On April 6th, 2022, the Biden administration proposed a change to how the IRS calculates the affordability of health insurance for employees and their families. The affordability test is used to calculate if a household is eligible for premium assistance through Covered CA when the family is also offered insurance by an employer. Currently, the IRS calculates the affordability of health insurance based on the premium for the employee only, not factoring in the cost of dependents. The proposed legislation would fix the “family glitch” by factoring in the cost of employees & their families, not just the employees.
For the 2022 tax year, health insurance offered by an employer is considered affordable for the entire family if the lowest cost employee-only contribution (not factoring in the premium of dependents) towards health insurance is no more than 9.61% of the household income. This measure of affordability makes it extremely rare for families to be eligible for premium assistance even if the health insurance for the family is rather expensive. Many employers, especially small businesses, only contribute towards the health insurance premium of their employees, not to dependents.
If the proposal is passed, it would go into effect no earlier than January 1st, 2023. This would be a great relief for many families we currently have to deny premium assistance due to how the affordability is currenlty calculated. We will follow the status of the legislation and keep our clients up-to-date to see if the affordability test changes to fix the family glitch. If you would like for us to review your current health insurance benefits and review your options, please contact us at 310-909-6135 or email us at firstname.lastname@example.org. At Solid Health Insurance Services, we strive to help our clients find the right health, dental, vision, life, and long-term care insurance which best fits their budget and medical needs.