Affordability of Health Coverage

Posted by BAS - 23 June, 2022

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Applicable Large Employers, those with 50 or more full-time employees in the prior year, must offer their full-time employees minimum essential coverage providing minimum value that is affordable.  

 

A plan is affordable if the premium for self-only coverage does not exceed a certain percentage of the employee’s household income. The IRS sets the percentage each year. The baseline percentage was 9.5%. 

 

In 2022, the affordability percentage is 9.61%. In 2021, it was 9.83%. A plan will be considered affordable if its premium for the lowest cost, single-only plan does not exceed the identified percentage of an employee’s household income. 

 

Since household income is not readily available, employers use one of three ACA affordability safe harbors to determine if their plans are affordable. 

 

  • W-2 Safe Harbor. In 2022, an employer’s offer of coverage will be considered affordable if the employee’s required contribution for the employer’s lowest cost single-only coverage that provides minimum value does not exceed 9.61% of the employee’s Form W-2 wages.

 

  • Rate of Pay Safe Harbor. In 2022, an employer’s offer of coverage will be considered affordable if the employee’s required contribution for the employer’s lowest cost single-only coverage that provides minimum value does not exceed 9.61% of the employee’s monthly salary (for hourly employees, this is generally hourly pay x 130 hours).

 

  • Federal Poverty Line (FPL) Safe Harbor. In 2022, an employer’s offer of coverage will be considered affordable if the employee’s required contribution for the employer’s lowest cost single-only coverage that provides minimum value does not exceed 9.61% of the monthly Federal Poverty Line for a single individual.

 

Many employers wish to use the Federal Poverty Line Safe Harbor as it is easily calculated and can allow an employer to identify Code 1A on Line 14 of an employee’s Form 1095-C, which the IRS seems to prefer.

 

For information about BAS’ ACA data collection and reporting services, contact your account manager or solutions@basusa.com

Topics: Health Care Reform (ACA), HR & Benefits Compliance, Compliance, Affordable Care Act


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