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IRS issues final regulations on health care reform affordability

IRS issues final regulations on health care reform affordability

Employers will not be hit with a stiff financial penalty and employees will not be eligible for federal premium subsidies to buy coverage in public health insurance exchanges regardless of how much employers charge for family coverage, under final Internal Revenue Service regulations.

These regulations affirm previously proposed rules involving a health care reform law “affordability” requirement. Under that Patient Protection and Affordable Care Act rule, if employer coverage is not affordable, employers are liable for a $3,000 penalty for each full-time employee whose required premium contribution does not meet the affordability test and receives a premium subsidy to buy coverage in an exchange.

Previously proposed regulations said the requirement only applied to self-only coverage, with coverage considered unaffordable if employees' premium contribution exceeds 9.5% of household income. At the time, though, regulators said they would examine whether the penalty also should apply if the premium they charge health plan enrollees for family coverage exceeds the 9.5% of income affordability test.

But in the final regulations published Wednesday, the IRS made clear that the affordability test will only apply to self-only coverage.

“These final regulations adopt the proposed rule without change,” the IRS said.

Federal premium subsidies only will be available “if self-only premium exceed 9.5% of household income,” said Rich Stover, a principal with Buck Consultants L.L.C. in Secaucus, N.J.

Despite pressure from interest groups seeking an expansion of eligibility for premium subsidies, regulators felt constrained by the statute, said Anne Waidmann, a director with PricewaterhouseCoopers L.L.P. in Washington.

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