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Column: New federal rule fixes family health insurance ‘glitch’ – Superior Telegram

Recently, the IRS released a final rule that changes the method for determining whether health insurance provided by employers to their employees is considered affordable when the coverage is extended to additional family members.

The impact of this change will be far-reaching in the Twin Ports area and beyond. Many employers do not contribute to the cost of covering additional family members, so these people go uninsured and risk serious financial implications. As an agent in the health insurance market, I have had to turn away hundreds of people who fall into this problem. Now they will have an alternative.

Before this change, an insurance plan was considered affordable if the amount an employee had to contribute to their single coverage was less than 9.5% of their household income. This was an easy calculation if the employee was a single individual. For example, if a single person earned $2,000 per month and their employer did not require them to pay more than $190 per month ($2,000 x 0.095) for their share of the health insurance premium, the coverage was considered affordable.

However, if the employee had a spouse and/or other dependents, many employers required the employee to pay the entire difference (or a very large portion of the premium) to provide them with coverage. In many cases, this has created a financial hardship and caused the spouse and/or dependents to seek coverage through the federal health insurance marketplace.

When they looked for coverage there, they found out that because they were eligible for affordable coverage, they didn’t qualify for the federal government’s premium tax credit that could be used to lower the cost of their coverage. This led to many people in this situation forgoing the cover and going uninsured because the government’s definition of affordable was definitely not!

After years of studies and input from many consumer groups, this bug was fixed on October 11th. The result is that affordable coverage is now defined differently when coverage for spouses and/or dependents is involved. Effective January 1, 2023, the definition allows employees to include the entire amount they contribute for the entire family premium to determine whether coverage falls into that affordable 9.5%.

Extending the previous example and assuming the employee earned $2,000 per month, a spouse also earned $2,000 per month, and two dependent children, here would be the results: If the employee earned more than $380/month ( $4,000 x 0.095) had to pay ) to cover the entire family, the coverage for the spouse and dependents would not be considered affordable and they could apply for the Premium Tax Credit and probably receive a comprehensive insurance plan that they could actually afford. However, the employee will still have to remain covered by their employer.

Tim Sauter has been an insurance agent for 51 years and is the president of Mediqwest Insurance Services, Inc. headquartered in Superior with offices in Superior, Hayward, Eau Claire, Menomonie, Hudson and Long Prairie, Minnesota. Mediqwest specializes in health insurance for individuals under 65 and plans for individuals covered under Medicare.

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