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Employer group asks for clarity on dependent health coverage rule

Employer group asks for clarity on dependent health coverage rule

Regulators should clarify that a health care reform law coverage requirement only applies to employees and not to their dependents, a big employer benefits lobbying group says.

Under the Patient Protection and Affordable Care Act, employers that do not offer coverage will be liable for a $2,000 penalty for each full-time employee starting in 2014.

Proposed regulations issued this year by the Internal Revenue Service said the coverage requirement would be satisfied if coverage is offered to 95% of full-time employees and their dependents.

While the Washington-based ERISA Industry Committee said the 95% test should be retained in the final regulation, the coverage test should not apply to dependents.

If the coverage requirement is interpreted to include dependents, employers would face increased administrative burdens without “necessarily including the numbers of dependents who have access to affordable coverage,” wrote ERIC President and CEO Scott Macey and Gretchen Young, ERIC's senior vice president of health policy, in a letter sent Monday to the IRS.

That is because, under other IRS regulations, a health care reform law provision that assesses a $3,000-per-employee penalty on employers that do not offer “affordable” coverage, only applies to individual coverage in which the premium paid by employees exceeds 9.5% of wages.

As a result, employers could require dependents to pay the full cost of coverage, but dependents would not be eligible for federal premium subsidies to purchase coverage in public insurance exchanges. That is because such subsidies are available if coverage is not offered or coverage for individual coverage fails the affordability test.

“A rule requiring employers to offer dependent coverage thus not only imposes an unnecessary administrative and cost burden on employers, it can actually harm the low-income employees whom the shared responsibility provisions were designed to help,” Mr. Macey and Ms. Young wrote.

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