Nonprofit Requests Prompt Adoption of Proposed Family Coverage Regs

June 1, 2022

The Honorable Charles Rettig
Commissioner
Internal Revenue Service
U.S. Department of the Treasury
P.O. Box 7604, Ben Franklin Station
Washington, D.C. 20044

Re: Affordability of Employer Coverage for Family Members of Employees (REG-114339-21)

Dear Commissioner Rettig:

Kansas Action for Children is a nonprofit advocacy organization working to make Kansas a place where every child has the opportunity to grow up healthy and thrive. We work across the political spectrum to improve the lives of Kansas children through bipartisan advocacy, partnership, and information-sharing on key issues, including early learning and education, health, and economic security for families.

Thank you for the opportunity to submit comments on the proposed rule, Affordability of Employer Coverage for Family Members of Employees, issued by the Internal Revenue Service (IRS). We are writing in strong support of the proposed rule, which would correct the "family glitch" that was created by a 2013 misreading of the Affordable Care Act (ACA). That misreading erected a barrier to affordable coverage for millions of Americans barring them from eligibility for premium tax credits despite having an offer of unaffordable employer coverage.

We ask that the proposed rule be finalized, as-is and as soon as possible, so that it can take effect in advance of open enrollment for the upcoming 2023 marketplace plan year.

We have long supported the interpretation applied in this proposed rule a s the best reading of the statute and consistent with the goals of the ACA to expand access to affordable coverage. As noted in the preamble to this proposed rule, the current interpretation was originally proposed in a broader rule on premium tax credits (76 FR 50931), but not finalized in 2012 (77 FR 30377). In that final rule, IRS noted that commenters opposed the proposed interpretation, calling instead for the IRS to adopt an affordability test for family members based on the cost of family coverage. Despite these objections, IRS finalized the policy in 2013 (78 FR 7264) with an interpretation inconsistent with the text and intent of the ACA, thereby creating the "family glitch."

The current interpretation affects as many as 5.1 million people who are barred from obtaining premium tax credits because "affordable" coverage is based only on the cost to cover the employee.¹ Most of the people impacted are children, and nearly half a million people go uninsured when faced with unaffordable coverage under a family member's employer plan.² Workers in small businesses are also impacted as they are more likely to face higher premiums for family coverage. Five percent of covered workers in large businesses face a premium of at least $10,000 to enroll family members in their employer plan. That number grows to 29 percent of covered workers in small businesses who must pay $10,000 to obtain family coverage.³

The "family glitch" has a greater impact on low-income families, but it is also a problem for middle-income families. Almost half (46%) of the people in the "family glitch" have incomes under 250% of the federal policy level (FPL) and another third (33%) have income between 250%-400% of FPL.⁴ Fixing the "family glitch" would provide greater premium savings for those families with incomes under 200% of FPL ($580 average savings per person).⁵ Low-income families would also see significant savings in out-of-pocket costs, thanks to cost-sharing subsidies available to families with income under 250% of FPL. This could mean thousands of dollars in cost-sharing savings for these families.⁶

According to a recent Kansas Health Institute research brief, an estimated 40,000 Kansans are impacted by the "family glitch."⁷ If this proposed rule is implemented, "total Kansas Marketplace enrollment could increase by about 42 percent," and the state could potentially "see a lower uninsured rate . . . [and] lower ACA Marketplace plan premiums."⁸

The proposed rule will help millions of families by allowing for a separate affordability test for family members that would be based on the cost to enroll family members in the employer coverage (not the cost of enrolling only the employee). We strongly support this interpretation of the statute and the approach to determining family members' eligibility for premium tax credits.

We also appreciate the opportunity to comment on the minimum value definition requiring employer plans to provide substantial coverage of inpatient hospital and physician services in order to satisfy the 60% actuarial value threshold. We support this definition and the proposed rule clarifying that the minimum value requirement should, like the affordability test, be applied separately for employees and family members. We agree that this clarification will ensure family members are not barred from premium tax credits by coverage that is affordable, but fails to provide minimum value.

Finally, the proposed rule would also better ensure that more of the almost 315,000 low-income children now enrolled in Medicaid or CHIP in Kansas,⁹ who may lose such coverage when the COVID-19 public health emergency expires, have access to affordable coverage through the marketplaces, rather than end up uninsured. The Families First Coronavirus Response Act included a critically important continuous coverage protection to keep children and other Medicaid beneficiaries enrolled during the public health emergency, which avoided a spike in the number of the uninsured during the pandemic. But when this protection ends, hundreds of thousands of children in our state could lose their Medicaid or CHIP coverage. Nationally, the Georgetown University Center for Children and Families estimates that 6.7 million children now enrolled in Medicaid will likely lose their Medicaid coverage when the continuous coverage protection expires.¹⁰ Some could end up uninsured because they get trapped in the "family glitch." The proposed rule, however, would help mitigate this risk by extending premium tax credit eligibility to more children losing Medicaid coverage and therefore reduce the number of children Kansas who may become newly uninsured.

We agree with the IRS that the proposed rule's new interpretation is a better reading of the statute. It is also consistent with the goals of the ACA to expand access to affordable coverage. As a result, millions of families — particularly those of low-wage workers — will no longer be forced to choose between unaffordable employer coverage and unsubsidized marketplace coverage for dependents. Families will be able to choose the coverage option that works best for them, whether that be to remain as a family in the employer plan or to obtain marketplace coverage, with financial assistance, for those family members for whom the employer plan would be unaffordable.

Thank you for this opportunity to comment.

Heather Braum
Health Policy Advisor
Kansas Action for Children
Topeka, KS
heather@kac.org