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.
