Last week the IRS released the final regulation addressing the effect of various items on an individual’s eligibility for premium tax credits.
Generally, premium tax credits are not normally available to individuals who are offered health insurance coverage by their employer. However, an employee may still be eligible for premium tax credits if the employer coverage does not provide minimum value (MV) (i.e., have an actuarial value of at least 60% and cover substantial hospital and physician services) or if such coverage is not “affordable” (i.e., 9.56% of an employee’s modified adjusted gross income).
The final regulation clarifies how wellness incentives, health reimbursement arrangements (HRAs), and other items effect affordability and in the case of HRAs, MV. With regard to wellness incentives, the final regulations provide that affordability and MV should be determined by assuming that employees fail to qualify for the wellness incentive premium or cost-sharing reductions. However, the regulation does provide one exception—if the wellness incentive relates to tobacco use, affordability will be determined based on the assumption that the employee qualifies for the incentive. Furthermore, if an employee uses tobacco and does not join a tobacco cessation program, thus incurring a tobacco surcharge and such surcharge causes the employer’s insurance to be unaffordable, then the employee and the employee’s family are deemed to be ineligible for premium tax credits.
The final regulation provides that amounts that are made available through an integrated HRA are counted toward an employee’s required contribution to determine affordability when the employee may use such amounts to pay premiums. With regard to MV, amounts available to an employee through an integrated HRA that the employee may only use to reduce cost-sharing is counted toward determining MV. If the HRA amounts may be used for either premiums or to reduce cost-sharing, they shall be considered for determining affordability but not MV.
Finally, the final regulation provides that a former employee’s eligibility for continuation coverage required under Federal or State law does not disqualify such former employee or their dependents from a subsidy unless the former employee enrolls in continuation coverage required under Federal or State law. While the regulation provides that if continuation coverage required under Federal or State law is offered to a current employee due to a reduction in hours it will disqualify the employee from a subsidy if such coverage is affordable and offers MV, it is highly unlikely that continuation coverage required under Federal or State law will be affordable for a part-time employee.
The final regulation provided clarification on a number of items. Hopefully this final regulation and the other guidance issued in the past week is an indication of things to come.
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