WASHINGTON — In a long-awaited interpretation of the new health-care law, the Obama administration said Monday that employers must offer health insurance to employees and their children but will not be subject to any penalties if family coverage is unaffordable to workers.
The requirement for employers to provide health benefits to employees is a cornerstone of the new law, but the new rules proposed by the Internal Revenue Service (IRS) said that employers’ obligation was to provide affordable insurance to cover their full-time employees and offers no guarantee of affordable insurance for a worker’s children or spouse. To avoid a possible tax penalty, the government said, employers with 50 or more full-time employees must offer affordable coverage to those employees. But, it said, the meaning of “affordable” depends entirely on the cost of individual coverage for the employee, what the worker would pay for “self-only coverage.”
The new rules, to be published in the Federal Registry, create a strong incentive for employers to put money into insurance for their employees rather than dependents. It is unclear whether the spouse and children of an employee will be able to obtain federal subsidies to help them buy coverage — separate from the employee — through insurance exchanges being established in every state. The administration explicitly reserved judgment on that question, which could affect millions of people in families with low and moderate incomes.
Many employers provide family coverage to full-time employees, but many do not. Family coverage is much more expensive, and the employee’s share of the premium is typically larger.
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In 2012, according to an annual survey by the Kaiser Family Foundation, premiums for employer-sponsored health insurance averaged $5,615 a year for single coverage and $15,745 for family coverage. The employee’s share of the premium averaged $951 for individual coverage and more than four times as much, $4,316, for family coverage.
Starting in 2014, most Americans will be required to have health insurance.
Low- and middle-income people can get tax credits to help pay their premiums, unless they have access to affordable coverage from an employer. In its proposal, the IRS said, “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.”
The IRS said employers could rely on the new proposed rules in making plans for 2014.
In writing the law, members of Congress often conjured up a picture of employees working year-round at full-time jobs. But in drafting the rules, the IRS wrestled with the complex reality of many part-time, seasonal and temporary workers.
In addition, the administration expressed concern that some employers might try to evade the new requirements by firing and rehiring employees, manipulating their work hours or using temporary staffing agencies. The rules include several provisions to prevent such abuse.