Planning for Spousal Coverage under PPACA

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With HHS defining “dependents” as children (“individuals under age 26″), employers have been handed a subtle planning opportunity. As we have been advising, there will be very interesting coverage strategies that will crop up as these regulations unfold.

The law requires that coverage be offered to “dependents,” but as with many aspects of ACA, substantive changes can be made when HHS codifies the 2,500 pages of law in many thousands of pages of regulations.

This HHS writing allows plans to offer coverage to children and not to spouses, which will be particularly important for the lower-paid workforce. If the employer adopts the minimum or bronze strategy (a plan with 60% actuarial value) that meets the affordability standard of 9.5% of W-2 earnings for single coverage, any members of the household who are eligible for coverage under the plan would not be eligible for credits or subsidies on the exchange.

For example if, an employee makes $30,000/yr., 9.5% of pay is $2,850. An employer that offers the minimum plan would charge $2,850 for employee-only coverage and the family would absorb the entire incremental cost for covering dependents.

A sigh of relief should be coming from spouses under the poverty-level guidelines for whom that plan would be unaffordable and who would be eligible for subsidies in the exchange. Those spouses might otherwise have had to absorb all of their incremental costs under an employer’s minimum plan. And, the children may still be able to apply for state-supported S-CHIP (subsidized coverage for children).

Although still not entirely clear, it may be that an employer can offer their “affordable” plan with eligibility for the employee and children under 26 and other “non-affordable” options that include spousal coverage.

As I have been saying. . .This ACA might not end up being so bad.

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