Column: New federal rule fixes family health insurance ‘glitch’ – Superior Telegram

The IRS recently issued a final rule that changes the method for determining whether health insurance, provided by employers to their employees, is considered affordable if coverage is extended to additional family members.

The impact of this change will reach far into the Twin Ports area and beyond. Many employers do not contribute to the cost of paying for additional family members, so these people are uninsured and risk serious financial consequences. As an agent in the health insurance market, I have had to turn away hundreds of people who fall into this problem. Now they will have another way.

Prior to this change, an insurance plan was considered affordable if the amount an employee had to contribute to their lump sum was less than 9.5% of their salary. This was a simple calculation if the worker was a single person. For example, if a single person earns $2,000 a month and their employer does not want them to pay more than $190 a month ($2,000 x .095) for their share of the health insurance premium, the coverage is considered affordable.

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However, if the employee had a spouse and/or other dependents, many employers required the employee to pay the entire difference (or the largest portion of the payment) in order to provide coverage. In many cases, this creates financial difficulties and causes the spouse and/or dependents to try to get help through the Health Insurance Marketplace.

When they sought coverage, they discovered that because they were eligible for affordable assistance, they did not qualify for the Premium Tax Credit from the federal government that could be used to lower the cost of paying it. This has led to many people in this situation giving up on looking closely and going without insurance because the government’s explanation for not being so cheap didn’t exist!

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After years of research and input from many consumer groups, the problem was fixed on Oct. 11. The result is that affordable coverage is now defined differently when coverage for spouses and/or dependents is involved. From 1 Jan. 2023, the definition allows employees to include the entire amount they contribute to the entire family premium to determine if coverage falls within that 9.5%.

Expanding on the previous example and assuming the employee earns $2,000 per month, if the spouse also earns $2,000 per month and two dependent children, here are the results: If the employee was required to pay more than $380/month ($4,000 x .095 ) to cover the entire family then the payment for the spouse and dependents will not be considered insolvency and they can apply for the Premium Tax Credit and possibly receive a comprehensive insurance plan that they can afford. However, the employee will still need to remain covered by their employer.

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Tim Sauter has been an insurance agent for 51 years and is president of Mediqwest Insurance Services, Inc. headquartered in Superior with offices in Superior, Hayward, Eau Claire, Menomonie, Hudson and Long Prairie, Minnesota. Mediqwest specializes in Health Insurance for people under the age of 65 and plans for people covered under Medicare.


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