31, 2018.
\5\ For purposes of this exemption for unaffordable coverage, an
employee or related individual who is otherwise exempt under Sec.
1.5000A-3 is not included in determining the required contribution.
---------------------------------------------------------------------------
In contrast to the affordability rule for related individuals in
Sec. 1.5000A-3(e)(3)(ii)(B), the Treasury Department and the IRS
issued final regulations in 2013 for purposes of the PTC providing that
employer coverage is affordable for the related individuals if the
share of the annual premium the employee must pay for self-only
coverage is not greater than the required contribution percentage of
household income, regardless of how expensive the annual premium for
family coverage would be. See Sec. 1.36B-2(c)(3)(v)(A)(2) (the 2013
regulations or 2013 affordability rule). Thus, under the 2013
affordability rule, the employee's share of the premium for family
coverage, as defined in Sec. 1.36B-1(m),\6\ was not considered in
determining whether employer coverage is affordable for related
individuals.
---------------------------------------------------------------------------
\6\ Section 1.36B-1(m) defines family coverage as health
insurance that covers more than one individual and provides coverage
for the essential health benefits as defined in section 1302(b)(1)
of the ACA.
---------------------------------------------------------------------------
When the 2013 regulations were issued, the Treasury Department and
the IRS considered the statutory language of section
36B(c)(2)(C)(i)(II) and its cross-reference to section 5000A(e)(1)(B),
as well as the statutory language of section 5000A(e)(1)(B) and the
cross-reference in section 5000A(e)(1)(C) to section 5000A(e)(1)(B). In
the preamble to those regulations, the Treasury Department and the IRS
interpreted the language of section 36B, through the cross-reference to
section 5000A(e)(1)(B), to provide that the affordability test for
related individuals is based on the cost of self-only coverage. Thus,
if the cost of self-only coverage is affordable, no PTC is allowed for
the Exchange coverage of related individuals even if family coverage
through the employer costs more than 9.5 percent of household income.
As noted above, section 36B(c)(2)(C) generally provides that an
individual is not treated as eligible for employer coverage if the
coverage offered is unaffordable or does not provide minimum value. An
eligible employer-sponsored plan provides minimum value under section
36B(c)(2)(C)(ii) and Sec. 1.36B-6(a)(1) only if the plan's share of
the total allowed costs of benefits provided to an employee is at least
60 percent. On November 4, 2014, the IRS released Notice 2014-69, 2014-
48 I.R.B. 903, which advised employers of the intent to propose
regulations providing that group health plans that fail to provide
substantial coverage for inpatient hospitalization or physician
services do not provide minimum value. Notice 2014-69 noted that the
Department of Health and Human Services (HHS) was concurrently issuing
parallel guidance and also provided that, pending issuance of final
Treasury regulations, an employee would not be required to treat a non-
hospital/non-physician services plan as providing minimum value for
purposes of an employee's eligibility for a PTC.
On November 26, 2014, HHS issued proposed regulations providing
that an eligible employer-sponsored plan provides minimum value only
if, in addition to covering at least 60 percent of the total allowed
costs of benefits provided under the plan, the plan benefits include
substantial coverage of inpatient hospital services and physician
services. See 79 FR 70674. On February 27, 2015, HHS finalized this
minimum value rule at 45 CFR 156.145(a). See 80 FR 10750, 10872. On
September 1, 2015, the Treasury Department and the IRS issued proposed
regulations under section 36B (REG-143800-14, 80 FR 52678) (2015
proposed regulations) to incorporate the substance of the HHS final
regulations regarding the minimum value rule. The 2015 proposed
regulations issued by the Treasury Department and the IRS relating to
substantial coverage of inpatient hospital services and physician
services have not been finalized.
III. E.O. 14009
On January 28, 2021, President Biden issued Executive Order (E.O.)
14009, Strengthening Medicaid and the Affordable Care Act (ACA).
Section 3(a) of E.O. 14009 directed the Secretary of the Treasury to
review, as soon as practicable, all existing regulations and other
agency actions to determine whether the actions are inconsistent with
the policy to protect and strengthen the ACA and, as part of this
review, to examine policies or practices that may reduce the
affordability of coverage or financial assistance for coverage,
including for dependents. Consistent with the E.O., the Treasury
Department and the IRS reviewed the regulations under section 36B,
including Sec. 1.36B-2(c)(3)(v)(A)(2).
IV. Proposed Regulations
On April 7, 2022, the Treasury Department and the IRS published
proposed regulations proposing to amend Sec. 1.36B-2(c)(3)(v)(A)(2) to
change the rule regarding the affordability of employer coverage for
related individuals. The proposed regulations provided that, for
purposes of determining eligibility for PTC, affordability of employer
coverage for related individuals in the employee's family would be
determined based on the cost of covering the employee and those related
individuals--just as affordability is determined in the regulations
implementing section 5000A. For this purpose, affordability for related
individuals would be based on the portion of the annual premium the
employee must pay for coverage of
[[Page 61981]]
the employee and all other individuals included in the employee's
family, within the meaning of Sec. 1.36B-1(d), who are offered the
coverage. Although some individuals who are not part of the family
might be offered the employer coverage through the employee, the cost
of covering individuals not in the family would not be considered in
determining whether the related individuals in the employee's family
have an offer of affordable employer coverage.
The proposed regulations would not change the affordability rule
for employees. As required by statute, employees have an offer of
affordable employer coverage if the employee's required contribution
for self-only coverage of the employee does not exceed the required
contribution percentage of household income.
The proposed regulations also addressed the minimum value rules in
section 36B. Under the proposed regulations, a separate minimum value
rule would be provided for related individuals that is based on the
level of coverage provided to related individuals under an eligible
employer-sponsored plan. In addition, the proposed regulations withdrew
the 2015 proposed regulations and re-proposed the rule regarding
substantial coverage of inpatient hospitalization services and
physician services. Thus, under the proposed regulations, an eligible
employer-sponsored plan would provide minimum value only if the plan
covers at least 60 percent of the total allowed costs of benefits
provided to an employee under the plan and the plan benefits include
substantial coverage of inpatient hospital services and physician
services.
Finally, the proposed regulations would amend Sec. 1.36B-
3(d)(1)(i) to clarify that, in computing the PTC for a coverage month,
a taxpayer's enrollment premiums for the month are the premiums for the
month, reduced by any amounts that were refunded in the same taxable
year the taxpayer incurred the premium liability.
Summary of Comments and Explanation of Revisions
I. Overview
The Treasury Department and the IRS received 3,888 comments on the
proposed regulations, the overwhelming majority of which were in
support of the rules in the proposed regulations, including the
affordability test for related individuals that is based on the cost of
family coverage offered to the related individuals. Many commenters
recounted personal stories of family members being uninsured due to the
unaffordability of family coverage offered by an employer and the
unavailability of a PTC for Exchange coverage. One married couple even
testified to a state legislature that they divorced solely to retain
the husband's eligibility for the PTC after his wife got a new job with
an offer of family coverage at a cost of $16,000, over half of the
husband's annual earnings.\7\ Some commenters made the point that an
affordability test for related individuals that is based on the cost of
the coverage offered to the employee and related individuals is family-
friendly because it is more likely to provide all family members with
access to affordable coverage. Many commenters agreed with the analysis
in the preamble to the proposed regulations that the language of
section 36B(c)(2)(C)(i) is best interpreted to require a separate
affordability determination for related individuals that is based on
the employee's cost to cover the employee and related individuals
rather than a single affordability determination for both employees and
related individuals that is based on the cost of self-only coverage to
employees, and provided persuasive legal support for this position.
Commenters also overwhelmingly supported the minimum value rules
provided in the proposed regulations and agreed that a failure to
provide a separate minimum value rule for related individuals could
undermine the separate affordability rule for related individuals.
---------------------------------------------------------------------------
\7\ See <a href="https://legislature.maine.gov/legis/bills/getTestimonyDoc.asp?id=161949">https://legislature.maine.gov/legis/bills/getTestimonyDoc.asp?id=161949</a>.
---------------------------------------------------------------------------
Other commenters expressed the view that the separate affordability
test and minimum value rule for related individuals in the proposed
regulations are contrary to the language of section 36B, and that the
Treasury Department and the IRS do not have the authority to change
those rules. Several of these commenters provided legal analyses in
support of their position as well as policy arguments against the
proposed affordability test and minimum value rule for related
individuals. For reasons explained in sections II and III of this
Summary of Comments and Explanation of Revisions, the Treasury
Department and the IRS are not persuaded by these arguments.
Some commenters suggested that the Treasury Department and the IRS
adopt various changes to the rules in the proposed regulations. Other
commenters requested outreach by HHS, the Treasury Department, and the
IRS to educate individuals, employers, and other stakeholders about the
final regulations once they are issued. Several commenters requested
clarification on certain issues related to employers, including
information reporting requirements under section 6056 of the Code and
the effect of the final regulations on individuals enrolled in non-
calendar year plans. These comments are addressed in sections IV, V,
and VI of the Summary of Comments and Explanation of Revisions.
Finally, many commenters supported the minimum value rule in the
proposed regulations under which an eligible employer-sponsored plan
would provide minimum value to an employee only if, in addition to
covering at least 60 percent of the total allowed costs of benefits
provided to an employee under the plan, the plan's benefits include
substantial coverage of inpatient hospitalization services and
physician services. In addition, many commenters supported the proposed
amendment to Sec. 1.36B-3(d)(1)(i) to clarify that, in computing the
PTC for a coverage month, a taxpayer's enrollment premiums for the
month are the premiums for the month, reduced by any amounts that were
refunded in the same taxable year the taxpayer incurred the premium
liability. Because commenters supported these rules and did not request
any modifications to them, both the proposed minimum value rule for
employees related to inpatient hospitalization services and physician
services and the proposed clarification of the premium refund rule are
being finalized without change.
II. Comments on Legal Analysis
A. Statutory Analysis of Affordability Rule
Under section 36B(c)(2)(C)(i)(II), an employee who does not enroll
in employer coverage is not considered eligible for the coverage if
``the employee's required contribution (within the meaning of section
5000A(e)(1)(B)) with respect to the plan exceeds 9.5 percent of the
applicable taxpayer's household income.'' The flush language following
this provision provides that ``[t]his clause shall also apply to an
individual who is eligible to enroll in the plan by reason of a
relationship the individual bears to the employee.''
As discussed in the preamble to the proposed regulations, the flush
language in section 36B(c)(2)(C)(i) does not state clearly and
expressly how section 36B(c)(2)(C)(i)(II) applies to related
individuals or how the cross-reference to section 5000A(e)(1)(B)
applies to coverage for related individuals. Section 5000A(e)(1)(B)(i)
provides that, for an
[[Page 61982]]
employee eligible to purchase employer coverage, the term ``required
contribution'' means ``the portion of the annual premium which would be
paid by the individual . . . for self-only coverage.'' For related
individuals, the definition of ``required contribution'' in section
5000A(e)(1)(B)(i) is modified by a ``special rule'' in section
5000A(e)(1)(C). Section 5000A(e)(1)(C) provides that ``[f]or purposes
of [section 5000A(e)(1)](B)(i), if an applicable individual is eligible
for minimum essential coverage through an employer by reason of a
relationship to an employee, the determination under [section
5000(e)(1)(A)] shall be made by reference to [the] required
contribution of the employee.'' The regulations under section 5000A
interpret section 5000A(e)(1)(C) as modifying the required contribution
rule in section 5000A(e)(1)(B)(i) for coverage for a related individual
to provide that the determination under section 5000A(e)(1)(A) is made
by reference to the required contribution of the employee for coverage
for the employee and that related individual. Specifically, for related
individuals, Sec. 1.5000A-3(e)(3)(ii)(B) provides that the required
contribution for related individuals is the amount an employee must pay
to cover the employee and all related individuals who are included in
the employee's family.\8\ This long-standing rule under section 5000A
was proposed in February 2013 \9\ and did not generate any critical
comments. The proposed rule was finalized without change in August 2013
\10\ and has never been challenged.
---------------------------------------------------------------------------
\8\ For purposes of this exemption for unaffordable coverage, an
employee or related individual who is otherwise exempt under Sec.
1.5000A-3 is not included in determining the required contribution.
\9\ REG-148500-12 (78 FR 7314).
\10\ TD 9632 (78 FR 53646).
---------------------------------------------------------------------------
Similar to the regulations implementing section 5000A, the proposed
regulations provided an affordability rule for related individuals for
section 36B purposes that looks to the cost of coverage for the
employee and related individuals and is separate from the affordability
rule for employees of the employer offering the coverage. Under the
proposed regulations, affordability for related individuals would be
based on the portion of the annual premium the employee must pay for
coverage of the employee and all other individuals included in the
employee's family, within the meaning of Sec. 1.36B-1(d), who are
offered the coverage.
Some commenters expressed the view that the affordability rule in
the proposed regulations conflicts with the language in section 36B,
that the 2013 affordability rule is correct, and that the affordability
rule for related individuals in the proposed regulations should be
withdrawn. These commenters argued that section 36B unambiguously
establishes a single affordability test for both employees and related
individuals that is based on the cost of self-only coverage to the
employee. As explained later in this section II.A. of the Summary of
Comments and Explanation of Revisions, however, the proposed rule's
approach represents the better reading of the statute and the better
means of implementing it. After careful consideration, the Treasury
Department and the IRS are adopting the affordability test as proposed.
The Treasury Department and the IRS are of the view that section
36B(c)(2)(C)(i), including the flush language that follows section
36B(c)(2)(C)(i)(II), is correctly interpreted to provide that the
affordability test for a related individual is based on the cost of
coverage for the employee and the related individual. The flush
language provides as follows: ``[t]his clause shall also apply to a
[related individual].'' Thus, taking into account the flush language,
section 36B(c)(2)(C)(i) may be read to apply to a related individual as
follows:
[A related individual] shall not be treated as eligible for
minimum essential coverage if such coverage (I) consists of an
eligible employer-sponsored plan [ ], and (II) the employee's \11\
required contribution (within the meaning of section 5000A(e)(1)(B))
with respect to the plan exceeds 9.5 percent of the applicable
taxpayer's household income.
---------------------------------------------------------------------------
\11\ The term ``employee'' would not be replaced with ``related
individual'' here because it is the employee who makes contributions
(through salary reduction or otherwise) to pay for employer
coverage, even if the employer coverage includes family members of
the employee.
This language includes four references to the coverage provided by
the employee's employer: ``minimum essential coverage,'' ``such
coverage,'' ``eligible employer-sponsored plan,'' and ``the plan.''
Without question, ``such coverage'' refers to the minimum essential
coverage offered by the employee's employer to the related individual,
as do references to ``employer-sponsored plan'' and ``the plan.''
Unless a related individual is also employed by that employer, the
related individual may not enroll in the employer's coverage on a self-
only basis. Thus, the minimum essential coverage referred to in section
36B(c)(2)(C)(i), as it applies to related individuals, is the coverage
the related individual may enroll in, which is the family coverage
offered by the employer. Under this reading, the reference to ``the
employee's required contribution . . . with respect to the plan'' is
the required contribution for family coverage.
This reading gives full effect to section 36B(c)(2)(C)(i)(II)'s
cross reference to section 5000A(e)(1)(B). As noted earlier in this
section II.A of the Summary of Comments and Explanation of Revisions,
section 36B(c)(2)(C)(i) specifies rules to determine the affordability
of coverage under an eligible employer-sponsored plan both for an
employee and for related individuals. Taken in isolation, section
5000A(e)(1)(B) would specify a rule for determining the affordability
of a required contribution only with respect to coverage for an
employee, even though the flush language in section 36B(c)(2)(C)(i)
requires a calculation to be performed for related individuals as well.
Section 5000A(e)(1)(C) provides a rule for that calculation by
specifying a ``special rule'' for purposes of the calculation of the
employee's required contribution for coverage that includes the related
individual. As explained earlier in this section II.A. of the Summary
of Comments and Explanation of Revisions, the Treasury Department and
the IRS have long understood section 5000A(e)(1)(C) in this way. See
Sec. 1.5000A-3(e)(3)(ii)(B), promulgated in 2013.
As noted in section I of this Summary of Comments and Explanation
of Revisions, the vast majority of commenters supported the proposed
affordability rule for related individuals, and several of these
commenters provided detailed technical analyses in support of this
interpretation of the statute. Some of those commenters argued that
section 36B unambiguously establishes a separate affordability test for
related individuals that is based on the cost of family coverage. For
example, one commenter asserted that the proposed affordability rule
for related individuals follows the plain language of the statute and
that section 5000A(c)(1)(C) states on its face that it must be read
into 5000A(c)(1)(B). Another commenter argued that the plain text of
the statute indicates that a related individual's eligibility for the
PTC is based on the cost of family coverage and that the affordability
rule in the 2013 regulations reflected a strained reading of the
statute. One commenter supported the proposed affordability rule for
related individuals but disagreed that the rule adopts an
``alternative'' reading of the statute. Instead, the commenter opined
that the interpretation in the proposed regulations is correct and that
the affordability rule in the 2013 regulations
[[Page 61983]]
reflected an erroneous interpretation of the ACA. Finally, one
commenter stated that the 2013 regulations implementing section 36B
badly misinterpret the statute and that section 36B mandates a family-
based affordability test. The commenter noted that if Congress had
intended a self-only test, it would have mandated that coverage be
deemed affordable for a related family member so long as the employee
can afford self-only coverage, rather than obliquely stating that the
special rule applies to related family members as well.
For reasons explained in section III of this Summary of Comments
and Explanation of Revisions, the Treasury Department and the IRS have
concluded that the affordability rule for related individuals in the
proposed regulations, as finalized in these regulations, is the better
reading of the statute and the better means of implementing the
statute. Further, the Treasury Department and the IRS believe that the
affordability rule in these final regulations is consistent with the
goal of the ACA to provide access to affordable, quality health care
for all Americans.\12\ Indeed, under the 2013 regulations, some family
members of employees could not access any PTC for Exchange coverage
even if their only offer of employer coverage was a family plan with
exorbitant premiums (about 16% of income, on average),\13\ solely
because the employee had access to affordable self-only coverage.
---------------------------------------------------------------------------
\12\ See H.R. Rep. No. 111-443 (2009).
\13\ <a href="https://www.healthaffairs.org/doi/10.1377/hlthaff.2015.1491">https://www.healthaffairs.org/doi/10.1377/hlthaff.2015.1491</a>.
---------------------------------------------------------------------------
As explained earlier in this section II.A of the Summary of
Comments and Explanation of Revisions, the Treasury Department and the
IRS disagree with commenters who argued that section 36B unambiguously
establishes a single affordability test for both employees and related
individuals that is based on the cost of self-only coverage to the
employee. Some of these commenters argued that, because section
36B(c)(2)(C)(i)(II) does not cross-reference section 5000A(e)(1)(C) in
defining the term ``required contribution,'' section 5000A(e)(1)(C)
cannot be considered in determining whether a related individual has
been offered affordable employer coverage for purposes of section 36B.
One of those commenters also argued that, under the negative-
implication canon of statutory interpretation,\14\ the reference to
section 5000A(e)(1)(A) in section 5000A(e)(1)(C) precludes the use of
the rule in section 5000A(e)(1)(C) for other purposes, such as
providing a rationale for an affordability test in section 36B for
related individuals that is separate from the test for employees.
---------------------------------------------------------------------------
\14\ The negative-implication canon of construction--expressio
unius est exclusio alterius--means the expression of one thing
implies the exclusion of the other.
---------------------------------------------------------------------------
The Treasury Department and the IRS disagree. As noted in the
Background section and earlier in this section II.A. of the Summary of
Comments and Explanation of Revisions, the definition of ``required
contribution'' in section 5000A(e)(1)(B)(i) is modified by a ``special
rule'' in section 5000A(e)(1)(C) that is applicable to related
individuals. Section 5000A(e)(1)(C) provides that ``[f]or purposes of
[section 5000A(e)(1)](B)(i), if an applicable individual is eligible
for minimum essential coverage through an employer by reason of a
relationship to an employee, the determination under subparagraph (A)
shall be made by reference to [the] required contribution of the
employee.'' The regulations under section 5000A interpret section
5000A(e)(1)(C) as modifying the required contribution rule in section
5000A(e)(1)(B)(i) regarding coverage for related individuals to take
into account the cost of covering the employee and the related
individuals, not just the employee. Specifically, Sec. 1.5000A-
3(e)(3)(ii)(B) provides that the required contribution for related
individuals is the amount an employee must pay to cover the employee
and the related individuals who are included in the employee's
family.\15\ Because section 5000A(e)(1)(C) begins with the language
``[f]or purposes of [section 5000A(e)(1)](B)(i),'' the parenthetical
cross reference in section 36B(c)(2)(C)(i)(II) to section
5000A(e)(1)(B)(i) incorporates the special rule in section
5000A(e)(1)(C) and modifies section 5000A(e)(1)(B)(i) when the coverage
in question is for related individuals. Accordingly, a specific
reference to section 5000A(e)(1)(C) in the flush language of section
36B(c)(2)(C)(i) is not necessary to require the consideration of
section 5000A(e)(1)(C) for determining whether coverage offered to
related individuals is affordable under section 36B.
---------------------------------------------------------------------------
\15\ For purposes of this exemption for unaffordable coverage,
an employee or related individual who is otherwise exempt under
Sec. 1.5000A-3 is not included in determining the required
contribution.
---------------------------------------------------------------------------
In addition, the Treasury Department and the IRS disagree that the
negative-implication canon of statutory construction compels the
conclusion that the reference to section 5000A(e)(1)(A) in section
5000A(e)(1)(C) precludes the use of the rule in section 5000A(e)(1)(C)
for section 36B purposes. As the Supreme Court has emphasized in
numerous cases, the force of any negative implication depends on the
context, and the negative-implication canon applies only when
circumstances support a sensible inference that the term left out must
have been meant to be excluded. See, for example, Chevron U.S.A. Inc.
v. Echazabal, 536 U.S. 73, 81 (2002) (``The [negative-implication
canon] is fine when it applies, but this case joins some others in
showing when it does not.''); United States v. Vonn, 535 U.S. 55, 65
(2002) (``At best, as we have said before, the [negative-implication
canon] is only a guide, whose fallibility can be shown by contrary
indications that adopting a particular rule or statute was probably not
meant to signal any exclusion of its common relatives''); United
Dominion Industries v. United States, 532 U.S. 822, 836 (2001) (``But
here, as always, the soundness of the [negative-implication canon] is a
function of timing''). \16\ See also Antonin Scalia & Bryan Garner,
Reading Law: The Interpretation of Legal Texts 107 (2012), stating that
the negative-implication canon ``must be applied with great caution
since its application depends so much on context.'' Here, the context
points in favor of not restricting the use of section 5000A(e)(1)(C) to
the determination in 5000A(e)(1)(A). Instead, the context points in
favor of reading the reference in section 36B(c)(2)(C)(i) to section
5000A(e)(1)(B) as incorporating the modification of that subparagraph
in section 5000A(e)(1)(C). This reading creates a clear and consistent
rule for determining the affordability of coverage for related
individuals for purposes of both section 36B and section 5000A. And, as
explained earlier in this section II.A. of the Summary of Comments and
[[Page 61984]]
Explanation of Revisions, without incorporating section 5000A(e)(1)(C),
the statute would point only to a calculation of affordability for the
employee's coverage, even though section 36B requires a calculation of
affordability for the related individuals as well.
---------------------------------------------------------------------------
\16\ Notably, in U.S. Venture, Inc. v. United States, 2 F.4th
1034 (7th Cir. 2021), the court rejected an argument by a taxpayer
that the negative-implication canon of statutory interpretation
required an outcome consistent with the taxpayer's interpretation of
a provision of the Internal Revenue Code. The question considered by
the court was whether a taxpayer's sale of a butane and gasoline mix
qualified for the alternative fuel mixture credit in section 6426 of
the Code. In discussing whether the sale of the butane and gasoline
mix should qualify for the credit, the court rejected the taxpayer's
argument that a specific cross reference in section 6426(e) to
section 4083(a)(1) for the definition of a term in section 6426(e)
forecloses using a third provision, section 4083(a)(2), to further
illuminate the definition in section 4083(a)(1). The court
``decline[d]'' the taxpayer's invitation ``to follow a
congressionally mandated cross-reference only part of the way.
Instead, we must accept and follow the cross-referenced definition
in full.'' U.S. Venture, Inc., 2 F.4th at 1042. ``Whether the cross-
reference is to the individual sub-paragraphs or to the whole
statute does not change the meaning that Congress chose to give
``gasoline'' in Sec. 4083 and, consequently, in Sec. 6426(e).''
Id.
---------------------------------------------------------------------------
Moreover, had Congress intended section 5000A(e)(1)(C) to apply
only to the affordability determination under section 5000A, excluding
all other provisions, it could have done so through explicit means,
such as using the language ``solely for purposes of the determination
under section 5000A(e)(1)(A).'' See, for example, section
4980H(c)(2)(D) and section 4980H(c)(2)(E), also enacted under the ACA
and which provide ``solely for purposes of'' limiting language. No such
limiting language is included in section 5000A(e)(1)(C). More
generally, had Congress intended a self-only affordability test for
related individuals, it could have explicitly provided that coverage is
affordable for a related individual so long as the employee is offered
affordable self-only coverage. Congress did just that in 2016 when it
enacted section 36B(c)(4), relating to the affordability of employer
coverage under a qualified small employer health reimbursement
arrangement (QSEHRA).
Under section 36B(c)(4)(A), a PTC is not allowed for a month for
the Exchange coverage of ``an employee (or any spouse or dependent of
such employee) if for such month the employee is provided a [QSEHRA]
which constitutes affordable coverage.'' A QSEHRA is affordable for a
month if the excess of (1) the monthly premium for the second lowest
cost silver plan for self-only coverage of the employee offered in the
Exchange for the rating area in which the employee resides, over (2) 1/
12 of the employee's permitted benefit (as defined in section
9831(d)(3)(C)) under the QSEHRA, does not exceed 1/12 of 9.5 percent of
the employee's household income.
In contrast to the language in section 36B(c)(2)(C)(i)(II), section
36B(c)(4)(A) does not reference section 5000A(e)(1)(B) for the QSEHRA
affordability determination or provide that ``this clause shall also
apply'' to a related individual. Instead, it provides the same
affordability rule for both employees and related individuals by
stating that affordability for coverage under a QSEHRA for ``an
employee (or any spouse or dependent of such employee)'' is based on
the cost of self-only coverage of the employee. That is far different
from the language in section 36B(c)(2)(C)(i)(II) and, therefore, it is
reasonable to conclude that the affordability rule in section
36B(c)(2)(C)(i)(II) for related individuals is not the same as the
affordability rule for related individuals in section 36B(c)(4)(A).
Additionally, the structure and context of sections 36B and 5000A
suggest that Congress did not intend to preclude the use of section
5000A(e)(1)(C) in determining the affordability of employer coverage
for related individuals for purposes of PTC eligibility under section
36B. Foremost, when the coverage in question is for related
individuals, section 36B(c)(2)(C)(i)(II) specifically refers to the
definition of required contribution in section 5000A(e)(1)(B)(i), and
section 5000A in turn specifically incorporates the special rule in
section 5000A(e)(1)(C) ``for purposes of'' section 5000A(e)(1)(B)(i).
Under this statutory structure, a specific reference to section
5000A(e)(1)(C) in the flush language of section 36B(c)(2)(C)(i) is not
necessary to require the consideration of section 5000A(e)(1)(C) in
determining affordability for related individuals for section 36B
purposes. This consideration of section 5000A(e)(1)(C) is particularly
sensible given the flush language in section 36B(c)(2)(C)(i)(II). That
is, the flush language evinces Congress's intent to provide an
affordability rule for related individuals. Given that there are
numerous cross references in section 36B to section 5000A and that
section 5000A confronts a similar situation relating to affordability
for related individuals that is resolved through section
5000A(e)(1)(C), it is logical to consider section 5000A(e)(1)(C) for
purposes of the affordability rule for related individuals under
section 36B. Finally, using the rule in section 5000A(e)(1)(C) in
determining the affordability of employer coverage for related
individuals for section 36B purposes supports the goal of the ACA to
provide affordable, quality health care for all Americans. See H.R.
Rep. No. 111-443 (2009).
B. Consistency Between the Affordability Rules of Sections 36B and
5000A
The preamble to the proposed regulations noted that the proposed
affordability rule under section 36B would create greater consistency
between the section 36B affordability rules and the rules in section
5000A used to determine whether an individual is exempt from the
individual shared responsibility payment under section 5000A because
employer coverage is unaffordable. With the finalization of the
proposed section 36B affordability rule in these final regulations,
both rules provide that affordability for employees is based on the
employee's cost for self-only coverage and that affordability for
family members is generally based on the amount an employee must pay to
cover the employee and the related individuals included in the
employee's family. Thus, these final regulations promote consistency
between these two affordability rules.
One commenter argued that Congress did not intend the affordability
rules of section 36B and section 5000A to be consistent, suggesting
that it instead sought to make it easier for a taxpayer to avoid a
section 5000A individual shared responsibility payment for a related
individual than to qualify for a PTC for such individual. In other
words, the commenter seems to be suggesting that Congress's intent was
to make it easier to go without health insurance coverage than to
qualify for subsidized Exchange coverage. However, the commenter does
not point to any evidence of this beyond the assertion that the
statutory text compels this result. As explained above, the Treasury
Department and the IRS disagree with the commenter's reading of the
statutory text. The commenter's argument also ignores Congress's
broader goal of expanding access to affordable health insurance
coverage through the ACA, which goal is advanced by the affordability
rule for related individuals in these final regulations.
C. Legislative History of ACA
One commenter also argued that the legislative history underlying
the ACA shows that Congress intended that the rule for affordability of
employer coverage for family members be the same as the affordability
rule for employees and that both determinations are intended to be
based on the cost of self-only coverage to the employee. The argument
is that S. 1796, the America's Healthy Future Act of 2009 \17\ (one of
the Senate bills that became the ACA through consolidation with another
bill \18\ and amendment), as introduced, based the determination of the
affordability of employer-sponsored coverage on the employee's required
contribution, as defined by (what was in that version of the bill)
section 5000A(e)(2), which would have set affordability tests for both
self-only and family coverage.
---------------------------------------------------------------------------
\17\ 111th Congress (2009).
\18\ H.R. 3590, 111th Congress (2009).
---------------------------------------------------------------------------
The commenter further argued that, when the bill that became the
ACA was introduced on the Senate floor, it altered
[[Page 61985]]
the language of S. 1796 to reflect the language currently in the
statute, in which the required contribution is described as ``within
the meaning of section 5000A(e)(1)(B).'' In the commenter's view, this
change demonstrates that the required contribution rule in section
5000A(e)(1)(C) does not apply to the section 36B affordability test for
related individuals. The commenter asserted that the proposed
regulations fail to consider the changes to S. 1796 because the
affordability test under the proposed regulations reflects exactly how
the required contribution for related individuals would have been
determined had these changes not been made.
The Treasury Department and the IRS disagree that the change in
legislative language on the Senate floor described by the commenter
indicates that Congress intended that affordability for related
individuals must be based on the cost of self-only coverage to the
employee. At the same time that the legislative sponsors added the
language to section 36B that cross-references section 5000A(e)(1)(B),
they also added the introductory phrase to section 5000A(e)(1)(C)
clarifying that that subparagraph applies ``for purposes of''
subparagraph (e)(1)(B). The fact that the legislative sponsors made
both of these changes at the same time indicates that they understood
that section 36B would incorporate both subparagraphs into its
affordability rule. Moreover, as noted by a number of commenters
supportive of the proposed regulations, had Congress intended an
identical affordability rule for employees and related individuals, the
flush language in section 36B(c)(2)(C)(i) would not have been
necessary. For example, Congress could simply have stated that
affordability for an employee (or any spouse or dependent of such
employee) is based on the cost of self-only coverage of the employee.
Indeed, as explained in section II.A. of this Summary of Comments and
Explanation of Revisions, Congress did exactly that when it enacted the
affordability rules for QSEHRAs in section 36B(c)(2)(4). That, however,
is not the direction that Congress chose to take with its changes to S.
1796. Instead, Congress enacted two rules, one for employees and one
for related individuals. Consequently, it is reasonable to conclude
that Congress's use of separate rules for employees and related
individuals indicates an intent to provide separate tests for an
employee, based on the cost of self-only coverage to the employee, and
for related individuals, based on the cost of the coverage for the
employee and those related individuals.
D. Legislative Proposals To Change Affordability Rule
Several commenters also argued that a change to the affordability
rule for related individuals should be accomplished by legislative
action, rather than regulatory action. They argued that, despite
requests to amend section 36B to provide that affordability of employer
coverage for related individuals is based on the employee's cost for
family coverage, Congress has not amended section 36B to specifically
command this result. In addition, they noted that Congress has included
language in various bills to amend the affordability rule, but the
proposed legislation has not been enacted. The commenters asserted that
this Congressional inaction means that the Treasury Department and the
IRS are not empowered to issue regulations to address a matter that
Congress acknowledges must be addressed in legislation.
Although the commenters are correct that members of Congress have
included language in various bills to address the section 36B
affordability rule in section 36B(c)(2)(C)(i), the introduction of
proposed legislation is not an acknowledgement by Congress that the
section 36B affordability test for related individuals must be
addressed in legislation and not by regulation. As the Supreme Court
has emphasized, ``failed legislative proposals are a particularly
dangerous ground on which to rest an interpretation of a prior statute
[internal quotations omitted] . . . Congressional inaction lacks
persuasive significance because several equally tenable inferences may
be drawn from that inaction, including the inference that the existing
legislation already incorporated the offered change.'' Central Bank of
Denver, N.A. v. First Interstate Bank of Denver, N.A., 511 U.S. 164,
187 (1994) (quoting Pension Benefit Guaranty Corporation v. LTV Corp.,
496 U.S. 633, 650 (1990)). Here, for instance, it is possible that
legislative proposals were introduced not because of insufficient
language in the ACA, but because members of Congress believed that the
2013 regulations had incorrectly interpreted the existing language of
the ACA. Although Congress may not have enacted legislation
specifically and unequivocally mandating the approach taken in these
final regulations, the Treasury Department and the IRS have determined
that existing section 36B(c)(2)(C)(i) is better interpreted to require
separate affordability determinations for employees and for family
members, as set forth in Sec. 1.36B-2(c)(3)(v)(A)(2) of these final
regulations.
E. Interpretation of Joint Committee on Taxation Report
In a footnote in the preamble to the proposed regulations, the
Treasury Department and the IRS observed that in the Joint Committee on
Taxation report, Technical Explanation of the Revenue Provisions of the
''Reconciliation Act of 2010,'' as amended, in combination with the
``Patient Protection and Affordable Care Act,'' (JCX-18-10), March 21,
2010 (JCT report), the staff of the Joint Committee on Taxation (Joint
Committee staff) initially explained that ``[u]naffordable is defined
as coverage with a premium required to be paid by the employee that is
9.5 percent or more of the employee's household income, based on the
type of coverage applicable (e.g., individual or family coverage).''
The Joint Committee staff later revised the quoted language, after the
enactment of the ACA, to state that ``[u]naffordable is defined as
coverage with a premium required to be paid by the employee that is 9.5
percent or more of the employee's household income, based on self-only
coverage.'' ERRATA for JCX-18-10, (JCX-27-10), May 4, 2010 (May 2010
Errata).
A few commenters expressed the view that the original JCT report
was in error and should not be viewed as evidence that the statutory
language in section 36B(c)(2)(C)(i)(II) supports a separate
affordability rule based on the cost of family coverage; these
commenters noted that the May 2010 Errata corrected the error. The
Treasury Department and the IRS acknowledge that the Joint Committee
staff characterized the May 2010 Errata as a correction of an error but
disagree with the commenters as to the relevance of that observation.
The May 2010 Errata was not before Congress at the time that the ACA
was enacted in March 2010. In any event, neither the JCT report nor the
May 2010 Errata is considered part of the legislative history, and
neither is dispositive of any particular statutory interpretation.
F. Relevance of Section 18081
The preamble to the proposed regulations noted that the proposed
regulations would promote consistency between the affordability rules
in sections 36B and 5000A and the rule in 42 U.S.C. 18081(b)(4)(C)
(section 18081(b)(4)(C)). Section 18081(b)(4)(C) relates to information
that a QHP enrollee must provide as part of the enrollee's QHP
application if the
[[Page 61986]]
enrollee wants to be determined eligible for advance payments of the
PTC (APTC) or cost-sharing reductions. Under section 18081(b)(4)(C), if
an employer offers minimum essential coverage to an individual seeking
to enroll in a QHP, and the individual asserts that the offer does not
preclude the individual from qualifying for APTC or cost-sharing
reductions because it is not affordable, the QHP applicant must provide
to the Exchange information on ``the lowest cost option for the
enrollee's or [related] individual's enrollment status and the
enrollee's or [related] individual's required contribution (within the
meaning of section 5000A(e)(1)(B) of title 26) under the employer-
sponsored plan.''
Certain commenters opined that they saw no inconsistency between
the 2013 affordability rule under section 36B, the affordability rule
under section 5000A, and the QHP applicant information rule in section
18081(b)(4)(C). One commenter stated that section 18081(b)(4)(C), by
referencing section 5000A(e)(1)(B), merely instructs Exchanges to
determine ``the portion of the annual premium which would be paid by
the individual . . . for self-only coverage'' under the employer-
sponsored plan. Another commenter argued that section 18081(b)(4)(C),
by using the term ``or'' and not ``and,'' requires the submission of
information on the required contribution solely for the employee who is
offered employer coverage, meaning the individual who would pay the
required contribution, but that the individual enrolling in the QHP
could be the employee or someone related to the employee. This
commenter further argued that in either case, the only information
required by section 18081(b)(4)(C) is the lowest cost option for self-
only coverage and the required contribution for the applicable
employee.
The Treasury Department and the IRS agree with the commenter who
noted that section 18081(b)(4)(C) requires the submission of
information on the required contribution solely for the employee who is
offered employer coverage and that the individual enrolling in the QHP
could be the employee or someone related to the employee. However, the
Treasury Department and the IRS disagree with the conclusion of both
commenters that section 18081(b)(4)(C) requires Exchanges to collect
information on only the portion of the annual premium that would be
paid by the employee for self-only coverage under the employer-
sponsored plan.
Section 18081 requires Exchanges to collect information from
enrollees who are offered coverage under an employer plan on ``the
lowest cost option'' that the employee, whether the enrollee or an
individual related to the enrollee, must contribute for the employee's
or individual's enrollment status. The language ``lowest cost option
for the . . . enrollment status'' indicates that the amount may vary
depending on whether the employee's enrollment status would be for
self-only or family coverage. Otherwise, section 18081(b)(4)(C) would
refer to ``the lowest cost option for the enrollee for self-only
coverage.'' Thus, the Treasury Department and the IRS are of the view
that the amendment to Sec. 1.36B-2(c)(3)(v)(A)(2) in these final
regulations and the similar affordability rule in Sec. 1.5000A-
3(e)(3)(ii)(B) are consistent with the QHP applicant information rule
in section 18081(b)(4)(C).
G. Coordination With Section 4980H
One commenter asserted that the framework of section 4980H supports
the view that a separate affordability test under section 36B for
related individuals is not warranted. Section 4980H provides that an
applicable large employer (ALE) generally must offer coverage to full-
time employees and their dependents or potentially be subject to an
employer shared responsibility payment. As the commenter noted,
although ALEs are required to offer coverage to full-time employees and
dependents, only the coverage offered to the full-time employees is
required to be affordable. There is no comparable affordability rule
for the coverage offered to dependents. In addition, an employer's
obligation to make a payment under section 4980H is triggered only when
a full-time employee is allowed a PTC.
The commenter stated that the affordability of self-only coverage
is the key determinant in whether an employer of a full-time employee
must make a section 4980H payment and in whether the full-time employee
and his or her dependents are allowed a PTC. The commenter argued that
this framework shows Congress's intent that section 36B and section
4980H have just one affordability test based on the cost of self-only
coverage to the employee and that providing an affordability test for
related individuals based on the cost of family coverage is not
consistent with that framework.
The Treasury Department and the IRS disagree. Section 36B and
section 4980H apply to different types of taxpayers and have different
purposes. Section 36B provides a PTC to taxpayers and their families
who meet certain requirements, one of which is that they are not
eligible for affordable, minimum value coverage from their employer.
The amount of the PTC is determined based on family size and household
income, among other factors, in recognition of the fact that
affordability of coverage depends on the cost to the family. The PTC is
integral to ensuring that individuals and their families can access
affordable coverage through an Exchange. In contrast, section 4980H
imposes a payment on ALEs if they fail to offer minimum essential
coverage to their full-time employees and their dependents, and at
least one full-time employee is allowed a PTC. Section 4980H does not
require that employer coverage be offered to an employee's spouse, and
it does not require that any coverage offered to spouses or dependents
be affordable. Further, employers do not owe a payment under section
4980H if a PTC is allowed for an employee's spouse or dependent. The
purpose of this provision is to ensure that large employers share
responsibility under the ACA for providing affordable health coverage
to employees, but this responsibility does not extend to affordable
coverage for spouses or dependents. Given these differing purposes,
there is nothing in this framework that suggests Congress intended for
section 36B and section 4980H to have a single affordability test based
on the cost of self-only coverage to the employee.
In addition, the goal of the ACA is to provide affordable, quality
health care for all Americans,\19\ not just to full-time employees of
ALEs, and these final regulations further that goal. In light of that
goal, and contrary to the suggestion of the commenter, the lack of any
requirement under section 4980H for ALEs to offer affordable coverage
to family members of employees indicates that a PTC should be allowed
for family members offered unaffordable coverage.
---------------------------------------------------------------------------
\19\ See H.R. Rep. No. 111-443 (2009).
---------------------------------------------------------------------------
H. Minimum Value Rule
As noted in the Background section of this preamble, an employee
generally is not treated as eligible for coverage under an eligible
employer-sponsored plan unless the coverage provides minimum value, as
defined in section 36B(c)(2)(C)(ii). Under section 36B(c)(2)(C)(ii) and
Sec. 1.36B-6(a)(1), an eligible employer-sponsored plan provides
minimum value if the plan's share of the total allowed costs of
benefits provided to an employee is at least 60 percent, regardless of
the total allowed costs of benefits.
The proposed regulations provided a minimum value rule for related
[[Page 61987]]
individuals that is based on the plan's share of the total allowed cost
of benefits provided to the related individuals. Under the proposed
regulations, an eligible employer-sponsored plan satisfies the minimum
value requirement for related individuals only if the plan's share of
the total allowed costs of benefits provided to related individuals is
at least 60 percent, similar to the existing rule in Sec. 1.36B-
6(a)(1) for employees.
The vast majority of commenters supported the separate minimum
value rule for related individuals in the proposed regulations.
However, two commenters stated that the minimum value requirement in
section 36B applies only to employees and that the Treasury Department
and the IRS have no authority to provide a minimum value rule for
related individuals. In the view of these commenters, related
individuals are eligible for employer coverage if the coverage is
affordable, even if the plan's share of the total allowed costs of
benefits provided to related individuals is below 60 percent. This
approach, however, is contrary to the approach taken in current Sec.
1.36B-2(c)(3)(i)(A), which was promulgated in final regulations in
2012. See TD 9590 (77 FR 30377). Section 1.36B-2(c)(3)(i)(A) clarifies
that there is a minimum value requirement for both employees and
related individuals, stating that ``an employee who may enroll in an
eligible employer-sponsored plan . . . that is minimum essential
coverage, and an individual who may enroll in the plan because of a
relationship to the employee (a related individual), are eligible for
minimum essential coverage under the plan for any month only if the
plan is affordable and provides minimum value.'' Under this long-
standing rule, a related individual who receives an offer of employer
coverage that does not provide minimum value is deemed to be ineligible
for the coverage, and a PTC may be allowed for the related individual
provided that the related individual does not enroll in the coverage.
The proposed regulations did not propose to revisit this long-standing
rule.
Further, as stated in the preamble to the proposed regulations,
without a separate minimum value rule for related individuals based on
the costs of benefits provided to related individuals, a PTC would not
be allowed for a related individual offered coverage under a plan that
was affordable but provided minimum value only to employees and not to
related individuals. This outcome would diminish the benefit a related
individual would derive from the amendment of the affordability rule
for related individuals. That is, the affordability of employer
coverage for related individuals would be based on the employee's cost
of covering the related individuals, but there would be no assurance
that the affordable coverage offered to the related individuals
provided a minimum value of benefits to the related individuals.
Moreover, as described by commenters supportive of the minimum
value rule for related individuals, it is extremely rare for an
employer plan to provide a different level of coverage for family
members than the coverage level provided to the employee enrolled in
the plan. This is because most employers that offer multiple benefits
packages offer family coverage on the condition that the employee and
the employee's family must enroll in the same benefits package, which
will then have the same minimum value for the entire family. Thus, if
an employer plan offered to employees provides minimum value, and that
plan is also offered to related individuals, the plan generally will
also provide minimum value to the family members. Nevertheless, because
the lack of a separate minimum value rule for related individuals would
be inconsistent with the goals of the ACA in providing comprehensive
health coverage and improving access to quality and affordable health
care, the final regulations provide that an eligible employer-sponsored
plan provides minimum value for related individuals only if the plan's
share of the total allowed costs of benefits provided to related
individuals is at least 60 percent and the plan benefits include
substantial coverage of inpatient hospital services and physician
services.
III. Rationale for Change
At the time that the Treasury Department and the IRS promulgated
the 2013 regulations, limited information was available to model the
effects of an affordability rule for related individuals based on the
cost of family coverage. In the years since the 2013 regulations became
effective in 2014, however, the Treasury Department and the IRS have
learned more about how the ACA is affecting individuals, families,
employers, group health plans, health insurance markets, and other
stakeholders. For example, in 2017, the Congressional Budget Office
(CBO) determined that 2010 reports by CBO and JCT on the budgetary
effects of the ACA dramatically overstated the cost of the PTC.\20\ In
the 2017 report, the CBO noted that, to a great extent, the differences
arose because actual results deviated from the agencies' expectations
about how the economy would change and how people and employers would
respond to the law, and that, to a lesser extent, the differences were
caused by judicial decisions, statutory changes, and administrative
actions that followed the ACA's enactment.
---------------------------------------------------------------------------
\20\ See <a href="https://www.cbo.gov/system/files/115th-congress-2017-2018/reports/53094-acaprojections.pdf">https://www.cbo.gov/system/files/115th-congress-2017-2018/reports/53094-acaprojections.pdf</a>.
---------------------------------------------------------------------------
Despite the initial uncertainty about the ACA's effects, there has
been substantial progress over the past several years toward meeting
the goal of the ACA to give all Americans the opportunity to enroll in
comprehensive health insurance at an affordable price. For individuals
who were previously uninsured, the ACA expanded eligibility for
Medicaid and created new Exchanges for eligible individuals to purchase
QHPs subsidized by the PTC. Research has shown that these policies
increased access to affordable health insurance and helped reduce the
share of the population that was uninsured.\21\
---------------------------------------------------------------------------
\21\ <a href="https://onlinelibrary.wiley.com/doi/epdf/10.1002/pam.22158">https://onlinelibrary.wiley.com/doi/epdf/10.1002/pam.22158</a>.
---------------------------------------------------------------------------
Despite this progress, roughly 26 million people still lack health
insurance coverage. About 8 percent of the population is still
uninsured.\22\ Because these people without health coverage face large,
unpredictable bills when they seek medical care, many forgo necessary
treatments. The key challenge for these families in obtaining coverage
is the cost of coverage. According to the National Health Interview
Survey, nearly 75 percent of uninsured adults reported the main reason
they were uninsured was because the coverage options available to them
were not affordable.\23\ Additionally, millions of adults reported that
in order to save money, they did not get needed medical care or take
medication as prescribed.\24\
---------------------------------------------------------------------------
\22\ <a href="https://aspe.hhs.gov/reports/2022-uninsurance-at-all-time-low">https://aspe.hhs.gov/reports/2022-uninsurance-at-all-time-low</a>.
\23\ <a href="https://www.cdc.gov/nchs/data/databriefs/db382-H.pdf">https://www.cdc.gov/nchs/data/databriefs/db382-H.pdf</a>.
\24\ <a href="https://www.cdc.gov/nchs/data/nhis/earlyrelease/earlyrelease202204.pdf">https://www.cdc.gov/nchs/data/nhis/earlyrelease/earlyrelease202204.pdf</a>.
---------------------------------------------------------------------------
Premium costs are particularly challenging for families enrolling
in employer coverage. Since the 2013 regulations were promulgated, the
average annual employee contribution for family coverage has increased
by over 30 percent--a growth rate that is nearly double the rate at
which the Consumer Price Index increased over the same period.\25\ In
2021, the average
[[Page 61988]]
annual employee contribution for a family plan offered by the employer
was $5,969. Contributions were even higher for employees at small firms
who faced an average cost of $7,710. Roughly 12 percent of workers
offered health coverage would have had to pay over $10,000 to cover
their entire family.\26\ Under the 2013 regulations, these families are
not eligible for the PTC if the self-only coverage offer is affordable,
even if the cost of family coverage exceeds their annual income.
Without access to affordable coverage from either their employer or the
Exchange, some low- and middle-income families are unable to obtain
coverage and must go uninsured.
---------------------------------------------------------------------------
\25\ <a href="https://www.bls.gov/cpi/data.htm">https://www.bls.gov/cpi/data.htm</a>.
\26\ <a href="https://www.kff.org/health-costs/report/2021-employer-health-benefits-survey/">https://www.kff.org/health-costs/report/2021-employer-health-benefits-survey/</a>.
---------------------------------------------------------------------------
For families that can afford employer coverage, the coverage is
sometimes of limited value because of high levels of cost-sharing. In
2020, roughly 90 percent of employer plans had a deductible.\27\ Among
family plans offered by employers with a deductible, the average amount
of the deductible was roughly $3,722. After families reach their
deductible, they are usually liable for co-insurance or co-payments
until they hit their out-of-pocket maximum. For 2020, the average out-
of-pocket maximum for a family plan offered by employers was $8,867.
There is also clear evidence that high levels of cost-sharing can
restrict access to necessary medical care and lead to adverse health
outcomes.\28\
---------------------------------------------------------------------------
\27\ <a href="https://www.meps.ahrq.gov/data_files/publications/cb25/cb25.pdf">https://www.meps.ahrq.gov/data_files/publications/cb25/cb25.pdf</a>.
\28\ <a href="https://academic.oup.com/qje/article-abstract/132/3/1261/3769421">https://academic.oup.com/qje/article-abstract/132/3/1261/3769421</a>;
<a href="https://www.nber.org/papers/w28439">https://www.nber.org/papers/w28439</a>.
---------------------------------------------------------------------------
Thus, although the ACA has succeeded in providing affordable health
care to millions of Americans, some still cannot afford coverage. With
increasingly higher premiums and out-of-pocket costs, the cost of
family coverage offered by employers has become particularly
unaffordable for some employees' family members. The self-only
affordability rule for related individuals in the 2013 regulations
exacerbates that problem. Although the Treasury Department and the IRS
could speculate in 2010-2013 that the self-only affordability rule
might adversely affect certain families, the data and subsequent
analysis have now borne out those adverse effects.
In addition to the data provided in the studies cited above,
numerous health care advocates have written articles over the years
describing the adverse effects of the 2013 affordability rule and
recommending a rule change.\29\ Most recently, the proposed regulations
themselves generated over 3,800 comments in support of the proposed
rule. As noted earlier in this preamble, many of these commenters
recounted personal stories of family members being uninsured due to the
unaffordability of family coverage offered by an employer and the
unavailability of a PTC for Exchange coverage. Finally, individuals
have shared stories in other forums regarding the negative impact of
the 2013 affordability rule on their lives. For example, one married
couple testified to a state legislature that they divorced solely to
retain the husband's eligibility for the PTC after his wife got a new
job with an offer of family coverage at a cost of $16,000, over half of
the husband's annual earnings.\30\
---------------------------------------------------------------------------
\29\ See, for example, Trapped by the Firewall: Policy Changes
Are Needed to Improve Health Coverage for Low-Income Workers
[verbar] Center on Budget and Policy Priorities (<a href="http://cbpp.org">cbpp.org</a>); https:/
<a href="http://www.healthaffairs.org/do/10.1377/forefront.20210520.564880/">www.healthaffairs.org/do/10.1377/forefront.20210520.564880/</a>.
\30\ See <a href="https://legislature.maine.gov/legis/bills/getTestimonyDoc.asp?id=161949">https://legislature.maine.gov/legis/bills/getTestimonyDoc.asp?id=161949</a>.
---------------------------------------------------------------------------
Consistent with E.O. 14009, issued in January 2021, the Treasury
Department and the IRS undertook a review of the affordability rule for
family members in the 2013 regulations at Sec. 1.36B-2(c)(3)(v)(A)(2).
As part of this review, the Treasury Department and the IRS
reconsidered the text of the relevant statutes and whether the 2013
affordability rule represents the best reading of that text. As
explained above, the Treasury Department and the IRS now believe (in
contrast to their view in 2013) that the 2013 affordability rule did
not represent the best reading of the statutory text. The Treasury
Department and the IRS also considered the evidence described above
from the intervening years and evaluated whether the 2013 affordability
rule is inconsistent with the overall goal of the ACA in providing
comprehensive, affordable health coverage, as well as the goal of
improving access to quality and affordable health care.\31\ This
evaluation was informed by the experience of the intervening years
since Exchange coverage and the PTC first became available. The
evaluation demonstrated adverse impacts of the 2013 regulations on
families and prompted the Treasury Department and the IRS to issue the
proposed regulations and solicit public comments.
---------------------------------------------------------------------------
\31\ See H.R. Rep. No. 111-443 (2009).
---------------------------------------------------------------------------
In addition, the Treasury Department and the IRS now have a clearer
idea of the potential cost and the coverage benefits of changing the
affordability rule, in part because of the time that has elapsed since
the issue was last considered and the experiences of different
insurance markets during that time. For example, analysis has shown how
adopting the policies in the final rule would increase access to
affordable Exchange coverage.\32\ Newly insured individuals will
receive substantial benefits. Recent academic research suggests that
enrollment in Exchange coverage provides financial protection and
improves health outcomes.\33\ Several commenters on the proposed
regulations also cited publicly available studies that estimate the
impact of the proposed affordability rule for related individuals on
Federal outlays and revenues.
---------------------------------------------------------------------------
\32\ <a href="https://www.healthaffairs.org/do/10.1377/forefront.20220420.498595/">https://www.healthaffairs.org/do/10.1377/forefront.20220420.498595/</a>.
\33\ <a href="https://academic.oup.com/qje/article/136/1/1/5911132">https://academic.oup.com/qje/article/136/1/1/5911132</a>;
<a href="https://www.sciencedirect.com/science/article/abs/pii/S0047272718302408">https://www.sciencedirect.com/science/article/abs/pii/S0047272718302408</a>.
---------------------------------------------------------------------------
In addition, several commenters cited publicly available studies
that estimate how changing the affordability rule for related
individuals could affect the number of people with health insurance
coverage.\34\ One commenter presented estimates based on their own
simulation of health insurance coverage decisions. Another commenter
cited a study that focused specifically on the state of California.\35\
Since the comment period on the proposed regulations ended, analysts
have continued to estimate the impact of changing the affordability
rule.\36\
---------------------------------------------------------------------------
\34\ See <a href="https://www.kff.org/health-reform/issue-brief/the-aca-family-glitch-and-affordability-of-employer-coverage/">https://www.kff.org/health-reform/issue-brief/the-aca-family-glitch-and-affordability-of-employer-coverage/</a>; <a href="https://www.kff.org/health-reform/issue-brief/many-workers-particularly-at-small-firms-face-high-premiums-to-enroll-in-family-coverage-leaving-many-in-the-family-glitch/">https://www.kff.org/health-reform/issue-brief/many-workers-particularly-at-small-firms-face-high-premiums-to-enroll-in-family-coverage-leaving-many-in-the-family-glitch/</a>; <a href="https://www.cbo.gov/system/files/2020-06/Patient_Protection_and_Affordable_Care_Enhancement_Act_0.pdf">https://www.cbo.gov/system/files/2020-06/Patient_Protection_and_Affordable_Care_Enhancement_Act_0.pdf</a>;
<a href="https://www.urban.org/research/publication/changing-family-glitch-would-make-health-coverage-more-affordable-many-families">https://www.urban.org/research/publication/changing-family-glitch-would-make-health-coverage-more-affordable-many-families</a>; <a href="https://www.urban.org/research/publication/marketplace-subsidies-changing-family-glitch-reduces-family-health-spending-increases-government-costs">https://www.urban.org/research/publication/marketplace-subsidies-changing-family-glitch-reduces-family-health-spending-increases-government-costs</a>; <a href="https://www.rand.org/pubs/research_reports/RR1296.html">https://www.rand.org/pubs/research_reports/RR1296.html</a>;
<a href="https://www.healthaffairs.org/doi/10.1377/hlthaff.2015.1491">https://www.healthaffairs.org/doi/10.1377/hlthaff.2015.1491</a>.
\35\ <a href="https://laborcenter.berkeley.edu/wp-content/uploads/2022/06/Fact-Sheet-Family-Glitch.pdf">https://laborcenter.berkeley.edu/wp-content/uploads/2022/06/Fact-Sheet-Family-Glitch.pdf</a>.
\36\ <a href="https://www.cbo.gov/system/files?file=2022-07/58313-Crapo_letter.pdf">https://www.cbo.gov/system/files?file=2022-07/58313-Crapo_letter.pdf</a>.
---------------------------------------------------------------------------
The studies cited by commenters found that implementing a policy
similar to the affordability rule described in the proposed regulations
would increase the number of individuals eligible for financial
assistance by between 3 million and 5.1 million. Other studies project
that, out of those newly eligible, between 600,000 and 2.3 million
individuals would
[[Page 61989]]
choose to enroll in Exchange coverage.\37\ Estimates of the number of
people who would be newly insured range from 80,000 to 700,000. These
studies estimate that this change in eligibility and subsequent
enrollment would increase the Federal deficit by between approximately
$2.6 billion and $4.5 billion per year on average.
---------------------------------------------------------------------------
\37\ Some studies estimated any Exchange enrollment while other
studies estimated only subsidized Exchange enrollment.
---------------------------------------------------------------------------
The studies also discussed which types of families would be most
likely to benefit from the proposed affordability rule for related
individuals. Families with incomes below 250 percent of the Federal
poverty level and families with employees who work for small employers
were expected to benefit the most. One study found that workers in
industries such as service, agriculture, mining, and construction were
more likely to be eligible for a PTC.\38\ Another study estimated that
families switching from employer coverage to Exchange coverage would
save an average of about $400 per person in premiums per year.\39\ The
studies also discussed how certain qualifying individuals would benefit
from cost-sharing reductions that are available for certain qualified
individuals enrolling in Exchange coverage.
---------------------------------------------------------------------------
\38\ <a href="https://www.kff.org/health-reform/issue-brief/many-workers-particularly-at-small-firms-face-high-premiums-to-enroll-in-family-coverage-leaving-many-in-the-family-glitch/">https://www.kff.org/health-reform/issue-brief/many-workers-particularly-at-small-firms-face-high-premiums-to-enroll-in-family-coverage-leaving-many-in-the-family-glitch/</a>.
\39\ <a href="https://www.urban.org/sites/default/files/publication/104223/changing-the-family-glitch-would-make-health-coverage-more-affordable-for-many-families_1.pdf">https://www.urban.org/sites/default/files/publication/104223/changing-the-family-glitch-would-make-health-coverage-more-affordable-for-many-families_1.pdf</a>.
---------------------------------------------------------------------------
These studies provide a range of estimated impacts on health
coverage status and the Federal deficit. Each study relies on different
data sources, modeling techniques, behavioral assumptions, and
budgetary baselines. Additionally, the policies they simulate are
different than the exact set of policies being adopted in the final
regulations. The Treasury Department and the IRS also note that there
is a substantial amount of uncertainty in estimating the impact of the
policy change.\40\
---------------------------------------------------------------------------
\40\ None of the studies reviewed by the Treasury Department and
the IRS provided a quantitative measure of the level of uncertainty
associated with their estimates. For example, the studies did not
report sensitivity checks describing how their results would change
under different modeling assumptions. Additionally, none of the
studies reported standard errors, a statistic that researchers use
to quantify sampling error and the significance of any differences.
---------------------------------------------------------------------------
In addition to these studies--those cited by commenters, as well as
others reviewed by the Treasury Department and the IRS--the Treasury
Department's Office of Tax Analysis has conducted its own analysis as
to the effect of the policy change on health insurance coverage
decisions and the Federal deficit. The policy change is projected to
increase the number of individuals with PTC-subsidized Exchange
coverage by about 1 million and increase the Federal deficit by an
average of $3.8 billion per year over the next 10 years. The
projections from this analysis are within the range of predictions
reported in the cited studies. The evaluation focused on direct,
predictable effects of the regulation. Although some studies predict
the affordability rule may incidentally increase enrollment in Medicaid
or CHIP, these effects are indirect and speculative. Taken as whole,
the Treasury Department and the IRS conclude that these analyses
provide compelling evidence that the new affordability rule for related
individuals will increase the affordability and accessibility of health
insurance. Although the range of numbers indicate there is uncertainty
in the precise number of individuals who will be affected, the studies
suggest that the final regulations will succeed in achieving two key
policy goals of the ACA: increasing coverage and reducing costs for
consumers. These studies, and the Treasury Department's own analysis,
lead the Treasury Department and the IRS to believe that the proposed
affordability rule, as finalized in these regulations, is consistent
with the overall goals of the ACA and is based on sound reasons for a
revision to the affordability rule. Further, as explained in section II
of this Summary of Comments and Explanation of Revisions, the Treasury
Department and the IRS are of the view that section 36B(c)(2)(C)(i) is
better interpreted in a manner that requires consideration of the
premium cost to the employee to cover not just the employee, but also
other members of the employee's family who may enroll in the employer
coverage. Thus, the Treasury Department and the IRS adopt in these
final regulations the proposed affordability rule for related
individuals that is based on the cost of family coverage because they
have concluded that such a rule is the better reading of the statute.
For the reasons stated in section II of this Summary of Comments and
Explanation of Revisions, the Treasury Department and the IRS have also
concluded that, to the extent there is ambiguity in the statute, the
proposed affordability rule would be the better alternative to resolve
that ambiguity and to implement the statute in a way consistent with
Congress's purposes in enacting the ACA.
IV. Recommended Amendments to Proposed Rules
A. Cost of Family Coverage
Under the proposed regulations, an eligible employer-sponsored plan
would be treated as affordable for related individuals if the portion
of the annual premium the employee must pay for family coverage, that
is, the employee's required contribution, does not exceed 9.5 percent
of household income. For this purpose, Sec. 1.36B-2(c)(3)(v)(A)(2) of
the proposed regulations provided that an employee's required
contribution for family coverage is the portion of the annual premium
the employee must pay for coverage of the employee and all other
individuals included in the employee's family, as defined in Sec.
1.36B-1(d), who are offered coverage under the eligible employer-
sponsored plan. Under Sec. 1.36B-1(d), an employee's family consists
of the employee, the employee's spouse filing a joint return with the
employee, and the employee's dependents.
A few commenters requested a change to Sec. 1.36B-2(c)(3)(v)(A)(2)
of the proposed regulations. Under the rule suggested by the
commenters, an employee's required contribution for family coverage
under Sec. 1.36B-2(c)(3)(v)(A)(2) would be the portion of the annual
premium the employee must pay for coverage of the employee and all
other individuals offered the employer coverage as a result of their
relationship to the employee, including non-dependents of the employee
who may enroll in the employer coverage (non-family members). As noted
by the commenters, many employers offer coverage to employees' children
up to age 26 without regard to whether a child is a dependent of the
employee.\41\ The commenters argued that including the cost to cover
all individuals offered the coverage in an employee's required
contribution will ensure that all of these individuals, including non-
family members, have access to affordable coverage.
---------------------------------------------------------------------------
\41\ Under Public Health Service Act section 2714, which is
incorporated into the Code through Code section 9815 and into the
Employee Retirement Income Security Act (ERISA) through section 715
of ERISA, group health plans and health insurance issuers offering
group or individual health insurance coverage that offer dependent
coverage for children must make that coverage available to
employees' children until they attain age 26. See 26 CFR 54.9815-
2714, 29 CFR 2590.715-2714, and 45 CFR 147.120.
---------------------------------------------------------------------------
The Treasury Department and the IRS do not adopt this comment.
Under the final regulations, as in the proposed
[[Page 61990]]
regulations, the cost of covering individuals who are offered the
coverage but are non-family members is not considered in determining
whether the employee's family members have an offer of affordable
employer coverage. Under Sec. 1.36B-2(c)(4)(i), an individual who may
enroll in employer coverage as a result of the individual's
relationship to an employee, but who is a non-family member, is treated
as eligible for the employer coverage only if he or she is enrolled in
the coverage. Consequently, an individual who may enroll in employer
coverage, but who is a non-family member, does not need a determination
of unaffordable coverage to enroll in a QHP and be eligible for the
PTC, if the individual otherwise qualifies. Unlike family members, a
non-family member may enroll in a QHP and be eligible for the PTC, if
the individual is otherwise eligible, by simply not enrolling in the
offered employer coverage. Accordingly, the cost of covering non-family
members should not be considered in determining whether other related
individuals have an offer of affordable employer coverage.
B. Determine Affordability for Employees Based on the Cost of Family
Coverage
Under Sec. 1.36B-2(c)(3)(v)(A)(1), an eligible employer-sponsored
plan is considered affordable for an employee offered coverage under
the plan if the employee's required contribution for self-only coverage
does not exceed 9.5 percent of household income. The proposed
regulations do not change the affordability rule for employees.
Several commenters requested that the final regulations amend the
affordability rule for employees to provide that, if an offer of
employer coverage is unaffordable for an employee's family members, the
offer would also be considered unaffordable for the employee. The
commenters noted that separate affordability rules for employees and
family members will sometimes result in a spouse or dependent of an
employee having an offer of employer coverage that is unaffordable even
though the employee has an affordable offer of self-only coverage. This
could cause families to enroll in multiple plans or policies, the
employee in the employer plan and the family members in a QHP, which
would be burdensome and costly for families who must navigate different
provider networks and drug formularies and incur separate deductibles
and caps on out-of-pocket spending.
Although the Treasury Department and the IRS understand the
concerns raised by the commenters, the affordability rule for employees
is specifically provided in section 36B(c)(2)(C)(i) and cannot be
changed by regulation. Under section 36B(c)(2)(C)(i), an employee is
not eligible for minimum essential coverage under an employer plan if
the employee's required contribution (within the meaning of section
5000A(e)(1)(B)) with respect to the plan exceeds 9.5 percent of
household income. Section 5000A(e)(1)(B) provides that the term
``required contribution'' means, ``in the case of an individual
eligible to purchase minimum essential coverage consisting of coverage
through an eligible employer-sponsored plan, the portion of the annual
premium which would be paid by the individual (without regard to
whether paid through salary reduction or otherwise) for self-only
coverage.'' Further, the affordability rule in section 5000A(e)(1)(C)
applies only to related individuals and not to employees. Consequently,
the final regulations do not amend the affordability rule for
employees.
C. Multiple Offers of Coverage
The proposed regulations provided that an individual who has offers
of employer coverage from multiple employers has an offer of affordable
coverage if at least one of the offers of coverage is affordable. For
example, if X has an offer of employer coverage from X's employer and
also from the employer of X's spouse, Y, for a year for which X and Y
file a joint return, X has an offer of affordable coverage if either
X's required contribution for self-only coverage under X's employer's
plan does not exceed 9.5 percent of X's and Y's household income, or if
Y's required contribution for family coverage under Y's employer's plan
does not exceed 9.5 percent of X's and Y's household income. One
commenter suggested that the Treasury Department and the IRS reconsider
this multiple coverage rule as it may be confusing for individuals with
multiple offers of coverage; however, the commenter did not include a
recommendation for a specific change to the regulations.
The final regulations do not change the rule provided in the
proposed regulations regarding affordability for individuals with
multiple offers of coverage. Although the current section 36B
regulations do not explicitly address situations involving multiple
offers of employer coverage, as noted in the Background section of this
preamble, a month is a coverage month for an individual only if the
individual is not eligible for MEC, other than individual market
coverage, for the month. Therefore, under the current regulations, an
individual with multiple employer coverage offers for a month is
eligible for MEC for that month if at least one of the offers of
coverage is affordable and provides minimum value. The rule in the
proposed regulations relating to multiple offers of coverage simply
states expressly how the affordability rule in the current regulations
applies to an individual with multiple offers of employer coverage.
Furthermore, an individual with multiple offers of employer
coverage seeking to enroll in a QHP with APTC would provide information
to the applicable Exchange concerning the required contribution for
each coverage offer. The Exchange will determine if at least one of the
offers is affordable, in which case APTC would not be allowed for the
individual's Exchange coverage. This process should minimize any burden
or confusion relating to whether an individual with multiple offers of
coverage has an affordable offer that would deny the individual APTC
and PTC for his or her Exchange coverage. In addition, for taxpayers
for whom APTC is not paid for their or their family's QHP coverage, the
IRS will update the instructions for Form 8962, Premium Tax Credit
(PTC), and Publication 974, Premium Tax Credit (PTC), to address
multiple offers of employer coverage.
D. Comments Requiring Legislative Changes
One commenter suggested that the final regulations include a rule
under which an employee and the employee's family members are not
considered to have an offer of affordable coverage if the cost of
coverage for the entire family is more than 15 percent of household
income. One commenter asked that the rule in section 36B(c)(2)(B) be
amended and that all individuals offered coverage under an employer
plan be permitted to choose between the employer coverage and Exchange
coverage with a PTC. Another commenter requested that the Treasury
Department and the IRS make permanent the rule in section 36B(c)(1)(E)
under which taxpayers with household income above 400 percent of the
applicable Federal poverty line may qualify for a PTC for taxable years
beginning in 2021 and 2022.\42\ One
[[Page 61991]]
commenter requested that the rules of section 36B be amended so that a
PTC for a child may be claimed by the taxpayer who pays for the health
insurance coverage of the child, not to the taxpayer claiming the child
as a dependent. Finally, one commenter suggested that the final
regulations include a rule under which excess APTC repayments would be
waived for taxable year 2023 while the Exchanges adjust and reeducate
consumers on the affordability calculation for family members.
---------------------------------------------------------------------------
\42\ Section 12001 of Public Law 117-169, 136 Stat. 1818 (August
16, 2022), commonly known as the Inflation Reduction Act of 2022
(IRA), extended through 2025 the rule in section 36B(c)(1)(E) under
which taxpayers with household income above 400 percent of the
applicable Federal poverty line may qualify for a PTC.
---------------------------------------------------------------------------
The Treasury Department and the IRS appreciate these comments but
note that these changes would require legislative action and cannot be
made by regulation. Thus, the final regulations do not include these
recommended rules.
E. ICHRA and QSEHRA Comments
In general, Sec. 1.36B-2(c)(3)(i)(B) provides affordability rules
related to employees who are offered a health reimbursement arrangement
(HRA) or other account-based group health plan that would be integrated
with individual health insurance coverage if the employee enrolls in
individual health insurance coverage (an individual coverage health
reimbursement arrangement or ICHRA). Those rules provide that an
individual who is offered an ICHRA because of a relationship to the
employee (a related HRA individual) is eligible for minimum essential
coverage under an eligible employer-sponsored plan for any month for
which the ICHRA is offered if (1) the ICHRA is affordable, or (2) the
employee does not opt out of and waive future reimbursements from the
ICHRA, regardless of whether the ICHRA is affordable. Under Sec.
1.36B-2(c)(5), an ICHRA is affordable for a month if the employee's
required HRA contribution does not exceed 9.5 percent of the employee's
household income for the taxable year, divided by 12. An employee's
required HRA contribution is the excess of the monthly premium for the
lowest cost silver plan for self-only coverage of the employee offered
in the Exchange for the rating area in which the employee resides, over
the monthly self-only ICHRA amount (or the monthly maximum amount
available to the employee under the ICHRA if the ICHRA provides for
reimbursements up to a single dollar amount regardless of whether an
employee has self-only or other-than-self-only coverage).
One commenter stated it was unclear whether the affordability rule
for related individuals in the proposed regulations applies to ICHRAs.
The commenter also suggested that the final regulations include a rule
under which family coverage amounts, not self-only coverage amounts,
are used to determine whether an ICHRA offer to a related HRA
individual is affordable.
The proposed regulations do not address the affordability rules
relating to an ICHRA offer, and, consequently, the final regulations
also do not address ICHRAs. Therefore, the rules for determining
affordability of an ICHRA remain unchanged. However, the Treasury
Department and the IRS, in coordination with HHS and the U.S.
Department of Labor (DOL), will consider whether future guidance should
be issued to change the ICHRA affordability rules for related HRA
individuals in the manner suggested by the commenter.
Other commenters suggested that a PTC be allowed for family members
in situations in which an employee is offered an affordable HRA,
whether an ICHRA or a QSEHRA, and does not opt-out of the HRA. The
commenters recommended that, in these situations, the employee and the
family members would enroll in an Exchange family plan and the employee
would not be allowed a PTC because of the affordable HRA, but the
family members would be allowed a PTC.
The rules relating to QSEHRAs are specifically provided by statute
in section 36B(c)(4). Because the Treasury Department and the IRS
cannot amend those rules by regulation, QSEHRAs are not addressed in
these final regulations.
Under the rules for ICHRAs, if the terms of the ICHRA provide that
reimbursements are allowed only for the medical expenses of the
employee and not for the expenses of related individuals, a PTC may be
allowed for the Exchange coverage of the related individuals,
irrespective of whether the ICHRA is considered affordable under Sec.
1.36B-2(c)(5), or whether the employee opts out of the ICHRA. However,
if the ICHRA offer includes reimbursements of the medical expenses of
related HRA individuals, a PTC is generally not allowed for the
Exchange coverage of the employee or the related HRA individuals if the
ICHRA offer is affordable or if the employee does not opt out of the
ICHRA. This is because an ICHRA is an eligible employer-sponsored plan
under section 5000A(f)(2) and, therefore, under section 36B(c)(2)(C),
if the coverage is affordable and provides minimum value, a PTC is
generally not allowed for the Exchange coverage of an individual to
whom the ICHRA offer extends or who does not opt out of the ICHRA.
Consequently, this rule relating to offers of employer coverage in
section 36B(c)(2)(C) cannot be amended by regulation. However, as noted
in connection with the prior comment concerning ICHRAs, the Treasury
Department and the IRS, in coordination with HHS and DOL, will consider
whether future guidance should be issued to provide an ICHRA
affordability rule for related individuals that is separate from the
affordability rule for employees.
F. Minimum Value
1. Minimum Value Rule for Related Individuals
The proposed regulations provided that an employer plan meets the
minimum value requirement for related individuals if the plan's share
of the total allowed costs of benefits provided to related individuals
is at least 60 percent, similar to the minimum value requirement for
employees. One commenter requested that the final regulations include a
minimum value safe harbor rule under which an employer plan is
considered to provide minimum value to related individuals if the
coverage provided to employees under the plan meets minimum value
requirements and the same benefits are provided to employees and family
members. Other commenters recommended that the final regulations allow
for the calculation of minimum value using a standard population that
includes both employees and dependents to calculate a single,
composite, minimum value for an employee and dependents, and that
separate populations not be required for coverage provided to employees
and coverage provided to related individuals.
As in the proposed regulations, the final regulations provide a
minimum value rule for related individuals that is separate from the
minimum value rule for employees, and that requires a plan's share of
the total allowed costs of benefits provided to related individuals to
be at least 60 percent. This minimum value rule for related individuals
is not intended to require the use of a standard population for family
members that is separate from the standard population for employees.
Rather, the intent of the rule is to ensure that employers continue to
provide a plan that has the same benefit design for employees and
related individuals, and not to burden employers with having to offer
different benefit packages for employees and related individuals.
Consequently, the final regulations include a rule providing that an
employer plan that provides minimum value to an
[[Page 61992]]
employee also provides minimum value to related individuals if the
scope of benefits and cost sharing (including deductibles, co-payments,
coinsurance, and out-of-pocket maximums) under the plan are the same
for employees and family members. If cost sharing varies based on
whether related individuals are enrolled and/or the number of related
individuals enrolled (that is, the tier of coverage), minimum value for
related individuals is based on the tier of coverage that would, if
elected, cover the employee and all related individuals (disregarding
any differences in deductibles or out-of-pocket maximums that are
attributable to a different tier of coverage, such as self plus one
versus family coverage.) In addition, the final regulations do not
require a departure from the practice of computing minimum value for
employees and related individuals based on the provision of benefits to
a standard population that includes both employees and related
individuals.
2. Require Coverage of All Essential Health Benefits
The proposed regulations provided that, to be considered to provide
minimum value, an eligible employer-sponsored plan must include
substantial coverage of inpatient hospital services and physician
services. One commenter asked that final regulations provide that an
employer plan does not meet the minimum value requirements unless it
provides coverage of all 10 essential health benefits that, under the
ACA, certain plans must cover, not just inpatient hospital services and
physician services. This comment requesting an expansion of the minimum
value rule is outside the scope of these final regulations. Thus, as in
the proposed regulations, the final regulations provide that an
eligible employer-sponsored plan does not meet minimum value
requirements unless it includes substantial coverage of inpatient
hospital services and physician services.
3. Minimum Value Calculator
Under 45 CFR 156.145(a)(1), a minimum value calculator is to be
made available by HHS and the IRS that an employer plan may use to
determine whether the percentage of total allowed costs under the plan
is at least 60 percent. Several commenters requested that the minimum
value calculator be updated to reflect more current large group data
and to incorporate appropriate model changes that have been made to the
actuarial value calculator.\43\ Although the commenters' request
concerning the minimum value calculator is outside the scope of the
final regulations, the Treasury Department and the IRS have shared
these comments with HHS to determine the best way to address these
comments relating to the calculator.
---------------------------------------------------------------------------
\43\ Under 45 CFR 156.135, HHS is responsible for developing and
updating an actuarial value calculator that issuers may use to
determine the actuarial value of a health plan.
---------------------------------------------------------------------------
G. Applicability Date of Final Regulations
The proposed regulations provided that the changes to Sec. Sec.
1.36B-2, 1.36B-3, and 1.36B-6(a)(2) in the proposed regulations, if
finalized, were expected to apply for taxable years beginning after
December 31, 2022. Several commenters requested instead that the final
regulations apply for taxable years beginning after December 31, 2023.
These commenters expressed concern that taxpayers will be faced with a
number of health care-related changes in 2022, including the end of the
temporary applicable percentages for 2021 and 2022 in section
36B(b)(3)(A)(iii) that increased PTC amounts.\44\ Commenters also noted
that at the end of the COVID-19 public health emergency, states will no
longer be required to comply with a Medicaid continuous enrollment
requirement in order to receive a temporary increase in Federal
Medicaid matching funds under the Families First Coronavirus Response
Act. The commenters stated that these changes, along with the changes
in the proposed regulations, will result in much uncertainty for QHP
enrollees for the open enrollment period that begins on November 1,
2022, and will lead to substantial confusion for QHP enrollees and
likely inaccurate APTC determinations by Exchanges.
---------------------------------------------------------------------------
\44\ Under section 12001 of the IRA, the temporary applicable
percentages for 2021 and 2022 in section 36B(b)(3)(A)(iii) were
extended through 2025 so taxpayers will not see a change in their
PTC amount due to the potential policy change described by
commenters.
---------------------------------------------------------------------------
Although the commenters' concerns are appreciated, the Treasury
Department and the IRS are of the view that those concerns are
outweighed by the goal of allowing spouses and dependents, some of whom
have been negatively affected by the 2013 affordability rule, to be
able to access affordable Exchange coverage beginning in the 2023 plan
year. For this reason, many commenters urged the Treasury Department
and the IRS to implement the changes to the affordability rule for
related individuals in time for QHP open enrollment for the 2023 plan
year. Although 2023 QHP enrollment may present some new challenges, as
discussed more fully in section IV of this Summary of Comments and
Explanation of Revisions, HHS has informed the Treasury Department and
the IRS that HHS will engage in thorough implementation efforts,
including revising the Exchange application and providing resources and
technical assistance education for State Exchanges, Navigators, agents,
brokers, and other assisters to help enrollees understand their options
for 2023. In addition, the IRS will be making changes to its forms,
instructions, publications, and website, in an effort to educate
taxpayers about any changes for the 2023 plan year. Therefore, the
Treasury Department and the IRS do not adopt the commenters' request
that the applicability date of the final regulations be delayed until
taxable years beginning after December 31, 2023. Instead, the final
regulations apply for taxable years beginning after December 31, 2022.
Another commenter urged that the Treasury Department and the IRS
consider the effective date implications of this rule for the State
Innovation Waiver program under section 1332 of the ACA (section 1332
waivers). The commenter requested that the Administration consider the
implications of the final regulations on states with approved section
1332 waivers and, if necessary, identify a plan to mitigate potential
harm to accessing affordable coverage for individuals. For example, the
commenter expressed concern that states would need to develop and
update actuarial analyses for section 1332 waivers and that there would
be an impact on states leveraging Federal pass-through funding under
section 1332 waivers, mostly through reinsurance programs, given that
the proposed regulations would modify who is eligible for the PTC and
APTC. The commenter also was concerned that there may be implications
for states exploring other innovative opportunities, such as public
health insurance options that enhance affordable options by leveraging
section 1332 Federal pass-through funding.
The section 1332 waiver program permits states to apply to waive
certain provisions of the ACA, including section 36B of the Code, to
undertake their own state-specific reforms to provide residents with
access to high quality, affordable health insurance while retaining the
basic protections of the ACA. A state applying for a section 1332
waiver must include in its application actuarial and economic analyses
that demonstrate that the
[[Page 61993]]
waiver proposal meets the statutory requirements for section 1332
waivers.<SUP>45 46</SUP> If a waiver yields Federal savings on certain
forms of Federal financial assistance under the ACA (such as the PTC),
those savings are passed through to the state to help implement the
state's approved waiver plan. Federal pass-through funding amounts are
calculated annually by the Treasury Department and HHS. Pass-through
amounts reflect current law and policy at the time of the calculation
but can be updated, as necessary, to reflect applicable changes in
Federal or state law.\47\ The Treasury Department plans to work with
HHS to communicate any implications of these final regulations,
including any associated requirements for states, to affected
stakeholders and to states that have approved section 1332 waivers or
that are considering section 1332 waivers. The Treasury Department and
the IRS recognize that the final regulations may affect states in
different ways but believe that any negative effects related to the
effective date are outweighed by the goal, supported by numerous
commenters, of allowing more spouses and dependents to be able to
access affordable Exchange coverage beginning in 2023. The Treasury
Department and the IRS also note that further innovation under section
1332 of the ACA is speculative, and that, in any event, section 1332
waiver policies are outside the scope of these regulations.
---------------------------------------------------------------------------
\45\ See 31 CFR 33.108(f)(4)(i) and (ii); 45 CFR
155.1308(f)(4)(i) and (ii).
\46\ Section 1332(b)(1)(A)-(D) of the ACA.
\47\ 31 CFR 33.122 and 45 CFR 155.1322.
---------------------------------------------------------------------------
V. Comments Regarding Outreach
Several commenters requested that HHS, the Treasury Department, and
the IRS provide clear resources aimed at helping various individuals
and employers. Many of the commenters who requested that HHS, the
Treasury Department, and the IRS provide outreach about the new rules
were concerned about families understanding the trade-offs if they are
considering ``split coverage,'' meaning that the employee would enroll
in employer coverage and the family members would enroll in Exchange
coverage. Some commenters noted that split coverage could lead to lower
premiums for the family or could lead to uninsured individuals gaining
coverage. Those commenters also noted, however, that some families with
split coverage will need to contend with different provider networks,
deductibles, out-of-pocket limits, open enrollment periods, appeals and
grievance procedures, and other parameters unique to their different
health plans. Another commenter added that for some families, moving
family members from employer coverage to Exchange coverage could mean
lower HRA or health savings account contributions from employers. One
commenter stated that confusion about split coverage could present
particular difficulties for those with limited English proficiency or
lower rates of health literacy.
The commenters who raised these concerns all supported the
affordability rule for related individuals provided in the proposed
regulations, but requested that the Treasury Department and the IRS
work with HHS to help ensure that families who choose to enroll in
split coverage will benefit from doing so. One commenter stated that
families considering whether to enroll in Exchange coverage with a PTC
in lieu of enrolling in employer coverage would greatly benefit from
resources and guidance that help them make an informed purchasing
decision. That commenter urged the Treasury Department and the IRS to
work with HHS on how to best communicate that information in an
accessible fashion to consumers both generally and as part of the
Exchange application. Finally, one commenter noted that numerous
studies show there is a correlation between advertising about the ACA
and an increase in individuals shopping for, and enrolling in, Exchange
coverage. Thus, that commenter suggested that the IRS and HHS should
reinvigorate efforts to educate the American public about Exchange open
enrollment (Open Enrollment), specifically focusing on this change to
the affordability rule for related individuals.
The Treasury Department and the IRS understand that the new
affordability rule in these final regulations will present families
with additional coverage options they will need to understand,
evaluate, and compare to determine the type of coverage that is best
for them. The Treasury Department and the IRS have been working with
HHS, and will continue to work with HHS, to ensure that the agencies
communicate information about the new rules in an accessible fashion to
individuals both generally and as part of the Exchange application.
Specifically, HHS has informed the Treasury Department and the IRS that
HHS will work to revise the Exchange application on <a href="http://HealthCare.gov">HealthCare.gov</a> in
advance of Open Enrollment for the 2023 plan year to include new
information that will assist consumers in filling out their
applications. Those revisions will include (1) new questions on the
application about employer coverage offers for family members, and (2)
revised materials for consumers to gather information from their
employer about the coverage being offered. To assist those with limited
English proficiency, <a href="http://HealthCare.gov">HealthCare.gov</a> offers language services upon
request through the Marketplace Call Center, and the <a href="http://HealthCare.gov">HealthCare.gov</a>
application is available in both English and Spanish.
The Treasury Department and the IRS also understand that HHS will
provide resources and technical assistance to State Exchanges that will
need to make similar changes on their websites and Exchange application
experiences. More generally, HHS is working regularly with State
Exchanges to provide technical assistance on implementation of the new
rules. HHS continues to track State Exchange planning and take all
necessary steps to support efforts by State Exchanges to implement the
new rules, with necessary outreach and education efforts, for Open
Enrollment for the 2023 plan year.
In addition, the Treasury Department and the IRS understand that
HHS will provide training on the new rules to agents, brokers, and
other assisters (for example, Navigators) so applicants will better
understand their options before enrolling, including the trade-offs if
applicants are considering split coverage. This training is
particularly important because over half of the applicants who apply
for Exchange coverage through <a href="http://HealthCare.gov">HealthCare.gov</a> are assisted by an agent,
broker, or other assister. HHS also will share available resources with
State Exchanges to leverage for use in training customer support
personnel in their states.
Finally, HHS has informed the Treasury Department and the IRS that
HHS is considering outreach to specific consumers. HHS has data from
prior years on applicants who applied through a Federally-facilitated
Exchange, were denied APTC at enrollment, and might benefit from the
new rules. HHS is evaluating opportunities for direct outreach to these
individuals.
The IRS also will need to implement the new rules for the 2023
taxable year. In particular, the IRS will update relevant forms,
instructions, and publications prior to the tax filing season for 2023,
to include the instructions for Form 8962 and Publication 974. In
addition, the IRS will update relevant materials on <a href="http://IRS.gov">IRS.gov</a> to provide
taxpayers with additional information about the new rules.
In addition to the commenters requesting that HHS, the Treasury
Department, and the IRS provide
[[Page 61994]]
outreach to individuals, a few commenters provided specific
recommendations related to employers. One commenter stated that
employers are thinking about ways to educate employees affected by this
new change but suggested that resources be made available from HHS, the
Treasury Department, and the IRS that could be shared with employees.
One commenter suggested that the Treasury Department, in coordination
with HHS and the U.S. Department of Labor, issue tri-agency guidance
and consumer-friendly resources to help employees navigate challenges
that arise from split coverage. One commenter stated that the Treasury
Department and the IRS should require employers to provide notification
to their employees about the new affordability test, including
information about Exchange coverage, the availability of financial
assistance, and how an individual may enroll in coverage. The commenter
also recommended that the Treasury Department and the IRS invite
stakeholder feedback on a draft of a model notice that employers could
share with employees. Finally, one commenter stated that the new rules
will create new requirements for plan sponsors and administrators to
ensure compliance with the rules and recommended that the Treasury
Department and the IRS issue a Request for Information to better
understand the recordkeeping and compliance needs of stakeholders who
will be affected by the final rule.
The Treasury Department and the IRS appreciate that employers are
interested in providing information to their employees about the new
rules and encourage employers to provide employees with resources
published by DOL, HHS, the Treasury Department, and the IRS relating to
the new rules. Regarding the suggestion to impose a notification
requirement on employers, such a requirement is outside the scope of
section 36B and these final regulations. Thus, the Treasury Department
and the IRS cannot impose a notification requirement on employers
through these final regulations. In addition, the Treasury Department
does not intend to issue formal tri-agency guidance with HHS and DOL or
publish a model notice. However, the agencies understand the need to
provide clear, consumer-friendly resources that can be accessed by
individuals in various ways, including through employers who want to
provide those resources directly to employees. Therefore, the Treasury
Department and the IRS, in coordination with HHS and DOL, will work to
ensure that outreach materials about these final regulations can be
accessed by individuals or by employers who choose to share the
materials with their employees. In addition, the agencies plan to
coordinate in conducting open door forums with employers, employer
associations, and employee benefits managers to educate them about the
new rules.
As noted earlier, one commenter stated that the new rules will
create new recordkeeping and compliance requirements for plan sponsors
and administrators. However, nothing in the proposed rules specifically
imposed any new requirements on plan sponsors or administrators and any
such requirements would be outside the scope of section 36B. In
addition, as discussed later, the new rules in these final regulations
do not create, even indirectly, any new recordkeeping or compliance
requirements for plan sponsors or administrators.
VI. Issues for Employers
A. Information Reporting
Multiple commenters pointed out that the proposed regulations did
not address whether the regulations would impose new information
reporting obligations on employers and other providers of minimum
essential coverage under sections 6055 and 6056. Section 6055 requires
providers of minimum essential coverage to report coverage information
by filing information returns with the IRS and furnishing statements to
individuals. Section 6056 requires ALEs to file information returns
with the IRS and furnish statements to full-time employees relating to
health coverage offered by an ALE to its full-time employees and their
dependents. Some commenters noted that the composition of an employee's
tax family is not readily ascertainable by an employer, no employer
collects the type of information that would allow them to make
determinations about the employment status and health coverage of
family members, and this data would be costly and burdensome to collect
and report.
The Treasury Department and the IRS clarify that nothing in these
final regulations affects any information reporting requirements for
employers, including the reporting required under sections 6055 and
6056, which is done on Form 1095-B, Health Coverage, and Form 1095-C,
Employer-Provided Health Insurance Offer and Coverage, respectively.
Further, these final regulations do not amend the regulations under
section 6055 or 6056, and the IRS does not intend to revise Form 1095-B
or Form 1095-C to require any additional data elements related to the
new rules. Additionally, the safe harbors that an employer may use to
determine affordability for purposes of the employer shared
responsibility provisions under section 4980H continue to be available
for employers.
B. Non-Calendar Year Plans
One commenter expressed concern about how the affordability rule
for related individuals would affect family members enrolled in non-
calendar year employer plans, especially individuals enrolled in
employer coverage through section 125 cafeteria plans (cafeteria
plans). The commenter noted that under current rules, spouses and
dependents of employees cannot, without a qualifying event, discontinue
their employer coverage during a plan year if the employee has elected
under the cafeteria plan to cover the spouse or dependent under the
employer plan.\48\ Thus, under current rules, if as of January 1, 2023,
a spouse or dependent enrolled in a non-calendar year employer plan
through a cafeteria plan wants to enroll in a QHP as of that date, no
PTC would be allowed for the period from January 1, 2023, until the
close of the employer plan year in 2023 because the spouse and
dependents would have to continue their enrollment in the employer
plan. The commenter opined that, because of this issue, the Treasury
Department and the IRS should consider making the final regulations
effective beginning in 2024 rather than 2023.
---------------------------------------------------------------------------
\48\ Although current cafeteria plan rules generally prohibit
employees, spouses, and dependents from discontinuing their employer
coverage during a plan year, Notice 2014-55, 2014-41 I.R.B. 672,
permits a cafeteria plan to allow an employee to revoke his or her
election under the cafeteria plan for coverage under the employer
plan if certain conditions are met. The notice does not allow an
employee to revoke an election solely for coverage of the employee's
spouse or dependents under the employer plan.
---------------------------------------------------------------------------
Spouses and dependents enrolled in non-calendar year employer plans
not associated with cafeteria plans may, subject to the plan rules,
disenroll from the employer plan effective on January 1, 2023, and
enroll in a QHP with coverage beginning on January 1, 2023. In that
situation, a PTC would be allowed for the Exchange coverage of the
spouse and dependents if the requirements for a PTC are met, including
that the employer plan is not affordable for the spouse and dependents
under the rules in Sec. 1.36B-2(c)(3)(v)(A). The rules in Sec. 1.36B-
2(c)(3)(v)(B) apply in determining whether the employer plan is
affordable for the spouse and dependents for the
[[Page 61995]]
period from January 1, 2023, until the end of the plan year.
For employer plans associated with cafeteria plans, the Treasury
Department and the IRS agree with the commenter that, as with
employees, spouses and dependents should be able to discontinue their
employer coverage during a plan year and enroll in a QHP, and that a
PTC should be allowed for their Exchange coverage if the other
requirements of section 36B are met. Consequently, simultaneous with
the issuance of these final regulations, Notice 2022-41 is being issued
to allow employees to revoke coverage in an employer plan associated
with a cafeteria plan for family members to allow them to enroll in a
QHP.\49\ The notice is effective for elections that are effective on or
after January 1, 2023. Thus, because employees will be permitted under
the notice to revoke coverage in an employer plan associated with a
cafeteria plan beginning in 2023, the issuance of the notice addresses
the commenter's concern about the effective date of the final
regulations.
---------------------------------------------------------------------------
\49\ Employees who revoke coverage in an employer plan
associated with a cafeteria plan for themselves or for family
members will be eligible for a Special Enrollment Period to enroll
in a QHP if a family member becomes newly eligible for APTC. See 45
CFR 155.420(d)(6)(iii).
---------------------------------------------------------------------------
C. Section 4980H Liability
One commenter that supported the proposed regulations noted in a
footnote that the proposed regulations would not have a direct effect
on an ALE's liability for an employer shared responsibility payment
with respect to the employees of that ALE. The Treasury Department and
the IRS agree with that comment; the employer shared responsibility
payment is triggered by the allowance of a PTC with respect to a full-
time employee of the ALE. These final regulations may affect a related
individual's eligibility for a PTC, but they do not affect an
employee's eligibility for a PTC, and thus these final regulations do
not affect the liability of the ALE of the employee.
The commenter also noted that the proposed regulations could have
an indirect impact on an ALE's liability for an employer shared
responsibility payment. That is, an ALE that does not offer affordable,
minimum value coverage to some of its full-time employees could have an
increase in its payment under section 4980H for full-time employees who
were previously ineligible for a PTC based on an offer of coverage from
their spouse's employer. The commenter did not request any change in
the proposed regulations, but merely noted this scenario. Certainly, an
ALE that has chosen not to offer affordable, minimum value coverage to
the requisite number of its full-time employees may have a potential
liability for a payment under section 4980H--a risk that the ALE
knowingly accepts. Whenever more employees of such an ALE are allowed a
PTC, for any reason, the ALE's liability may grow. The Treasury
Department and the IRS have considered the interests such an employer
might have in retaining the affordability rule in the 2013 regulations,
but do not believe that any such ALE would have a meaningful reliance
interest in the 2013 affordability rule. Such an ALE is already risking
liability under section 4980H due to its failure to offer affordable
self-only coverage to its employees, and has avoided or limited that
liability solely through the happenstance that one or more of its
employees has received an offer of coverage through a family member
that the 2013 affordability rule deemed to be affordable. After careful
consideration of this potential interest and broader policy
considerations, the Treasury Department and the IRS are adopting these
final rules to give full effect to the statutory language and to
promote the ACA's goal of providing affordable, quality health care for
all Americans.
VII. Procedural Requirements for Regulations and Cost of New Rules
A few commenters argued that the proposed affordability rule for
related individuals would be too costly, producing an inefficient use
of Federal resources. These commenters all cited a report from the CBO
estimating the costs of H.R. 1425, introduced during the 116th
Congress, which included provisions that would have amended section 36B
to provide an affordability rule for related individuals similar to the
one in the proposed regulations. See section 103 of H.R. 1425.
According to the CBO analysis, that provision would have increased
Federal deficits by $45 billion over ten years.\50\
---------------------------------------------------------------------------
\50\ <a href="https://www.cbo.gov/system/files/2020-06/Combined%20Tables.pdf">https://www.cbo.gov/system/files/2020-06/Combined%20Tables.pdf</a>.
---------------------------------------------------------------------------
The Treasury Department and the IRS acknowledge that multiple
analyses have been undertaken since 2013 that analyze the impact of the
2013 interpretation and estimate any impact of changing the policy of
the affordability rule. These analyses consider several aspects of the
policy change, including the estimated impact on the Federal deficit,
the change in individuals' health coverage status, and the estimated
increase in PTC. The Treasury Department and the IRS reviewed the CBO
analysis of H.R. 1425, more recent CBO analyses, and other studies that
were cited by commenters. In addition to the CBO analysis referred to
by commenters, CBO has released an updated analysis estimating that the
proposed affordability rule for related individuals, if finalized,
would increase the deficit by approximately $3.4 billion annually on
average.\51\ Further, the Treasury Department analysis indicates a
potential increase in the Federal deficit by an average of $3.8 billion
per year over the next 10 years. These analyses are discussed in
section III of this Summary of Comments and Explanation of Revisions.
However, the Treasury Department and the IRS disagree that the benefits
of the policy change are insufficient to justify the impact on the
Federal deficit. As discussed in section III, these studies
consistently project an increase in coverage and affordability for a
substantial number of individuals. The Treasury Department and the IRS
have determined that adding to the Federal deficit to this extent is a
worthwhile tradeoff to achieve these policy goals.
---------------------------------------------------------------------------
\51\ <a href="https://www.cbo.gov/system/files?file=2022-07/58313-Crapo_letter.pdf">https://www.cbo.gov/system/files?file=2022-07/58313-Crapo_letter.pdf</a>.
---------------------------------------------------------------------------
Some of those commenters also criticized the Treasury Department
and the IRS for not including specific cost estimates in the preamble
to the proposed regulations. One commenter argued that the failure to
include a cost-benefit analysis in the proposed affordability rule for
related individuals violates the Administrative Procedure Act \52\
because it deprives the public of an opportunity for meaningful notice
and comment and demonstrates the lack of a reasoned explanation for the
rule change.
---------------------------------------------------------------------------
\52\ 5 U.S.C. 551-559.
---------------------------------------------------------------------------
The Treasury Department and the IRS have provided analysis in
accord with the 2018 Memorandum of Agreement between the Treasury
Department and the Office of Management and Budget (OMB) (2018
MOA),\53\ which specifies that the Treasury Department and the IRS will
provide qualitative analysis of the potential costs and benefits of tax
regulatory actions determined to raise novel legal or policy issues, as
described in section 6(a)(3)(B) of E.O. 12866.
---------------------------------------------------------------------------
\53\ The Department of the Treasury and the Office of Management
and Budget, Memorandum of Agreement, Review of Tax Regulations under
Executive Order 12866, April 11, 2018, <a href="https://home.treasury.gov/sites/default/files/2018-04/04-11%20Signed%20Treasury%20OIRA%20MOA.pdf">https://home.treasury.gov/sites/default/files/2018-04/04-11%20Signed%20Treasury%20OIRA%20MOA.pdf</a>.
---------------------------------------------------------------------------
Another commenter asserted that the Treasury Department and the IRS
did not provide the analyses required by E.O. 12866, E.O. 13563, and
the Regulatory Flexibility Act when it
[[Page 61996]]
issued the proposed regulations. EOs 12866 and 13563 direct agencies to
assess costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits to the American public. The Regulatory Flexibility Act
requires the assessment of the numbers of small businesses potentially
impacted by the proposed rule. The commenter argued that the analysis
contained in the proposed rule lacks quantifiable data and thus is
inadequate to satisfy the procedural requirements in E.O. 12866, E.O.
13563, and the Regulatory Flexibility Act.
The commenter first argued that the Treasury Department and the IRS
failed to satisfy the requirements of EOs 12866 and 13563 because they
did not provide a reasoned explanation of the need for regulatory
action or an assessment of the costs and benefits of all alternatives.
The commenter stated that studies or surveys should have been conducted
to assess a more precise number of persons impacted and that the
Treasury Department and the IRS failed to quantify the costs of the
proposed rule. The commenter asserted that the Treasury Department and
the IRS are required to conduct research and assess the costs of all
the regulatory alternatives, including the alternative of no action.
The Treasury Department and the IRS disagree. The preamble to the
proposed regulations provided a detailed qualitative analysis of the
proposed rule's benefits, costs, and transfers. In addition, the
Treasury Department and the IRS requested comments regarding data,
other evidence, or models. In response to comments, the Special
Analyses section of this preamble includes further explanation of the
qualitative analysis used by the Treasury Department and the IRS. This
analysis meets the requirements of EOs 12866 and 13563 applicable to
tax regulatory actions and was issued after coordination with and
review by OMB under the 2018 MOA.
As noted by the commenter, the Regulatory Flexibility Act generally
requires the assessment of the numbers of small businesses potentially
impacted by a proposed rule. However, section 605 of the Regulatory
Flexibility Act provides an exception under which an assessment is not
required if the agency certifies that the rule will not, if
promulgated, have a significant economic impact on a substantial number
of small entities. If the exception applies, the agency must publish
the certification in the Federal Register at the time of publication of
the proposed rule, along with a statement providing the factual basis
for such certification. The agency also must provide the certification
and statement to the Chief Counsel for Advocacy of the Small Business
Administration.
In the preamble to the proposed regulations, the Treasury
Department and the IRS certified that the proposed regulations would
not have a significant economic effect on a substantial number of small
entities. The preamble stated that the certification is based on the
fact that the majority of the effect of the proposed regulations falls
on individual taxpayers, and that entities will experience only small
changes. The preamble further noted that the proposed regulations have
been submitted to the Chief Counsel for the Office of Advocacy of the
Small Business Administration for comment on their impact on small
business. Thus, the Treasury Department and the IRS fully complied with
the Regulatory Flexibility Act in promulgating the proposed
regulations. Further, the Treasury Department and the IRS did not
receive any comments from the Small Business Administration regarding
the proposed rule's impact on small business. Accordingly, as stated in
the Special Analyses section of this preamble, the Treasury Department
and the IRS certify that, as with the proposed regulations, these final
regulations will not have a significant economic impact on a
substantial number of small entities.
VIII. Effect of New Rules on Other Stakeholders
A. Effect of New Rules on Insurance Markets
Several commenters opined that the affordability rule for related
individuals provided in the proposed regulations will have an adverse
effect on the employer insurance market. In the view of the commenters,
one result of changing the affordability rule for related individuals
will be that a substantial number of dependents of employees, who are
generally younger and healthier than the employees, will shift from
employer plans to Exchange coverage. The commenters stated that this
shifting of younger, healthier individuals from employer plans to
Exchange coverage will result in increased premiums for employer plans.
One commenter, however, opined that it is unlikely that the magnitude
of the impact on premiums for employer plans would be large. Some
commenters pointed out that the shift also will result in decreased
premiums for Exchange coverage, but one commenter asserted that the
potential impact on the individual market is likely to be minor.
Finally, a few commenters expressed concern that the affordability rule
for related individuals will cause employers to discontinue or reduce
insurance contributions for the coverage of related individuals. One
commenter also mentioned this concern but opined that relatively few
employers would take this approach.
The Treasury Department and the IRS do not expect the affordability
rule will have a meaningful effect on average premiums for employer
plans. Overall, the aggregate amount that employers spend on family
coverage is expected to decrease by a small amount because some
individuals who would otherwise enroll in employer coverage will prefer
to enroll in Exchange coverage with a PTC. Commenters are correct that
individuals enrolled in Exchange coverage and individuals enrolled in
employer coverage have, on average, different levels of morbidity.
However, the Treasury Department and the IRS do not expect that the
morbidity of the marginal individual--rather than average individual--
is significantly different such that there would be large effects on
premiums. In some cases, individuals who would have otherwise enrolled
in employer plans may have higher than average costs while in other
cases those individuals will have lower than average costs.
Furthermore, the number of individuals who are expected to switch plans
based on this affordability rule will be modest relative to the over
170 million individuals enrolled in employer health plans. As a result,
the net effect on employer premiums--if any--is likely to be
negligible.
Because the rule is not expected to have a meaningful impact on
premiums for employer coverage, the Treasury Department and the IRS
disagree that changes in morbidity would result in employers
discontinuing coverage or reducing their contributions to that
coverage. Additionally, there are several reasons the Treasury
Department and the IRS expect that employers will continue to have
strong incentives to offer family coverage. The exclusion of employer
coverage from taxable income encourages employers to compensate
employees with (and increases employees' demand for) generous health
coverage in lieu of taxable wages. In addition, employers face
competitive pressure to offer generous family coverage to their
employees at a relatively low cost. Employers who reduce their
contributions for family coverage may find it difficult to recruit or
retain employees. Thus, competitive forces in the labor market will
[[Page 61997]]
discourage employers from reducing contributions.
B. Effect of New Rules on Individuals
Some commenters asserted that the proposed affordability rule for
related individuals would harm individuals and families in various
ways. In particular, commenters argued that individuals and families
would face increased complexity as they navigate multiple plan choices,
including the choice to enroll in ``split coverage'' in which the
employee with an affordable offer enrolls in self-only employer
coverage and the employee's family members separately enroll in
Exchange coverage. Some commenters asserted that the shift to Exchange
coverage caused by the proposed rule would be a poor trade-off for
individuals and would harm individuals because Exchange coverage in
general provides coverage that is inferior to and less generous than
employer plans. These commenters asserted, for example, that Exchange
coverage may be less expensive than an available employer plan but
provide significantly higher deductibles, narrower networks, or lower
actuarial value than the available employer plan.
The Treasury Department and the IRS are of the view that providing
individuals and families with more choices for health coverage is a
positive aspect of the new affordability rule, especially if those
additional choices include options for more affordable coverage. The
new affordability rule for related individuals does not change the
availability of any current coverage options for individuals, nor does
it change any aspect of those coverage options. Specifically, family
members of employees for whom a PTC may now be allowed as a result of
the new affordability rule are free to retain their current coverage,
or continue to go without coverage, based on their particular
circumstances. Because the coverage decision is voluntary, families who
would have enrolled in employer coverage will likely enroll in the
Exchange if they expect the benefit of split coverage exceeds the
monetary or other cost. As detailed in the Special Analyses section of
this preamble, the Treasury Department and the IRS expect that only a
limited number of families--relative to the population enrolled in
employer coverage and relative to those newly eligible for the PTC--
will choose to shift their coverage. Only family members for whom it is
advantageous, based on their personal and family circumstances, will
choose to shift their coverage.
Further, the Treasury Department and the IRS disagree with
commenters who suggest that Exchange coverage is necessarily inferior
to employer plans. The cost and quality of employer coverage compared
to Exchange coverage will depend on what plans are available to the
family and the family's particular circumstances. The Treasury
Department and the IRS agree, however, that individuals and families
could face new, more complex choices under the new rules as they
navigate multiple plan choices, including the choice to enroll in split
coverage. Individuals and families will need to assess their current
situation and determine whether they want to enroll family members in
Exchange coverage with a PTC or in an available employer plan. In
comparing their options, these families will need to consider the
factors noted by the commenters, including the cost of premiums, the
amount of deductibles, the available networks, and the actuarial value
of the plans, as well as the various trade-offs if the family is
considering split coverage. The Treasury Department and the IRS
understand these concerns and are working closely with HHS to ensure
that individuals and families have clear and accurate information about
the new rules so they can make informed decisions about their health
coverage and choose their optimal health coverage. Accordingly, as
further explained in section V of this Summary of Comments and
Explanation of Revisions, the Treasury Department and the IRS have been
working with HHS, and will continue to work with HHS, to ensure that
information about the new rules is provided in an accessible fashion to
individuals both generally and as part of the Exchange application. In
addition, HHS, the Treasury Department, and the IRS encourage
individuals to work with agents, brokers, and other assisters when
applying for Exchange coverage, whether applying through an Exchange
using the Federal eligibility and enrollment platform or a State
Exchange using its own platform. Those agents, brokers, and other
assisters can help families understand their health coverage options
and help them determine which option will best meet their particular
needs. The Treasury Department and the IRS also encourage employers to
provide employees with resources published by HHS, the Treasury
Department, and the IRS relating to the new rules.
C. Effect of New Rules on States
A few commenters asserted that states will face adverse
consequences because family members who seek Exchange coverage under
the new affordability rule for related individuals may find instead
that they qualify for Medicaid or the Children's Health Insurance
Program (CHIP). The commenters asserted that people may switch from
employer coverage, where states bear no cost, to public programs, the
most significant items on state budgets, which will impose new burdens
on states. Some of these commenters stated that the new affordability
rule will increase costs on state Medicaid programs by increasing the
number of people who apply for coverage through the Exchange and then
enroll in Medicaid. These commenters cited an analysis by the Urban
Institute estimating that 90,000 family members--mainly children--would
newly enroll in Medicaid or CHIP owing to their parents seeking
Exchange coverage.\54\ The Treasury Department and the IRS did not
receive comments from any states expressing concern about potential
adverse consequences.
---------------------------------------------------------------------------
\54\ See Changing the ``Family Glitch'' Would Make Health
Coverage More Affordable for Many Families [bond] Urban Institute.
---------------------------------------------------------------------------
As an initial matter, the Treasury Department and the IRS note that
Congressional legislation established the Medicaid and CHIP programs
prior to, and independent of, the ACA and these final regulations.
States have knowingly and consistently elected to participate in the
Medicaid and CHIP programs since these programs were adopted. These
final regulations have no effect on the Federal standards for those
programs, nor do they affect how states determine eligibility for
enrollment in their Medicaid or CHIP programs.\55\ The Federal
government provides the majority of the funding for State Medicaid and
CHIP programs. (The exact share varies based on factors such as the
state's economic characteristics and the types of beneficiaries who
enroll.) In general, states pay no more than half of the costs of
additional children who enroll in these programs. Additionally, per
capita costs to insure children in these programs are substantially
lower than costs for adults.
---------------------------------------------------------------------------
\55\ Although the Federal government imposes certain mandatory
coverage requirements, states primarily determine eligibility
standards for these programs. See <a href="https://crsreports.congress.gov/product/pdf/R/R43357/16">https://crsreports.congress.gov/product/pdf/R/R43357/16</a> and <a href="https://crsreports.congress.gov/product/pdf/R/R43949/19">https://crsreports.congress.gov/product/pdf/R/R43949/19</a>.
---------------------------------------------------------------------------
In addition, despite the commenters' assertions that the final
regulations will increase costs to states by increasing enrollment in
state programs, the Treasury Department and the IRS view these effects
as highly uncertain. Any changes in Medicaid or CHIP enrollment would
be second-order
[[Page 61998]]
effects that would not stem from changes in Medicaid or CHIP
eligibility. Although it is possible the rule may indirectly lead to
higher state Medicaid or CHIP spending, there are other factors that
will reduce costs for state and local governments. In particular, the
analysis cited by the commenters finds that over 75 percent of states'
higher Medicaid and CHIP costs will be offset by less spending on
uncompensated care for the uninsured. The study projects the potential
``tiny'' increase in state spending would also be at least partially
offset by additional tax revenue.\56\ Because employers are assumed to
hold total compensation constant, the Federal government is projected
to receive more tax revenue as employers shift compensation from health
coverage towards taxable wages; states may receive more tax revenue for
the same reason. The combined effect of increased state tax revenue and
decreased spending on uncompensated care may completely offset any
increase in Medicaid spending. Research has shown that Medicaid
expansions under the ACA increased hospital revenue and reduced
spending on locally-funded safety net programs, and it is likely that
any increase in enrollment in Medicaid and CHIP enrollment that
indirectly arises from the rule would have similar effects.\57\ Over
the long-term, Medicaid and CHIP beneficiaries may also have higher
earnings and pay more in taxes.\58\ Although it is difficult to
quantify the combined effect of these factors on state and local
budgets, the Treasury Department and the IRS expect any net impact
(whether positive or negative) to be small relative to states' total
Medicaid spending.\59\
---------------------------------------------------------------------------
\56\ See <a href="https://www.urban.org/sites/default/files/publication/104223/changing-the-family-glitch-would-make-health-coverage-more-affordable-for-many-families_1.pdf">https://www.urban.org/sites/default/files/publication/104223/changing-the-family-glitch-would-make-health-coverage-more-affordable-for-many-families_1.pdf</a> at pg. 12.
\57\ <a href="https://www.aeaweb.org/articles?id=10.1257/pol.20190279">https://www.aeaweb.org/articles?id=10.1257/pol.20190279</a>.
\58\ <a href="https://academic.oup.com/restud/article/87/2/792/5538992?login=false">https://academic.oup.com/restud/article/87/2/792/5538992?login=false</a>.
\59\ For context, as of May 2022, there were nearly 89 million
individuals enrolled in Medicaid or CHIP. The change of 90,000
people predicted by the Urban Institute analysis is a change of 0.1
percent. See <a href="https://www.medicaid.gov/medicaid/national-medicaid-chip-program-information/downloads/may-2022-medicaid-chip-enrollment-trend-snapshot.pdf">https://www.medicaid.gov/medicaid/national-medicaid-chip-program-information/downloads/may-2022-medicaid-chip-enrollment-trend-snapshot.pdf</a>.
---------------------------------------------------------------------------
One commenter asserted that Medicaid and CHIP are associated with
narrow networks of medical providers, making it harder for families to
find pediatricians and other primary care physicians, dentists, and
medical specialists. The Treasury Department and the IRS again note
that the final regulations do not require individuals to enroll in any
particular type of coverage. Family members who currently are enrolled
in an employer plan and are determined eligible for Medicaid or CHIP
when they apply for Exchange coverage are not required to leave the
employer plan and enroll in Medicaid or CHIP. These family members
always have a choice to stay in the employer plan if they prefer the
network of medical providers or other aspects of the employer plan to
what is provided under Medicaid or CHIP.
IX. Comments Exceeding Scope of Final Regulations
A number of commenters submitted comments on matters not within the
purview of the Treasury Department and the IRS. For example, several
commenters suggested that the U.S. adopt a Medicare-for-all style of
health coverage or offer universal health coverage in a manner similar
to the health coverage provided by other countries. Other commenters
requested that coverage rules be changed so that children over age 25
could remain enrolled on a parent's health insurance policies, while
others recommended that health care providers be required to accept
Medicare and Medicaid insurance. These comments are outside the scope
of matters handled by the Treasury Department and the IRS and thus are
not addressed in the final regulations.
X. Severability
If any provision in this rulemaking is held to be invalid or
unenforceable facially, or as applied to any person or circumstance, it
shall be severable from the remainder of this rulemaking, and shall not
affect the remainder thereof, or the application of the provision to
other persons not similarly situated or to other dissimilar
circumstances.
Special Analyses
I. Regulatory Planning and Review--Economic Analysis
EOs 12866 and 13563 direct agencies to assess costs and benefits of
available regulatory alternatives and, if regulation is necessary, to
select regulatory approaches that maximize net benefits (including
potential economic, environmental, public health and safety effects,
distributive impacts, and equity). E.O. 13563 emphasizes the importance
of quantifying both costs and benefits, of reducing costs, of
harmonizing rules, and of promoting flexibility.
These final regulations have been designated as subject to review
under E.O. 12866 pursuant to the 2018 MOA between the Treasury
Department and OMB regarding review of tax regulations.
A. Background
1. Affordability of Employer Coverage for Family Members of an Employee
As noted earlier in this preamble, section 36B provides a PTC for
applicable taxpayers who meet certain eligibility requirements,
including that the taxpayer or one or more family members is enrolled
in a QHP for one or more months in which they are not eligible for
other MEC. However, an individual who is eligible to enroll in employer
coverage, but chooses not to, is not considered eligible for the
employer coverage if it is ``unaffordable.'' Section 36B defines
employer coverage as unaffordable for an employee if the employee's
share of the self-only premium is more than 9.5 percent of the
employee's household income.
Section 1.36B-2(c)(3)(v)(A)(2) provides that affordability of
employer coverage for each related individual of the employee is
determined by the cost of self-only coverage. Thus, the employee and
any related individuals included in the employee's family, within the
meaning of Sec. 1.36B-1(d), are eligible for MEC and are ineligible
for the PTC if (1) the plan provides minimum value and (2) the
employee's share of the self-only coverage is not more than 9.5 percent
of household income (that is, the self-only coverage for the employee
is ``affordable'').
2. Description of the Final Regulations
The final regulations revise Sec. 1.36B-2(c)(3)(v)(A)(2) to
provide a separate affordability test for related individuals based on
the cost to the employee of family coverage. The final regulations do
not change the affordability test for the employee. When a family
applies for Exchange coverage, the Exchange will ask for information
concerning which of the family members are offered coverage by their
own employer, and the family members to whom the employer's coverage
offer extends. When an applicant for whom APTC is otherwise allowed
indicates that their employer offers them coverage, the Exchange will
ask for the premium for self-only coverage for the applicant and make
an affordability determination for the applicant on that basis. When an
applicant for whom APTC is otherwise allowed indicates an offer of
coverage through an employer of another family member, the Exchange
will ask for the premium for family coverage and make an affordability
determination for the applicant on that basis. It is therefore
[[Page 61999]]
possible that family members would be eligible for APTC but the
employee would not. In this case, if the entire family chooses to
enroll in Exchange coverage with APTC, the APTC would be paid only for
coverage of the employee's family members but would not be paid for
coverage of the employee.
B. Baseline
The Treasury Department and the IRS have assessed the benefits and
costs of the final regulations relative to a no-action baseline
reflecting anticipated Federal income tax-related behavior in the
absence of these regulations.
C. Affected Entities
Some families with an offer of employer coverage to the employee
and at least one other family member would be newly eligible for the
PTC for the Exchange coverage of the non-employee family members. The
final regulations will have no effect on families for whom self-only
employer coverage costs more than 9.5 percent of household income--as
family coverage is more expensive than self-only coverage--because the
affordability status of their employer coverage is unchanged.
Similarly, the final regulations will not affect families for whom the
cost of family employer coverage does not exceed 9.5 percent of
household income because their coverage is determined to be affordable
either way. In contrast, the final regulations will affect only family
members--other than the employee--for whom the employee's cost for the
available employer coverage does not exceed 9.5 percent of household
income for a self-only plan but does exceed 9.5 percent of household
income for a family plan or for whom the offer of the family plan is
affordable but does not provide minimum value.
Employers may see some of their employees shift from family
coverage to self-only coverage when family members newly qualify for
the PTC. The cost per enrollee could increase or decrease depending on
the characteristics of those that remain covered. However, this shift
will likely lead to a small decrease in the total amount employers are
spending on health coverage--due to covering fewer total people--as the
Federal government increases spending on PTC for the non-employee
family members who move from employer coverage to Exchange coverage.
D. Economic Analysis of the Final Regulations
1. Overview
For some families, the final regulations will lower the premium
contributions required to purchase coverage for all family members by
allowing family members other than the employee to receive a PTC. For
some families with offers of employer coverage who will be newly
eligible for the PTC, the combined cost of split coverage (self-only
employer coverage for the employee plus PTC-subsidized Exchange
coverage for related individuals) will be lower than what they pay for
family coverage through the employer. Some low-income families with
uninsured individuals where the employee is offered low-cost, self-only
employer coverage and relatively high-cost family employer coverage
will gain access to a lower-cost option through eligibility for the PTC
on behalf of one or more related individuals.
However, the cost for families to purchase Exchange coverage with
PTC is determined in part by the applicable percentage and household
income, which are the same regardless of the number of individuals
actually covered. Therefore, if the number of individuals needing
Exchange coverage is small--such as when some family members have
access to other MEC--the cost of Exchange coverage per enrollee is
relatively high when added to the cost of the employee share of self-
only employer coverage. Furthermore, split coverage also means multiple
deductibles and maximum out-of-pocket limits for the family, which
potentially increases out-of-pocket costs for families. As a result of
these features, many families with offers of employer coverage who will
be newly eligible for the PTC under the final regulations--including
families with some uninsured individuals--would not see any savings in
the combined cost of out-of-pocket premiums and cost sharing. Lastly,
many families may prefer the benefits and provider networks of employer
coverage, compared to Exchange coverage.
Taking all these factors into account, the Treasury Department and
the IRS expect new take-up of Exchange coverage may be modest relative
to the size of the newly eligible population and relative to the total
number of individuals who are either uninsured or covered by employer
coverage because many will either still prefer employer coverage or
prefer to purchase other goods and services, or save or invest, rather
than insure all family members.
The Office of Tax Analysis has evaluated the effect of the policy
change on health insurance coverage decisions and the Federal deficit.
The policy change is predicted to increase the number of individuals
with PTC-subsidized Exchange coverage by approximately 1 million and
increase the Federal deficit by an average of $3.8 billion per year
over the next 10 years. The deficit increases as enrollment in PTC-
subsidized Exchange coverage increases, offset by a modest decrease in
the tax exclusion for employer coverage.\60\ These changes to the
revenue effect associated with the PTC as well as the tax exclusion for
employer coverage are transfer payments. Transfer payments are neither
a cost nor a benefit. The analysis relied on tax data as well as the
Medical Expenditure Panel Survey. The Medical Expenditure Panel Survey
dataset includes several variables that are not observed in the tax
data such as employee contribution amounts for family coverage as well
as health care utilization.
---------------------------------------------------------------------------
\60\ The predictions rely on various assumptions including, but
not limited to, the economic and technical assumptions from the 2023
Mid-Session Review. The assumptions are based on the current law
baseline as of August 31, 2022. The baseline includes the PTC
changes enacted under the IRA.
---------------------------------------------------------------------------
2. Benefits
Gain of health insurance coverage. For those individuals who are
uninsured because the premiums for family coverage through a family
member's employer are unaffordable, gaining access to the PTC for the
purchase of Exchange coverage may make coverage more affordable and may
prompt some of them to take up coverage.
Additional health insurance option. For those individuals who are
covered by family coverage through a family member's employer that
costs more than 9.5 percent of their household income, the final
regulations will, by providing access to a PTC, give them an additional
option that could provide coverage at a lower cost or with more
comprehensive benefits.
3. Costs
Administrative costs. Adding this new option for eligibility for
PTC increases the cost to the IRS to evaluate PTC claims. The IRS's PTC
infrastructure will require one-time changes to certain processes,
forms, and instructions to be implemented in time for the 2023 taxable
year, and the cost of these changes is expected to be negligible. The
Centers for Medicare & Medicaid Services (CMS), as the administrator of
[[Page 62000]]
the Federally-facilitated Exchanges and the Federal Exchange
eligibility and enrollment platform, and the State Exchanges that
operate their own Exchange eligibility and enrollment platforms will
also incur administrative costs as the Exchanges will have primary
responsibility for implementing the rule as part of the eligibility and
enrollment process when families are applying for Exchange coverage
with APTC. Exchanges will incur one-time costs to update Exchange
eligibility systems to account for the new treatment of family
contribution amounts for employer coverage for purposes of determining
eligibility for APTC. In addition, CMS, State Exchanges, State Medicaid
Agencies, and CMS-approved Enhanced Direct Enrollment partners will
incur administrative costs to make conforming updates to their
respective consumer applications and consumer-facing affordability
tools. The Treasury Department and the IRS anticipate total
administrative costs to CMS, the Exchanges, State Medicaid Agencies,
and Enhanced Direct Enrollment partners associated with the final
regulation to be modest.
The Treasury Department and the IRS do not expect any new
administrative costs for employers because the final regulations do not
impose new reporting requirements. Under current regulations, ALEs must
report the cost of self-only coverage on Form 1095-C. The primary
purpose of this reporting is to collect information relevant for the
administration of the employer shared responsibility provisions in
section 4980H. Because the cost of family coverage is not relevant for
computing the employer shared responsibility payment, the final
regulations do not require ALEs to report the cost of family coverage
on Form 1095-C. Further, as noted earlier in this preamble, these final
regulations do not amend the regulations under section 6055 or 6056,
and the IRS does not intend to revise Form 1095-B or Form 1095-C to
require any additional data elements related to the new rules.
4. Transfer Payments
Increased PTC costs for new Exchange enrollees. Because some
individuals may be newly eligible for the PTC, some individuals may
move from employer coverage or uninsured status to Exchange coverage.
Thus, the final regulations may increase the amount of PTC being paid
by the government and reduce employer contributions.
Decreased employer exclusion for people who drop employer coverage.
If individuals drop their employer coverage, or do not enroll when they
otherwise would have, to take up Exchange coverage, the amount of money
that was going toward their employer coverage, which provides tax-
preferred health benefits, will go into the employee's wages, other
employees' wages, and/or employer profits and will no longer be tax
exempt. Thus, the final regulations may increase the amount of tax
revenue received from income and payroll taxes.
II. Paperwork Reduction Act
This final rule does not include information collections under the
Paperwork Reduction Act (5 U.S.C. chapter 35).
III. Regulatory Flexibility Act
It is hereby certified that these final regulations will not have a
significant economic impact on a substantial number of small entities
within the meaning of section 601(6) of the Regulatory Flexibility Act
(5 U.S.C. chapter 6).
As mentioned in the response to commenters, the Treasury Department
and the IRS hereby certify that these final regulations will not have a
significant economic impact on a substantial number of small entities.
This certification is based on the fact that the majority of the effect
of the final regulations falls on individual taxpayers, and entities
will experience only small changes.
Pursuant to section 7805(f) of the Code, these final regulations
were submitted to the Chief Counsel for the Office of Advocacy of the
Small Business Administration for comment on their impact on small
business, and no comments were received.
IV. Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA)
requires that agencies assess anticipated costs and benefits and take
certain other actions before issuing a final rule that includes any
Federal mandate that may result in expenditures in any one year by a
state, local, or tribal government, in the aggregate, or by the private
sector, of $100 million (updated annually for inflation). This rule
does not include any Federal mandate that may result in expenditures by
state, local, or tribal governments, or by the private sector in excess
of that threshold.
V. Executive Order 13132: Federalism
E.O. 13132 (Federalism) prohibits an agency from publishing any
rule that has Federalism implications if the rule either imposes
substantial, direct compliance costs on state and local governments,
and is not required by statute, or preempts state law, unless the
agency meets the consultation and funding requirements of section 6 of
the E.O. This rule does not have Federalism implications and does not
impose substantial direct compliance costs on state and local
governments or preempt state law within the meaning of the E.O.
VI. Congressional Review Act
Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.),
the Office of Information and Regulatory Affairs designated this rule
as a major rule as defined by 5 U.S.C. 804(2).
Statement of Availability of IRS Documents
Guidance cited in this preamble is published in the Internal
Revenue Bulletin and is available from the Superintendent of Documents,
U.S. Government Publishing Office, Washington, DC 20402, or by visiting
the IRS website at <a href="https://www.irs.gov">https://www.irs.gov</a>.
Drafting Information
The principal author of these regulations is Clara L. Raymond of
the Office of Associate Chief Counsel (Income Tax and Accounting).
However, other personnel from the Treasury Department and the IRS
participated in the development of these regulations.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
Adoption of Amendments to the Regulations
Accordingly, the Treasury Department and the IRS amend 26 CFR part
1 as follows:
PART 1--INCOME TAXES
0
Paragraph 1. The authority citation for part 1 continues to read in
part as follows:
Authority: 26 U.S.C. 7805 * * *
0
Par. 2. Section 1.36B-0 is amended by:
0
a. Adding an entry for Sec. 1.36B-2(c)(3)(v)(A)(8);
0
b. Adding entries for Sec. 1.36B-6(a)(1) and (2) and (a)(2)(i) and
(ii); and
0
c. Revising the entry for Sec. 1.36B-6(g)(2).
The additions and revisions read as follows:
Sec. 1.36B-0 Table of contents.
* * * * *
Sec. 1.36B-2 Eligibility for premium tax credit.
* * * * *
[[Page 62001]]
(c) * * *
(3) * * *
(v) * * *
(A) * * *
(8) Multiple offers of coverage.
* * * * *
Sec. 1.36B-6 Premium tax credit definitions.
(a) * * *
(1) Employees.
(2) Related individuals
(i) In general.
(ii) Plans providing MV to employees.
* * * * *
(g) * * *
(2) Exceptions.
0
Par. 3. Section 1.36B-2 is amended by:
0
a. Revising the first sentence and adding a new second sentence in
paragraph (c)(3)(v)(A)(2).
0
b. Adding paragraph (c)(3)(v)(A)(8).
0
c. Revising the second sentence of paragraph (c)(3)(v)(B).
0
d. In paragraph (c)(3)(v)(D), Examples 1 through 9 are designated as
paragraphs (c)(3)(v)(D)(1) through (9), respectively.
0
e. In newly designated paragraphs (c)(3)(v)(D)(3), (5), (6), (7), and
(9), redesignating the paragraphs in the first column as the paragraphs
in the second column:
------------------------------------------------------------------------
Old paragraphs New paragraphs
------------------------------------------------------------------------
(c)(3)(v)(D)(3)(i) through (ii)........... (c)(3)(v)(D)(3)(i) through
(ii)
(c)(3)(v)(D)(5)(i) through (ii)........... (c)(3)(v)(D)(5)(i) through
(ii)
(c)(3)(v)(D)(6)(i) through (ii)........... (c)(3)(v)(D)(6)(i) through
(ii)
(c)(3)(v)(D)(7)(i) through (iv)........... (c)(3)(v)(D)(7)(i) through
(iv)
(c)(3)(v)(D)(9)(i) through (ii)........... (c)(3)(v)(D)(9)(i) through
(ii)
------------------------------------------------------------------------
0
f. Revising newly redesignated paragraphs (c)(3)(v)(D)(1) and (2).
0
g. Redesignating paragraphs (c)(3)(v)(D)(3) through (9) as paragraphs
(c)(3)(v)(D)(7) through (13), respectively.
0
h. Adding new paragraphs (c)(3)(v)(D)(3) through (6).
0
i. Revising the heading for newly redesignated paragraph
(c)(3)(v)(D)(7), the heading and first sentence of newly redesignated
paragraph (c)(3)(v)(D)(8), the heading of newly redesignated paragraph
(c)(3)(v)(D)(9), and the first sentence of newly redesignated paragraph
(c)(3)(v)(D)(9)(i).
0
j. In the headings for newly redesignated paragraphs (c)(3)(v)(D)(10)
through (13), removing the first period and adding a colon in its
place.
0
k. Revising paragraph (e)(1).
0
l. Adding paragraph (e)(5).
The revisions and additions read as follows:
Sec. 1.36B-2 Eligibility for premium tax credit.
* * * * *
(c) * * *
(3) * * *
(v) * * *
(A) * * *
(2) * * * Except as provided in paragraph (c)(3)(v)(A)(3) of this
section, an eligible employer-sponsored plan is affordable for a
related individual if the employee's required contribution for family
coverage under the plan does not exceed the required contribution
percentage, as defined in paragraph (c)(3)(v)(C) of this section, of
the applicable taxpayer's household income for the taxable year. For
purposes of this paragraph (c)(3)(v)(A)(2), an employee's required
contribution for family coverage is the portion of the annual premium
the employee must pay for coverage of the employee and all other
individuals included in the employee's family, as defined in Sec.
1.36B-1(d), who are offered coverage under the eligible employer-
sponsored plan. * * *
* * * * *
(8) Multiple offers of coverage. An individual who has offers of
coverage under eligible employer-sponsored plans from multiple
employers, either as an employee or a related individual, has an offer
of affordable coverage if at least one of the offers of coverage is
affordable under paragraph (c)(3)(v)(A)(1) or (2) of this section.
(B) * * * Coverage under an eligible employer-sponsored plan is
affordable for a part-year period if the annualized required
contribution for self-only coverage, in the case of an employee, or
family coverage, in the case of a related individual, under the plan
for the part-year period does not exceed the required contribution
percentage of the applicable taxpayer's household income for the
taxable year. * * *
* * * * *
(D) * * *
(1) Example 1: Basic determination of affordability. For all of
2023, taxpayer C works for an employer, X, that offers its employees
and their spouses a health insurance plan under which, to enroll in
self-only coverage, C must contribute an amount for 2023 that does not
exceed the required contribution percentage of C's 2023 household
income. Because C's required contribution for self-only coverage does
not exceed the required contribution percentage of C's household
income, under paragraph (c)(3)(v)(A)(1) of this section, X's plan is
affordable for C, and C is eligible for minimum essential coverage for
all months in 2023.
(2) Example 2: Basic determination of affordability for a related
individual. (i) The facts are the same as in paragraph (c)(3)(v)(D)(1)
of this section (Example 1), except that C is married to J, they file a
joint return, and to enroll C and J, X's plan requires C to contribute
an amount for coverage for C and J for 2023 that exceeds the required
contribution percentage of C's and J's household income. J does not
work for an employer that offers employer-sponsored coverage.
(ii) J is a member of C's family as defined in Sec. 1.36B-1(d).
Because C's required contribution for coverage of C and J exceeds the
required contribution percentage of C's and J's household income, under
paragraph (c)(3)(v)(A)(2) of this section, X's plan is unaffordable for
J. Accordingly, J is not eligible for minimum essential coverage for
2023. However, under paragraph (c)(3)(v)(A)(1) of this section, X's
plan is affordable for C, and C is eligible for minimum essential
coverage for all months in 2023.
(3) Example 3: Multiple offers of coverage. The facts are the same
as in paragraph (c)(3)(v)(D)(2) of this section (Example 2), except
that J works all year for an employer that offers employer-sponsored
coverage to employees. J's required contribution for the cost of self-
only coverage from J's employer does not exceed the required
contribution percentage of C's and J's household income. Although the
coverage offered by C's employer for C and J is unaffordable for J, the
coverage offered by J's employer is affordable for J. Consequently,
under paragraphs (c)(3)(v)(A)(1) and (8) of this section, J is eligible
for minimum essential coverage for all months in 2023.
(4) Example 4: Cost of covering individuals not part of taxpayer's
family. (i) D and E are married, file a joint return, and have two
children, F and G, under age 26. F is a dependent of D and E, but G is
not. D works all year for an employer that offers employer-sponsored
coverage to employees, their spouses, and their children under age 26.
E, F, and G do not work for employers offering coverage. D's required
contribution for self-only coverage under D's employer's coverage does
not exceed the required contribution percentage of D's and E's
household income. D's required contribution for coverage of D, E, F,
and G exceeds the required contribution percentage of D's and E's
household income, but D's required contribution for coverage of D, E,
and F does not exceed the required contribution percentage of the
household income.
(ii) E and F are members of D's family as defined in Sec. 1.36B-
1(d). G is not a member of D's family under Sec. 1.36B-
[[Page 62002]]
1(d), because G is not D's dependent. Under paragraph (c)(3)(v)(A)(1)
of this section, D's employer's coverage is affordable for D because
D's required contribution for self-only coverage does not exceed the
required contribution percentage of D's and E's household income. D's
employer's coverage also is affordable for E and F, because, under
paragraph (c)(3)(v)(A)(2) of this section, D's required contribution
for coverage of D, E, and F does not exceed the required contribution
percentage of D's and E's household income. Although D's cost to cover
D, E, F, and G exceeds the required contribution percentage of D's and
E's household income, under paragraph (c)(3)(v)(A)(2) of this section,
the cost to cover G is not considered in determining whether D's
employer's coverage is affordable for E and F, regardless of whether G
actually enrolls in the plan, because G is not in D's family. D, E, and
F are eligible for minimum essential coverage for all months in 2023.
Under paragraph (c)(4)(i) of this section, G is considered eligible for
the coverage offered by D's employer only if G enrolls in the coverage.
(5) Example 5: More than one family member with an employer
offering coverage. (i) K and L are married, file a joint return, and
have one dependent child, M. K works all year for an employer that
offers coverage to employees, spouses, and children under age 26. L
works all year for an employer that offers coverage to employees only.
K's required contribution for self-only coverage under K's employer's
coverage does not exceed the required contribution percentage of K's
and L's household income. Likewise, L's required contribution for self-
only coverage under L's employer's coverage does not exceed the
required contribution percentage of K's and L's household income.
However, K's required contribution for coverage of K, L, and M exceeds
the required contribution percentage of K's and L's household income.
(ii) L and M are members of K's family as defined in Sec. 1.36B-
1(d). Under paragraph (c)(3)(v)(A)(1) of this section, K's employer's
coverage is affordable for K because K's required contribution for
self-only coverage does not exceed the required contribution percentage
of K's and L's household income. Similarly, L's employer's coverage is
affordable for L, because L's required contribution for self-only
coverage does not exceed the required contribution percentage of K's
and L's household income. Thus, K and L are eligible for minimum
essential coverage for all months in 2023. However, under paragraph
(c)(3)(v)(A)(2) of this section, K's employer's coverage is
unaffordable for M, because K's required contribution for coverage of
K, L, and M exceeds the required contribution percentage of K's and L's
household income. Accordingly, M is not eligible for minimum essential
coverage for 2023.
(6) Example 6: Multiple offers of coverage for a related
individual. (i) The facts are the same as in paragraph (c)(3)(v)(D)(5)
of this section (Example 5), except that L works all year for an
employer that offers coverage to employees, spouses, and children under
age 26. L's required contribution for coverage of K, L, and M does not
exceed the required contribution percentage of K's and L's household
income.
(ii) Although M is not eligible for affordable employer coverage
under K's employer's coverage, paragraph (c)(3)(v)(A)(8) of this
section dictates that L's employer coverage must be evaluated to
determine whether L's employer coverage is affordable for M. Under
paragraph (c)(3)(v)(A)(2) of this section, L's employer's coverage is
affordable for M, because L's required contribution for K, L, and M
does not exceed the required contribution percentage of K's and L's
household income. Accordingly, M is eligible for minimum essential
coverage for all months in 2023.
(7) Example 7: Determination of unaffordability at enrollment. * *
*
(8) Example 8: Determination of unaffordability for plan year. The
facts are the same as in paragraph (c)(3)(v)(D)(7) of this section
(Example 7), except that X's employee health insurance plan year is
September 1 to August 31. * * *
(9) Example 9: No affordability information affirmatively provided
for annual redetermination. (i) The facts are the same as in paragraph
(c)(3)(v)(D)(7) of this section (Example 7), except the Exchange
redetermines D's eligibility for advance credit payments for 2015. * *
*
* * * * *
(e) * * *
(1) Except as provided in paragraphs (e)(2) through (5) of this
section, this section applies to taxable years ending after December
31, 2013.
* * * * *
(5) The first two sentences of paragraph (c)(3)(v)(A)(2), paragraph
(c)(3)(v)(A)(8), the second sentence of paragraph (c)(3)(v)(B),
paragraphs (c)(3)(v)(D)(1) through (6), and the first sentences of
paragraphs (c)(3)(v)(D)(8) and (9) of this section apply to taxable
years beginning after December 31, 2022.
0
Par. 4. Section 1.36B-3 is amended by revising paragraphs (d)(1)(i) and
(n)(1) and adding paragraph (n)(3) to read as follows:
Sec. 1.36B-3 Computing the premium assistance credit amount.
* * * * *
(d) * * *
(1) * * *
(i) The premiums for the month, reduced by any amounts that were
refunded in the same taxable year as the premium liability is incurred,
for one or more qualified health plans in which a taxpayer or a member
of the taxpayer's family enrolls (enrollment premiums); or
* * * * *
(n) * * *
(1) Except as provided in paragraphs (n)(2) and (3) of this
section, this section applies to taxable years ending after December
31, 2013.
* * * * *
(3) Paragraph (d)(1)(i) of this section applies to taxable years
beginning after December 31, 2022.
0
Par. 5. Section 1.36B-6 is amended by revising paragraphs (a) and
(g)(2) to read as follows:
Sec. 1.36B-6 Minimum value.
(a) In general--(1) Employees. An eligible employer-sponsored plan
provides minimum value (MV) for an employee of the employer offering
the coverage only if--
(i) The plan's MV percentage, as defined in paragraph (c) of this
section, is at least 60 percent based on the plan's share of the total
allowed costs of benefits provided to the employee; and
(ii) The plan provides substantial coverage of inpatient hospital
services and physician services.
(2) Related individuals--(i) In general. An eligible employer-
sponsored plan provides MV for an individual who may enroll in the plan
because of a relationship to an employee of the employer offering the
coverage (a related individual) only if--
(A) The plan's MV percentage, as defined in paragraph (c) of this
section, is at least 60 percent based on the plan's share of the total
allowed costs of benefits provided to the related individual; and
(B) The plan provides substantial coverage of inpatient hospital
services and physician services.
(ii) Plans providing MV to employees. If an eligible employer-
sponsored plan provides MV to an employee under paragraph (a)(1) of
this section, the plan also provides MV for related individuals if--
[[Page 62003]]
(A) The scope of benefits is the same for the employee and related
individuals; and
(B) Cost sharing (including deductibles, co-payments, coinsurance,
and out-of-pocket maximums) under the plan is the same for the employee
and related individuals under the tier of coverage that would, if
elected, include the employee and all related individuals (disregarding
any differences in deductibles or out-of-pocket maximums that are
attributable to a different tier of coverage, such as self plus one
versus family coverage).
* * * * *
(g) * * *
(2) Exceptions. (i) Paragraph (a)(1)(ii) of this section applies
for plan years beginning after November 3, 2014; and
(ii) Paragraph (a)(2) of this section applies to taxable years
beginning after December 31, 2022.
Douglas W. O'Donnell,
Deputy Commissioner for Services and Enforcement.
Approved: October 1, 2022.
Lily Batchelder,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2022-22184 Filed 10-11-22; 8:45 am]
BILLING CODE 4830-01-P
</pre></body>
</html>Indexed from Federal Register on October 13, 2022.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.