New rules released by the Obama administration Monday require employers with 50 or more full-time employees to offer affordable health insurance to employees and their children. Employers must offer coverage to employees starting in 2014, and dependents starting in 2015. Those employers who fail to do so will be subject to a possible tax penalty, but employers will not be penalized if family coverage is unaffordable.
What is the reasoning behind this contradiction? Well, the rules proposed by the Internal Revenue Service (IRS) state that the meaning of “affordable” depends solely on the cost to each employee of individual coverage, as opposed to the employee’s dependents. The IRS specifies these terms in its proposal:
“Coverage for an employee under an employer-sponsored plan is affordable if the employee’s required contribution for self-only coverage does not exceed 9.5 percent of the employee’s household income.”
This development spurs employers to funnel money into health insurance coverage for their employees rather than dependents. Family coverage is significantly more expensive than individual insurance, and employees typically pay more for their share of the premium.
The IRS defines a dependent as an employee’s child who is under the age of 26. Spouses are not considered dependents. Therefore, under the new rules, employers must offer coverage to the children of an employee, but they are not required to offer it to their spouse.
The rules apply to state and local government agencies, private businesses and nonprofit organizations. Several provisions were included to prevent employers from evading the requirements by using temporary staffing agencies, firing and rehiring employees or manipulating their work hours.
The fate of dependent coverage remains to be seen. Administration officials reserved judgment on the question of whether or not the spouse and children of employees will be eligible for federal subsidies to aid them in purchasing coverage through state insurance exchanges.