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Affordable coverage under PPACA, theoretically

Published
  • March 15 2013, 1:31am EDT

The IRS and HHS have been issuing guidance and notices, as well as regulations, regarding the definition of affordable coverage under the Patient Protection and Affordable Care Act. But employers seem to be caught up in household income, 8%, 9.5% and what constitutes affordable coverage to avoid penalties. So breaking down this one issue of “affordability,” let’s summarize where we presently appear to be (at least as I understand the rules):

First, assume you are offering coverage that meets the minimum essential value test (which is still being defined). If the employee cost of obtaining “single coverage” is less than 9.5% of that employee’s total compensation as reported in box 1 of that employee’s W-2, that coverage will be “affordable.” Coverage generally has to be available to cover dependents, excluding spouses, but the cost of dependent coverage is not calculated in the determination of whether the employer is offering affordable coverage. It may have an impact on the eligibility for subsidies of the employee, but not the employer. So, as it presently sits, if the cost of single coverage to the employee is less than 9.5% of their compensation, it is affordable.

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