Expanded eligibility for premium tax credits in the health insurance exchange: What is the impact on the ALE's obligation to offer minimum value coverage meeting the affordability threshold?

While the eligibility criteria for premium tax credits (PTCs) was changed by the American Rescue Plan Act (ARPA), this does not change large employers' obligations under the employer mandate.

Prior to the ARPA, individuals were eligible for a PTC to purchase individual coverage through the exchange if these two conditions applied:

• They had household income between 100% and 400% of federal poverty level (FPL).
• They were not eligible for minimum value coverage from an employer where the self-only coverage cost 9.5% (adjusted annually) or less of household income.

Since an employer does not typically know an employee's household income, an ALE's responsibility under the ACA's employer mandate is to offer minimum value coverage to full-time employees and their children. The employee's required contribution for the employer's lowest cost option self-only coverage cannot be more than 9.5% (adjusted annually, and 9.83% in 2021) of the employee's earnings, as determined under one of the three affordability safe harbor options (FPL, rate of pay, Form W-2).

The ARPA made two changes to the PTC eligibility conditions for calendar year 2021. First, the 400% of federal poverty level maximum household income limit has been removed. In other words, U.S. taxpayers who have household incomes greater than 400% of FPL will now be eligible for a PTC. Second, individuals receiving unemployment compensation for any week in 2021 may receive a PTC even if they have income below 100% of FPL.

Importantly, if an individual is eligible for qualified coverage from an employer (meeting both the minimum value and affordability standards) they are not eligible for a PTC, regardless of income. Further, ALEs are still required to offer qualified coverage to full-time employees or be at risk of a penalty under the employer mandate. If a full-time employee who is eligible for qualified coverage from an employer purchases coverage in the exchange, they would not receive a PTC, would be required to pay the full premium in the exchange, and could not trigger a penalty for the ALE.