The internal Revenue Service released the proposed rule “Affordability of Employer Coverage for Family Members of Employees,” (REG-114339-21), April 5. The rule would amend existing regulations on the calculation of eligibility for marketplace premium tax credits (APTC) for individuals who are also eligible for employer health coverage. Instead of only calculating the cost of individual health coverage, the new rule would alter the affordability calculation to factor in the total cost of coverage to the individual’s household.

Currently, individuals would be eligible for APTC to purchase a qualified health plan (QHP) on the marketplaces if their required contribution for individual medical coverage is greater than 9.5% of household income.

The family glitch, so called by policy makers, occurs when the plan that covers the other members of the employee’s household cost was greater than 9.5% of income and the cost of individual employee coverage was below 9.5%, they would not be eligible for subsidies.

The rule would change the benchmark for APTC from the cost of an individual plan to the cost for the entire household including children.

While the rule does not directly impact the availability of standalone dental plans (SADPs) on the federal marketplaces, the department argues that the rule may cause:

“… a shift for some of their employees from family coverage to self-only coverage when family members newly qualify for APTC. The cost per enrollee could increase or decrease depending on the characteristics of those that remain covered. However, this shift would likely lead to a decrease in the total amount employers are spending on health insurance as the Federal government increases spending on APTC for the non-employee family members.”

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