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The IRS Cannot “Fix” The “Family Glitch”

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Public Advisor
Doug Badger’s career in public policy spans more than three decades and includes stints as a policy adviser to the White House, the U.S. Senate, the Department of Health and Human Services, and the Social Security Administration.

The Treasury Department and the Internal Revenue Service, with uncharacteristic ambivalence, have proposed amending a longstanding regulation regarding eligibility for premium tax credits [PTCs] through the Affordable Care Act (ACA) marketplaces, or exchanges. Under the ACA, workers and their dependents are ineligible for PTCs when a worker has an “affordable” offer of employer-based insurance (ESI) offering at least “minimum value.” In an April 7, 2022 Federal Register notice, the agencies propose a new affordability test for dependents of workers with an offer of employer-sponsored insurance, stating that they have “tentatively determined” that the existing rule “is not required by the relevant statutes.”

The newly proposed affordability test is contrary to the statute. There is only one lawful affordability test for those with an offer of ESI, and it applies to workers and their dependents: If a worker must pay more than 9.5 percent of household income for self-only coverage, then she and her dependents qualify for PTCs.

The agencies offer a deeply flawed rationale for legislating a new affordability test for dependents, confusing an exemption from the ACA’s tax penalty on the uninsured for an entitlement to tax credits.

The full article can be found in Health Affairs.

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