Affordability of Employer Coverage for Family Members of Employees, 61979-62003 [2022-22184]

Agencies

• Internal Revenue Service
• DEPARTMENT OF THE TREASURY

[Federal Register Volume 87, Number 197 (Thursday, October 13, 2022)]
[Rules and Regulations]
[Pages 61979-62003]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-22184]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 9968]
RIN 1545-BQ16


Affordability of Employer Coverage for Family Members of 
Employees

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations.

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SUMMARY: This document contains final regulations under section 36B of 
the Internal Revenue Code (Code) that amend the regulations regarding 
eligibility for the premium tax credit (PTC) to provide that 
affordability of employer-sponsored minimum essential coverage 
(employer coverage) for family members of an employee is determined 
based on the employee's share of the cost of covering the employee and 
those family members, not the cost of covering only the employee. The 
final regulations also add a minimum value rule for family members of 
employees based on the benefits provided to the family members. The 
final regulations affect taxpayers who enroll, or enroll a family 
member, in individual health insurance coverage through a Health 
Insurance Exchange (Exchange) and who may be allowed a PTC for the 
coverage.

DATES: These final regulations are effective on December 12, 2022.

FOR FURTHER INFORMATION CONTACT: Clara Raymond at (202) 317-4718 (not a 
toll-free number).

SUPPLEMENTARY INFORMATION: 

Background

I. Overview

    This document amends the Income Tax Regulations (26 CFR part 1) 
under section 36B of the Code. On April 7, 2022, the Department of the 
Treasury (Treasury Department) and the IRS published a notice of 
proposed rulemaking (REG-114339-21) in the Federal Register (87 FR 
20354) under section 36B (proposed regulations). A public hearing was 
held on June 27, 2022. The Treasury Department and the IRS also 
received written comments on the proposed regulations. After 
consideration of the testimony heard at the public hearing and the 
comments received, the proposed regulations are adopted as amended by 
this Treasury decision (final regulations).
    These final regulations provide that, for purposes of determining 
eligibility for PTC, affordability of employer coverage for individuals 
eligible to enroll in the coverage because of their relationship to an 
employee of the employer (related individuals) is determined based on 
the employee's share of the cost of covering the employee and the 
related individuals. As further explained in the Summary of Comments 
and Explanation of Revisions, the affordability rule for related 
individuals in these final regulations represents the better reading of 
the relevant statutes and is consistent with Congress's purpose in the 
Affordable Care Act (ACA) \1\ to expand access to affordable health 
care coverage. The final regulations also include amendments to the 
rules relating to the determination of whether employer coverage 
provides a minimum level of benefits, referred to as minimum value; 
conforming amendments to the current regulations; and clarification of 
the treatment of premium refunds.
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    \1\ The term ACA in this preamble means the Patient Protection 
and Affordable Care Act, Pub. L. 111-148, 124 Stat. 119 (2010), as 
amended by the Health Care and Education Reconciliation Act of 2010, 
Pub. L. 111-152, 124 Stat. 1029 (2010).
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II. Eligibility for Employer Coverage Under Section 36B

    Section 36B provides a PTC for applicable taxpayers who meet 
certain eligibility requirements, including that a member of the 
taxpayer's family enrolls in a qualified health plan through an 
Exchange (QHP or Exchange coverage) for one or more ``coverage 
months.'' Under Sec.  1.36B-1(d) of the Income Tax Regulations, a 
taxpayer's family consists of the taxpayer, the taxpayer's spouse if 
filing jointly, and any dependents of the taxpayer.
    Section 1.36B-3(d)(1) provides that the PTC for a coverage month is 
the lesser of: (i) the premiums for the month, reduced by any amounts 
that were refunded, for one or more QHPs in which a taxpayer or a 
member of the taxpayer's family enrolls (enrollment premiums); or (ii) 
the excess of the adjusted monthly premium for the applicable benchmark 
plan over 1/12 of the product of a taxpayer's household income and the 
applicable percentage for the taxable year (taxpayer's contribution 
amount).
    Under section 36B(c)(2)(B) and Sec.  1.36B-3(c), a month is a 
coverage month for an individual only if the individual is not eligible 
for minimum essential coverage (MEC) for that full calendar month 
(other than coverage under a health care plan offered in the individual 
market within a state). Under section 5000A(f)(1)(B) of the Code, the 
term MEC includes employer coverage. If an individual is eligible for 
employer coverage for a given month, no PTC is allowed for the 
individual for that month.
    Section 36B(c)(2)(C) generally provides that an individual is not 
treated as eligible for employer coverage if the coverage offered is 
unaffordable or does not provide minimum value. However, if the 
individual enrolls in employer coverage, the individual is eligible for 
MEC, irrespective of whether the employer coverage is affordable or 
provides minimum value. See section 36B(c)(2)(C)(iii) and Sec.  1.36B-
2(c)(3)(vii).
    Under the affordability test in section 36B(c)(2)(C)(i)(II), an 
employee who does not enroll in employer coverage is not treated as 
eligible for the coverage if ``the employee's required contribution 
(within the meaning of section 5000A(e)(1)(B)) with respect to the plan 
exceeds 9.5 percent of the applicable taxpayer's household income.'' 
\2\ The flush language following this provision provides that ``[t]his 
clause shall also apply to an individual who is eligible to enroll in 
the plan by reason of a relationship the individual bears to the 
employee.''
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    \2\ This required contribution percentage of 9.5 is indexed 
annually under section 36B(c)(2)(C)(iv). For simplicity, this 
preamble refers to 9.5 percent as the required contribution 
percentage.
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    Section 5000A generally requires applicable individuals \3\ to make 
an individual shared responsibility payment \4\ with their tax return 
if they

[[Page 61980]]

do not maintain minimum essential coverage for themselves and any 
dependents. Section 5000A(e)(1) establishes exemptions from the 
individual shared responsibility payment that would otherwise apply for 
``individuals who cannot afford coverage,'' which the statute defines 
in section 5000A(e)(1)(A) to be applicable individuals whose required 
contribution for coverage exceeds a specified percentage of their 
household income. Section 5000A(e)(1)(B)(i) provides that, for an 
employee eligible to purchase employer coverage, the term ``required 
contribution'' means ``the portion of the annual premium which would be 
paid by the individual . . . for self-only coverage.'' For related 
individuals, the definition of ``required contribution'' in section 
5000A(e)(1)(B)(i) is modified by a ``special rule'' in section 
5000A(e)(1)(C). Section 5000A(e)(1)(C) provides that ``[f]or purposes 
of [section 5000A(e)(1)](B)(i), if an applicable individual is eligible 
for minimum essential coverage through an employer by reason of a 
relationship to an employee, the determination [of affordability] under 
subparagraph (A) shall be made by reference to [the] required 
contribution of the employee.'' The regulations under section 5000A 
interpret section 5000A(e)(1)(C) as modifying the required contribution 
rule in section 5000A(e)(1)(B)(i) regarding coverage for related 
individuals to take into account the cost of covering the employee and 
the related individuals, not just the employee. Specifically, for 
related individuals, Sec.  1.5000A-3(e)(3)(ii)(B) provides that the 
required contribution is the amount an employee must pay to cover the 
employee and the related individuals who are included in the employee's 
family.\5\ Thus, under Sec.  1.5000A-3(e)(3)(ii)(B), employer coverage 
is affordable for those related individuals if the share of the annual 
premium the employee must pay to cover the employee and the related 
individuals is not greater than the required contribution percentage of 
household income.
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    \3\ Section 5000A(d)(1) defines an applicable individual as any 
individual other than an individual with a religious conscience 
exemption, an individual who is not lawfully present or an 
individual who is incarcerated.
    \4\ Public Law 115-97 (2017), commonly referred to as the Tax 
Cuts and Jobs Act, reduced the individual shared responsibility 
payment amount to zero for months beginning after December 31, 2018.
    \5\ For purposes of this exemption for unaffordable coverage, an 
employee or related individual who is otherwise exempt under Sec.  
1.5000A-3 is not included in determining the required contribution.
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    In contrast to the affordability rule for related individuals in 
Sec.  1.5000A-3(e)(3)(ii)(B), the Treasury Department and the IRS 
issued final regulations in 2013 for purposes of the PTC providing that 
employer coverage is affordable for the related individuals if the 
share of the annual premium the employee must pay for self-only 
coverage is not greater than the required contribution percentage of 
household income, regardless of how expensive the annual premium for 
family coverage would be. See Sec.  1.36B-2(c)(3)(v)(A)(2) (the 2013 
regulations or 2013 affordability rule). Thus, under the 2013 
affordability rule, the employee's share of the premium for family 
coverage, as defined in Sec.  1.36B-1(m),\6\ was not considered in 
determining whether employer coverage is affordable for related 
individuals.
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    \6\ Section 1.36B-1(m) defines family coverage as health 
insurance that covers more than one individual and provides coverage 
for the essential health benefits as defined in section 1302(b)(1) 
of the ACA.
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    When the 2013 regulations were issued, the Treasury Department and 
the IRS considered the statutory language of section 
36B(c)(2)(C)(i)(II) and its cross-reference to section 5000A(e)(1)(B), 
as well as the statutory language of section 5000A(e)(1)(B) and the 
cross-reference in section 5000A(e)(1)(C) to section 5000A(e)(1)(B). In 
the preamble to those regulations, the Treasury Department and the IRS 
interpreted the language of section 36B, through the cross-reference to 
section 5000A(e)(1)(B), to provide that the affordability test for 
related individuals is based on the cost of self-only coverage. Thus, 
if the cost of self-only coverage is affordable, no PTC is allowed for 
the Exchange coverage of related individuals even if family coverage 
through the employer costs more than 9.5 percent of household income.
    As noted above, section 36B(c)(2)(C) generally provides that an 
individual is not treated as eligible for employer coverage if the 
coverage offered is unaffordable or does not provide minimum value. An 
eligible employer-sponsored plan provides minimum value under section 
36B(c)(2)(C)(ii) and Sec.  1.36B-6(a)(1) only if the plan's share of 
the total allowed costs of benefits provided to an employee is at least 
60 percent. On November 4, 2014, the IRS released Notice 2014-69, 2014-
48 I.R.B. 903, which advised employers of the intent to propose 
regulations providing that group health plans that fail to provide 
substantial coverage for inpatient hospitalization or physician 
services do not provide minimum value. Notice 2014-69 noted that the 
Department of Health and Human Services (HHS) was concurrently issuing 
parallel guidance and also provided that, pending issuance of final 
Treasury regulations, an employee would not be required to treat a non-
hospital/non-physician services plan as providing minimum value for 
purposes of an employee's eligibility for a PTC.
    On November 26, 2014, HHS issued proposed regulations providing 
that an eligible employer-sponsored plan provides minimum value only 
if, in addition to covering at least 60 percent of the total allowed 
costs of benefits provided under the plan, the plan benefits include 
substantial coverage of inpatient hospital services and physician 
services. See 79 FR 70674. On February 27, 2015, HHS finalized this 
minimum value rule at 45 CFR 156.145(a). See 80 FR 10750, 10872. On 
September 1, 2015, the Treasury Department and the IRS issued proposed 
regulations under section 36B (REG-143800-14, 80 FR 52678) (2015 
proposed regulations) to incorporate the substance of the HHS final 
regulations regarding the minimum value rule. The 2015 proposed 
regulations issued by the Treasury Department and the IRS relating to 
substantial coverage of inpatient hospital services and physician 
services have not been finalized.

III. E.O. 14009

    On January 28, 2021, President Biden issued Executive Order (E.O.) 
14009, Strengthening Medicaid and the Affordable Care Act (ACA). 
Section 3(a) of E.O. 14009 directed the Secretary of the Treasury to 
review, as soon as practicable, all existing regulations and other 
agency actions to determine whether the actions are inconsistent with 
the policy to protect and strengthen the ACA and, as part of this 
review, to examine policies or practices that may reduce the 
affordability of coverage or financial assistance for coverage, 
including for dependents. Consistent with the E.O., the Treasury 
Department and the IRS reviewed the regulations under section 36B, 
including Sec.  1.36B-2(c)(3)(v)(A)(2).

IV. Proposed Regulations

    On April 7, 2022, the Treasury Department and the IRS published 
proposed regulations proposing to amend Sec.  1.36B-2(c)(3)(v)(A)(2) to 
change the rule regarding the affordability of employer coverage for 
related individuals. The proposed regulations provided that, for 
purposes of determining eligibility for PTC, affordability of employer 
coverage for related individuals in the employee's family would be 
determined based on the cost of covering the employee and those related 
individuals--just as affordability is determined in the regulations 
implementing section 5000A. For this purpose, affordability for related 
individuals would be based on the portion of the annual premium the 
employee must pay for coverage of

[[Page 61981]]

the employee and all other individuals included in the employee's 
family, within the meaning of Sec.  1.36B-1(d), who are offered the 
coverage. Although some individuals who are not part of the family 
might be offered the employer coverage through the employee, the cost 
of covering individuals not in the family would not be considered in 
determining whether the related individuals in the employee's family 
have an offer of affordable employer coverage.
    The proposed regulations would not change the affordability rule 
for employees. As required by statute, employees have an offer of 
affordable employer coverage if the employee's required contribution 
for self-only coverage of the employee does not exceed the required 
contribution percentage of household income.
    The proposed regulations also addressed the minimum value rules in 
section 36B. Under the proposed regulations, a separate minimum value 
rule would be provided for related individuals that is based on the 
level of coverage provided to related individuals under an eligible 
employer-sponsored plan. In addition, the proposed regulations withdrew 
the 2015 proposed regulations and re-proposed the rule regarding 
substantial coverage of inpatient hospitalization services and 
physician services. Thus, under the proposed regulations, an eligible 
employer-sponsored plan would provide minimum value only if the plan 
covers at least 60 percent of the total allowed costs of benefits 
provided to an employee under the plan and the plan benefits include 
substantial coverage of inpatient hospital services and physician 
services.
    Finally, the proposed regulations would amend Sec.  1.36B-
3(d)(1)(i) to clarify that, in computing the PTC for a coverage month, 
a taxpayer's enrollment premiums for the month are the premiums for the 
month, reduced by any amounts that were refunded in the same taxable 
year the taxpayer incurred the premium liability.

Summary of Comments and Explanation of Revisions

I. Overview

    The Treasury Department and the IRS received 3,888 comments on the 
proposed regulations, the overwhelming majority of which were in 
support of the rules in the proposed regulations, including the 
affordability test for related individuals that is based on the cost of 
family coverage offered to the related individuals. Many commenters 
recounted personal stories of family members being uninsured due to the 
unaffordability of family coverage offered by an employer and the 
unavailability of a PTC for Exchange coverage. One married couple even 
testified to a state legislature that they divorced solely to retain 
the husband's eligibility for the PTC after his wife got a new job with 
an offer of family coverage at a cost of $16,000, over half of the 
husband's annual earnings.\7\ Some commenters made the point that an 
affordability test for related individuals that is based on the cost of 
the coverage offered to the employee and related individuals is family-
friendly because it is more likely to provide all family members with 
access to affordable coverage. Many commenters agreed with the analysis 
in the preamble to the proposed regulations that the language of 
section 36B(c)(2)(C)(i) is best interpreted to require a separate 
affordability determination for related individuals that is based on 
the employee's cost to cover the employee and related individuals 
rather than a single affordability determination for both employees and 
related individuals that is based on the cost of self-only coverage to 
employees, and provided persuasive legal support for this position. 
Commenters also overwhelmingly supported the minimum value rules 
provided in the proposed regulations and agreed that a failure to 
provide a separate minimum value rule for related individuals could 
undermine the separate affordability rule for related individuals.
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    \7\ See https://legislature.maine.gov/legis/bills/getTestimonyDoc.asp?id=161949.
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    Other commenters expressed the view that the separate affordability 
test and minimum value rule for related individuals in the proposed 
regulations are contrary to the language of section 36B, and that the 
Treasury Department and the IRS do not have the authority to change 
those rules. Several of these commenters provided legal analyses in 
support of their position as well as policy arguments against the 
proposed affordability test and minimum value rule for related 
individuals. For reasons explained in sections II and III of this 
Summary of Comments and Explanation of Revisions, the Treasury 
Department and the IRS are not persuaded by these arguments.
    Some commenters suggested that the Treasury Department and the IRS 
adopt various changes to the rules in the proposed regulations. Other 
commenters requested outreach by HHS, the Treasury Department, and the 
IRS to educate individuals, employers, and other stakeholders about the 
final regulations once they are issued. Several commenters requested 
clarification on certain issues related to employers, including 
information reporting requirements under section 6056 of the Code and 
the effect of the final regulations on individuals enrolled in non-
calendar year plans. These comments are addressed in sections IV, V, 
and VI of the Summary of Comments and Explanation of Revisions.
    Finally, many commenters supported the minimum value rule in the 
proposed regulations under which an eligible employer-sponsored plan 
would provide minimum value to an employee only if, in addition to 
covering at least 60 percent of the total allowed costs of benefits 
provided to an employee under the plan, the plan's benefits include 
substantial coverage of inpatient hospitalization services and 
physician services. In addition, many commenters supported the proposed 
amendment to Sec.  1.36B-3(d)(1)(i) to clarify that, in computing the 
PTC for a coverage month, a taxpayer's enrollment premiums for the 
month are the premiums for the month, reduced by any amounts that were 
refunded in the same taxable year the taxpayer incurred the premium 
liability. Because commenters supported these rules and did not request 
any modifications to them, both the proposed minimum value rule for 
employees related to inpatient hospitalization services and physician 
services and the proposed clarification of the premium refund rule are 
being finalized without change.

II. Comments on Legal Analysis

A. Statutory Analysis of Affordability Rule
    Under section 36B(c)(2)(C)(i)(II), an employee who does not enroll 
in employer coverage is not considered eligible for the coverage if 
``the employee's required contribution (within the meaning of section 
5000A(e)(1)(B)) with respect to the plan exceeds 9.5 percent of the 
applicable taxpayer's household income.'' The flush language following 
this provision provides that ``[t]his clause shall also apply to an 
individual who is eligible to enroll in the plan by reason of a 
relationship the individual bears to the employee.''
    As discussed in the preamble to the proposed regulations, the flush 
language in section 36B(c)(2)(C)(i) does not state clearly and 
expressly how section 36B(c)(2)(C)(i)(II) applies to related 
individuals or how the cross-reference to section 5000A(e)(1)(B) 
applies to coverage for related individuals. Section 5000A(e)(1)(B)(i) 
provides that, for an

[[Page 61982]]

employee eligible to purchase employer coverage, the term ``required 
contribution'' means ``the portion of the annual premium which would be 
paid by the individual . . . for self-only coverage.'' For related 
individuals, the definition of ``required contribution'' in section 
5000A(e)(1)(B)(i) is modified by a ``special rule'' in section 
5000A(e)(1)(C). Section 5000A(e)(1)(C) provides that ``[f]or purposes 
of [section 5000A(e)(1)](B)(i), if an applicable individual is eligible 
for minimum essential coverage through an employer by reason of a 
relationship to an employee, the determination under [section 
5000(e)(1)(A)] shall be made by reference to [the] required 
contribution of the employee.'' The regulations under section 5000A 
interpret section 5000A(e)(1)(C) as modifying the required contribution 
rule in section 5000A(e)(1)(B)(i) for coverage for a related individual 
to provide that the determination under section 5000A(e)(1)(A) is made 
by reference to the required contribution of the employee for coverage 
for the employee and that related individual. Specifically, for related 
individuals, Sec.  1.5000A-3(e)(3)(ii)(B) provides that the required 
contribution for related individuals is the amount an employee must pay 
to cover the employee and all related individuals who are included in 
the employee's family.\8\ This long-standing rule under section 5000A 
was proposed in February 2013 \9\ and did not generate any critical 
comments. The proposed rule was finalized without change in August 2013 
\10\ and has never been challenged.
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    \8\ For purposes of this exemption for unaffordable coverage, an 
employee or related individual who is otherwise exempt under Sec.  
1.5000A-3 is not included in determining the required contribution.
    \9\ REG-148500-12 (78 FR 7314).
    \10\ TD 9632 (78 FR 53646).
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    Similar to the regulations implementing section 5000A, the proposed 
regulations provided an affordability rule for related individuals for 
section 36B purposes that looks to the cost of coverage for the 
employee and related individuals and is separate from the affordability 
rule for employees of the employer offering the coverage. Under the 
proposed regulations, affordability for related individuals would be 
based on the portion of the annual premium the employee must pay for 
coverage of the employee and all other individuals included in the 
employee's family, within the meaning of Sec.  1.36B-1(d), who are 
offered the coverage.
    Some commenters expressed the view that the affordability rule in 
the proposed regulations conflicts with the language in section 36B, 
that the 2013 affordability rule is correct, and that the affordability 
rule for related individuals in the proposed regulations should be 
withdrawn. These commenters argued that section 36B unambiguously 
establishes a single affordability test for both employees and related 
individuals that is based on the cost of self-only coverage to the 
employee. As explained later in this section II.A. of the Summary of 
Comments and Explanation of Revisions, however, the proposed rule's 
approach represents the better reading of the statute and the better 
means of implementing it. After careful consideration, the Treasury 
Department and the IRS are adopting the affordability test as proposed.
    The Treasury Department and the IRS are of the view that section 
36B(c)(2)(C)(i), including the flush language that follows section 
36B(c)(2)(C)(i)(II), is correctly interpreted to provide that the 
affordability test for a related individual is based on the cost of 
coverage for the employee and the related individual. The flush 
language provides as follows: ``[t]his clause shall also apply to a 
[related individual].'' Thus, taking into account the flush language, 
section 36B(c)(2)(C)(i) may be read to apply to a related individual as 
follows:

    [A related individual] shall not be treated as eligible for 
minimum essential coverage if such coverage (I) consists of an 
eligible employer-sponsored plan [ ], and (II) the employee's \11\ 
required contribution (within the meaning of section 5000A(e)(1)(B)) 
with respect to the plan exceeds 9.5 percent of the applicable 
taxpayer's household income.
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    \11\ The term ``employee'' would not be replaced with ``related 
individual'' here because it is the employee who makes contributions 
(through salary reduction or otherwise) to pay for employer 
coverage, even if the employer coverage includes family members of 
the employee.

    This language includes four references to the coverage provided by 
the employee's employer: ``minimum essential coverage,'' ``such 
coverage,'' ``eligible employer-sponsored plan,'' and ``the plan.'' 
Without question, ``such coverage'' refers to the minimum essential 
coverage offered by the employee's employer to the related individual, 
as do references to ``employer-sponsored plan'' and ``the plan.'' 
Unless a related individual is also employed by that employer, the 
related individual may not enroll in the employer's coverage on a self-
only basis. Thus, the minimum essential coverage referred to in section 
36B(c)(2)(C)(i), as it applies to related individuals, is the coverage 
the related individual may enroll in, which is the family coverage 
offered by the employer. Under this reading, the reference to ``the 
employee's required contribution . . . with respect to the plan'' is 
the required contribution for family coverage.
    This reading gives full effect to section 36B(c)(2)(C)(i)(II)'s 
cross reference to section 5000A(e)(1)(B). As noted earlier in this 
section II.A of the Summary of Comments and Explanation of Revisions, 
section 36B(c)(2)(C)(i) specifies rules to determine the affordability 
of coverage under an eligible employer-sponsored plan both for an 
employee and for related individuals. Taken in isolation, section 
5000A(e)(1)(B) would specify a rule for determining the affordability 
of a required contribution only with respect to coverage for an 
employee, even though the flush language in section 36B(c)(2)(C)(i) 
requires a calculation to be performed for related individuals as well. 
Section 5000A(e)(1)(C) provides a rule for that calculation by 
specifying a ``special rule'' for purposes of the calculation of the 
employee's required contribution for coverage that includes the related 
individual. As explained earlier in this section II.A. of the Summary 
of Comments and Explanation of Revisions, the Treasury Department and 
the IRS have long understood section 5000A(e)(1)(C) in this way. See 
Sec.  1.5000A-3(e)(3)(ii)(B), promulgated in 2013.
    As noted in section I of this Summary of Comments and Explanation 
of Revisions, the vast majority of commenters supported the proposed 
affordability rule for related individuals, and several of these 
commenters provided detailed technical analyses in support of this 
interpretation of the statute. Some of those commenters argued that 
section 36B unambiguously establishes a separate affordability test for 
related individuals that is based on the cost of family coverage. For 
example, one commenter asserted that the proposed affordability rule 
for related individuals follows the plain language of the statute and 
that section 5000A(c)(1)(C) states on its face that it must be read 
into 5000A(c)(1)(B). Another commenter argued that the plain text of 
the statute indicates that a related individual's eligibility for the 
PTC is based on the cost of family coverage and that the affordability 
rule in the 2013 regulations reflected a strained reading of the 
statute. One commenter supported the proposed affordability rule for 
related individuals but disagreed that the rule adopts an 
``alternative'' reading of the statute. Instead, the commenter opined 
that the interpretation in the proposed regulations is correct and that 
the affordability rule in the 2013 regulations

[[Page 61983]]

reflected an erroneous interpretation of the ACA. Finally, one 
commenter stated that the 2013 regulations implementing section 36B 
badly misinterpret the statute and that section 36B mandates a family-
based affordability test. The commenter noted that if Congress had 
intended a self-only test, it would have mandated that coverage be 
deemed affordable for a related family member so long as the employee 
can afford self-only coverage, rather than obliquely stating that the 
special rule applies to related family members as well.
    For reasons explained in section III of this Summary of Comments 
and Explanation of Revisions, the Treasury Department and the IRS have 
concluded that the affordability rule for related individuals in the 
proposed regulations, as finalized in these regulations, is the better 
reading of the statute and the better means of implementing the 
statute. Further, the Treasury Department and the IRS believe that the 
affordability rule in these final regulations is consistent with the 
goal of the ACA to provide access to affordable, quality health care 
for all Americans.\12\ Indeed, under the 2013 regulations, some family 
members of employees could not access any PTC for Exchange coverage 
even if their only offer of employer coverage was a family plan with 
exorbitant premiums (about 16% of income, on average),\13\ solely 
because the employee had access to affordable self-only coverage.
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    \12\ See H.R. Rep. No. 111-443 (2009).
    \13\ https://www.healthaffairs.org/doi/10.1377/hlthaff.2015.1491.
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    As explained earlier in this section II.A of the Summary of 
Comments and Explanation of Revisions, the Treasury Department and the 
IRS disagree with commenters who argued that section 36B unambiguously 
establishes a single affordability test for both employees and related 
individuals that is based on the cost of self-only coverage to the 
employee. Some of these commenters argued that, because section 
36B(c)(2)(C)(i)(II) does not cross-reference section 5000A(e)(1)(C) in 
defining the term ``required contribution,'' section 5000A(e)(1)(C) 
cannot be considered in determining whether a related individual has 
been offered affordable employer coverage for purposes of section 36B. 
One of those commenters also argued that, under the negative-
implication canon of statutory interpretation,\14\ the reference to 
section 5000A(e)(1)(A) in section 5000A(e)(1)(C) precludes the use of 
the rule in section 5000A(e)(1)(C) for other purposes, such as 
providing a rationale for an affordability test in section 36B for 
related individuals that is separate from the test for employees.
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    \14\ The negative-implication canon of construction--expressio 
unius est exclusio alterius--means the expression of one thing 
implies the exclusion of the other.
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    The Treasury Department and the IRS disagree. As noted in the 
Background section and earlier in this section II.A. of the Summary of 
Comments and Explanation of Revisions, the definition of ``required 
contribution'' in section 5000A(e)(1)(B)(i) is modified by a ``special 
rule'' in section 5000A(e)(1)(C) that is applicable to related 
individuals. Section 5000A(e)(1)(C) provides that ``[f]or purposes of 
[section 5000A(e)(1)](B)(i), if an applicable individual is eligible 
for minimum essential coverage through an employer by reason of a 
relationship to an employee, the determination under subparagraph (A) 
shall be made by reference to [the] required contribution of the 
employee.'' The regulations under section 5000A interpret section 
5000A(e)(1)(C) as modifying the required contribution rule in section 
5000A(e)(1)(B)(i) regarding coverage for related individuals to take 
into account the cost of covering the employee and the related 
individuals, not just the employee. Specifically, Sec.  1.5000A-
3(e)(3)(ii)(B) provides that the required contribution for related 
individuals is the amount an employee must pay to cover the employee 
and the related individuals who are included in the employee's 
family.\15\ Because section 5000A(e)(1)(C) begins with the language 
``[f]or purposes of [section 5000A(e)(1)](B)(i),'' the parenthetical 
cross reference in section 36B(c)(2)(C)(i)(II) to section 
5000A(e)(1)(B)(i) incorporates the special rule in section 
5000A(e)(1)(C) and modifies section 5000A(e)(1)(B)(i) when the coverage 
in question is for related individuals. Accordingly, a specific 
reference to section 5000A(e)(1)(C) in the flush language of section 
36B(c)(2)(C)(i) is not necessary to require the consideration of 
section 5000A(e)(1)(C) for determining whether coverage offered to 
related individuals is affordable under section 36B.
---------------------------------------------------------------------------

    \15\ For purposes of this exemption for unaffordable coverage, 
an employee or related individual who is otherwise exempt under 
Sec.  1.5000A-3 is not included in determining the required 
contribution.
---------------------------------------------------------------------------

    In addition, the Treasury Department and the IRS disagree that the 
negative-implication canon of statutory construction compels the 
conclusion that the reference to section 5000A(e)(1)(A) in section 
5000A(e)(1)(C) precludes the use of the rule in section 5000A(e)(1)(C) 
for section 36B purposes. As the Supreme Court has emphasized in 
numerous cases, the force of any negative implication depends on the 
context, and the negative-implication canon applies only when 
circumstances support a sensible inference that the term left out must 
have been meant to be excluded. See, for example, Chevron U.S.A. Inc. 
v. Echazabal, 536 U.S. 73, 81 (2002) (``The [negative-implication 
canon] is fine when it applies, but this case joins some others in 
showing when it does not.''); United States v. Vonn, 535 U.S. 55, 65 
(2002) (``At best, as we have said before, the [negative-implication 
canon] is only a guide, whose fallibility can be shown by contrary 
indications that adopting a particular rule or statute was probably not 
meant to signal any exclusion of its common relatives''); United 
Dominion Industries v. United States, 532 U.S. 822, 836 (2001) (``But 
here, as always, the soundness of the [negative-implication canon] is a 
function of timing''). \16\ See also Antonin Scalia & Bryan Garner, 
Reading Law: The Interpretation of Legal Texts 107 (2012), stating that 
the negative-implication canon ``must be applied with great caution 
since its application depends so much on context.'' Here, the context 
points in favor of not restricting the use of section 5000A(e)(1)(C) to 
the determination in 5000A(e)(1)(A). Instead, the context points in 
favor of reading the reference in section 36B(c)(2)(C)(i) to section 
5000A(e)(1)(B) as incorporating the modification of that subparagraph 
in section 5000A(e)(1)(C). This reading creates a clear and consistent 
rule for determining the affordability of coverage for related 
individuals for purposes of both section 36B and section 5000A. And, as 
explained earlier in this section II.A. of the Summary of Comments and

[[Page 61984]]

Explanation of Revisions, without incorporating section 5000A(e)(1)(C), 
the statute would point only to a calculation of affordability for the 
employee's coverage, even though section 36B requires a calculation of 
affordability for the related individuals as well.
---------------------------------------------------------------------------

    \16\ Notably, in U.S. Venture, Inc. v. United States, 2 F.4th 
1034 (7th Cir. 2021), the court rejected an argument by a taxpayer 
that the negative-implication canon of statutory interpretation 
required an outcome consistent with the taxpayer's interpretation of 
a provision of the Internal Revenue Code. The question considered by 
the court was whether a taxpayer's sale of a butane and gasoline mix 
qualified for the alternative fuel mixture credit in section 6426 of 
the Code. In discussing whether the sale of the butane and gasoline 
mix should qualify for the credit, the court rejected the taxpayer's 
argument that a specific cross reference in section 6426(e) to 
section 4083(a)(1) for the definition of a term in section 6426(e) 
forecloses using a third provision, section 4083(a)(2), to further 
illuminate the definition in section 4083(a)(1). The court 
``decline[d]'' the taxpayer's invitation ``to follow a 
congressionally mandated cross-reference only part of the way. 
Instead, we must accept and follow the cross-referenced definition 
in full.'' U.S. Venture, Inc., 2 F.4th at 1042. ``Whether the cross-
reference is to the individual sub-paragraphs or to the whole 
statute does not change the meaning that Congress chose to give 
``gasoline'' in Sec.  4083 and, consequently, in Sec.  6426(e).'' 
Id.
---------------------------------------------------------------------------

    Moreover, had Congress intended section 5000A(e)(1)(C) to apply 
only to the affordability determination under section 5000A, excluding 
all other provisions, it could have done so through explicit means, 
such as using the language ``solely for purposes of the determination 
under section 5000A(e)(1)(A).'' See, for example, section 
4980H(c)(2)(D) and section 4980H(c)(2)(E), also enacted under the ACA 
and which provide ``solely for purposes of'' limiting language. No such 
limiting language is included in section 5000A(e)(1)(C). More 
generally, had Congress intended a self-only affordability test for 
related individuals, it could have explicitly provided that coverage is 
affordable for a related individual so long as the employee is offered 
affordable self-only coverage. Congress did just that in 2016 when it 
enacted section 36B(c)(4), relating to the affordability of employer 
coverage under a qualified small employer health reimbursement 
arrangement (QSEHRA).
    Under section 36B(c)(4)(A), a PTC is not allowed for a month for 
the Exchange coverage of ``an employee (or any spouse or dependent of 
such employee) if for such month the employee is provided a [QSEHRA] 
which constitutes affordable coverage.'' A QSEHRA is affordable for a 
month if the excess of (1) the monthly premium for the second lowest 
cost silver plan for self-only coverage of the employee offered in the 
Exchange for the rating area in which the employee resides, over (2) 1/
12 of the employee's permitted benefit (as defined in section 
9831(d)(3)(C)) under the QSEHRA, does not exceed 1/12 of 9.5 percent of 
the employee's household income.
    In contrast to the language in section 36B(c)(2)(C)(i)(II), section 
36B(c)(4)(A) does not reference section 5000A(e)(1)(B) for the QSEHRA 
affordability determination or provide that ``this clause shall also 
apply'' to a related individual. Instead, it provides the same 
affordability rule for both employees and related individuals by 
stating that affordability for coverage under a QSEHRA for ``an 
employee (or any spouse or dependent of such employee)'' is based on 
the cost of self-only coverage of the employee. That is far different 
from the language in section 36B(c)(2)(C)(i)(II) and, therefore, it is 
reasonable to conclude that the affordability rule in section 
36B(c)(2)(C)(i)(II) for related individuals is not the same as the 
affordability rule for related individuals in section 36B(c)(4)(A).
    Additionally, the structure and context of sections 36B and 5000A 
suggest that Congress did not intend to preclude the use of section 
5000A(e)(1)(C) in determining the affordability of employer coverage 
for related individuals for purposes of PTC eligibility under section 
36B. Foremost, when the coverage in question is for related 
individuals, section 36B(c)(2)(C)(i)(II) specifically refers to the 
definition of required contribution in section 5000A(e)(1)(B)(i), and 
section 5000A in turn specifically incorporates the special rule in 
section 5000A(e)(1)(C) ``for purposes of'' section 5000A(e)(1)(B)(i). 
Under this statutory structure, a specific reference to section 
5000A(e)(1)(C) in the flush language of section 36B(c)(2)(C)(i) is not 
necessary to require the consideration of section 5000A(e)(1)(C) in 
determining affordability for related individuals for section 36B 
purposes. This consideration of section 5000A(e)(1)(C) is particularly 
sensible given the flush language in section 36B(c)(2)(C)(i)(II). That 
is, the flush language evinces Congress's intent to provide an 
affordability rule for related individuals. Given that there are 
numerous cross references in section 36B to section 5000A and that 
section 5000A confronts a similar situation relating to affordability 
for related individuals that is resolved through section 
5000A(e)(1)(C), it is logical to consider section 5000A(e)(1)(C) for 
purposes of the affordability rule for related individuals under 
section 36B. Finally, using the rule in section 5000A(e)(1)(C) in 
determining the affordability of employer coverage for related 
individuals for section 36B purposes supports the goal of the ACA to 
provide affordable, quality health care for all Americans. See H.R. 
Rep. No. 111-443 (2009).
B. Consistency Between the Affordability Rules of Sections 36B and 
5000A
    The preamble to the proposed regulations noted that the proposed 
affordability rule under section 36B would create greater consistency 
between the section 36B affordability rules and the rules in section 
5000A used to determine whether an individual is exempt from the 
individual shared responsibility payment under section 5000A because 
employer coverage is unaffordable. With the finalization of the 
proposed section 36B affordability rule in these final regulations, 
both rules provide that affordability for employees is based on the 
employee's cost for self-only coverage and that affordability for 
family members is generally based on the amount an employee must pay to 
cover the employee and the related individuals included in the 
employee's family. Thus, these final regulations promote consistency 
between these two affordability rules.
    One commenter argued that Congress did not intend the affordability 
rules of section 36B and section 5000A to be consistent, suggesting 
that it instead sought to make it easier for a taxpayer to avoid a 
section 5000A individual shared responsibility payment for a related 
individual than to qualify for a PTC for such individual. In other 
words, the commenter seems to be suggesting that Congress's intent was 
to make it easier to go without health insurance coverage than to 
qualify for subsidized Exchange coverage. However, the commenter does 
not point to any evidence of this beyond the assertion that the 
statutory text compels this result. As explained above, the Treasury 
Department and the IRS disagree with the commenter's reading of the 
statutory text. The commenter's argument also ignores Congress's 
broader goal of expanding access to affordable health insurance 
coverage through the ACA, which goal is advanced by the affordability 
rule for related individuals in these final regulations.
C. Legislative History of ACA
    One commenter also argued that the legislative history underlying 
the ACA shows that Congress intended that the rule for affordability of 
employer coverage for family members be the same as the affordability 
rule for employees and that both determinations are intended to be 
based on the cost of self-only coverage to the employee. The argument 
is that S. 1796, the America's Healthy Future Act of 2009 \17\ (one of 
the Senate bills that became the ACA through consolidation with another 
bill \18\ and amendment), as introduced, based the determination of the 
affordability of employer-sponsored coverage on the employee's required 
contribution, as defined by (what was in that version of the bill) 
section 5000A(e)(2), which would have set affordability tests for both 
self-only and family coverage.
---------------------------------------------------------------------------

    \17\ 111th Congress (2009).
    \18\ H.R. 3590, 111th Congress (2009).
---------------------------------------------------------------------------

    The commenter further argued that, when the bill that became the 
ACA was introduced on the Senate floor, it altered

[[Page 61985]]

the language of S. 1796 to reflect the language currently in the 
statute, in which the required contribution is described as ``within 
the meaning of section 5000A(e)(1)(B).'' In the commenter's view, this 
change demonstrates that the required contribution rule in section 
5000A(e)(1)(C) does not apply to the section 36B affordability test for 
related individuals. The commenter asserted that the proposed 
regulations fail to consider the changes to S. 1796 because the 
affordability test under the proposed regulations reflects exactly how 
the required contribution for related individuals would have been 
determined had these changes not been made.
    The Treasury Department and the IRS disagree that the change in 
legislative language on the Senate floor described by the commenter 
indicates that Congress intended that affordability for related 
individuals must be based on the cost of self-only coverage to the 
employee. At the same time that the legislative sponsors added the 
language to section 36B that cross-references section 5000A(e)(1)(B), 
they also added the introductory phrase to section 5000A(e)(1)(C) 
clarifying that that subparagraph applies ``for purposes of'' 
subparagraph (e)(1)(B). The fact that the legislative sponsors made 
both of these changes at the same time indicates that they understood 
that section 36B would incorporate both subparagraphs into its 
affordability rule. Moreover, as noted by a number of commenters 
supportive of the proposed regulations, had Congress intended an 
identical affordability rule for employees and related individuals, the 
flush language in section 36B(c)(2)(C)(i) would not have been 
necessary. For example, Congress could simply have stated that 
affordability for an employee (or any spouse or dependent of such 
employee) is based on the cost of self-only coverage of the employee. 
Indeed, as explained in section II.A. of this Summary of Comments and 
Explanation of Revisions, Congress did exactly that when it enacted the 
affordability rules for QSEHRAs in section 36B(c)(2)(4). That, however, 
is not the direction that Congress chose to take with its changes to S. 
1796. Instead, Congress enacted two rules, one for employees and one 
for related individuals. Consequently, it is reasonable to conclude 
that Congress's use of separate rules for employees and related 
individuals indicates an intent to provide separate tests for an 
employee, based on the cost of self-only coverage to the employee, and 
for related individuals, based on the cost of the coverage for the 
employee and those related individuals.
D. Legislative Proposals To Change Affordability Rule
    Several commenters also argued that a change to the affordability 
rule for related individuals should be accomplished by legislative 
action, rather than regulatory action. They argued that, despite 
requests to amend section 36B to provide that affordability of employer 
coverage for related individuals is based on the employee's cost for 
family coverage, Congress has not amended section 36B to specifically 
command this result. In addition, they noted that Congress has included 
language in various bills to amend the affordability rule, but the 
proposed legislation has not been enacted. The commenters asserted that 
this Congressional inaction means that the Treasury Department and the 
IRS are not empowered to issue regulations to address a matter that 
Congress acknowledges must be addressed in legislation.
    Although the commenters are correct that members of Congress have 
included language in various bills to address the section 36B 
affordability rule in section 36B(c)(2)(C)(i), the introduction of 
proposed legislation is not an acknowledgement by Congress that the 
section 36B affordability test for related individuals must be 
addressed in legislation and not by regulation. As the Supreme Court 
has emphasized, ``failed legislative proposals are a particularly 
dangerous ground on which to rest an interpretation of a prior statute 
[internal quotations omitted] . . . Congressional inaction lacks 
persuasive significance because several equally tenable inferences may 
be drawn from that inaction, including the inference that the existing 
legislation already incorporated the offered change.'' Central Bank of 
Denver, N.A. v. First Interstate Bank of Denver, N.A., 511 U.S. 164, 
187 (1994) (quoting Pension Benefit Guaranty Corporation v. LTV Corp., 
496 U.S. 633, 650 (1990)). Here, for instance, it is possible that 
legislative proposals were introduced not because of insufficient 
language in the ACA, but because members of Congress believed that the 
2013 regulations had incorrectly interpreted the existing language of 
the ACA. Although Congress may not have enacted legislation 
specifically and unequivocally mandating the approach taken in these 
final regulations, the Treasury Department and the IRS have determined 
that existing section 36B(c)(2)(C)(i) is better interpreted to require 
separate affordability determinations for employees and for family 
members, as set forth in Sec.  1.36B-2(c)(3)(v)(A)(2) of these final 
regulations.
E. Interpretation of Joint Committee on Taxation Report
    In a footnote in the preamble to the proposed regulations, the 
Treasury Department and the IRS observed that in the Joint Committee on 
Taxation report, Technical Explanation of the Revenue Provisions of the 
''Reconciliation Act of 2010,'' as amended, in combination with the 
``Patient Protection and Affordable Care Act,'' (JCX-18-10), March 21, 
2010 (JCT report), the staff of the Joint Committee on Taxation (Joint 
Committee staff) initially explained that ``[u]naffordable is defined 
as coverage with a premium required to be paid by the employee that is 
9.5 percent or more of the employee's household income, based on the 
type of coverage applicable (e.g., individual or family coverage).'' 
The Joint Committee staff later revised the quoted language, after the 
enactment of the ACA, to state that ``[u]naffordable is defined as 
coverage with a premium required to be paid by the employee that is 9.5 
percent or more of the employee's household income, based on self-only 
coverage.'' ERRATA for JCX-18-10, (JCX-27-10), May 4, 2010 (May 2010 
Errata).
    A few commenters expressed the view that the original JCT report 
was in error and should not be viewed as evidence that the statutory 
language in section 36B(c)(2)(C)(i)(II) supports a separate 
affordability rule based on the cost of family coverage; these 
commenters noted that the May 2010 Errata corrected the error. The 
Treasury Department and the IRS acknowledge that the Joint Committee 
staff characterized the May 2010 Errata as a correction of an error but 
disagree with the commenters as to the relevance of that observation. 
The May 2010 Errata was not before Congress at the time that the ACA 
was enacted in March 2010. In any event, neither the JCT report nor the 
May 2010 Errata is considered part of the legislative history, and 
neither is dispositive of any particular statutory interpretation.
F. Relevance of Section 18081
    The preamble to the proposed regulations noted that the proposed 
regulations would promote consistency between the affordability rules 
in sections 36B and 5000A and the rule in 42 U.S.C. 18081(b)(4)(C) 
(section 18081(b)(4)(C)). Section 18081(b)(4)(C) relates to information 
that a QHP enrollee must provide as part of the enrollee's QHP 
application if the

[[Page 61986]]

enrollee wants to be determined eligible for advance payments of the 
PTC (APTC) or cost-sharing reductions. Under section 18081(b)(4)(C), if 
an employer offers minimum essential coverage to an individual seeking 
to enroll in a QHP, and the individual asserts that the offer does not 
preclude the individual from qualifying for APTC or cost-sharing 
reductions because it is not affordable, the QHP applicant must provide 
to the Exchange information on ``the lowest cost option for the 
enrollee's or [related] individual's enrollment status and the 
enrollee's or [related] individual's required contribution (within the 
meaning of section 5000A(e)(1)(B) of title 26) under the employer-
sponsored plan.''
    Certain commenters opined that they saw no inconsistency between 
the 2013 affordability rule under section 36B, the affordability rule 
under section 5000A, and the QHP applicant information rule in section 
18081(b)(4)(C). One commenter stated that section 18081(b)(4)(C), by 
referencing section 5000A(e)(1)(B), merely instructs Exchanges to 
determine ``the portion of the annual premium which would be paid by 
the individual . . . for self-only coverage'' under the employer-
sponsored plan. Another commenter argued that section 18081(b)(4)(C), 
by using the term ``or'' and not ``and,'' requires the submission of 
information on the required contribution solely for the employee who is 
offered employer coverage, meaning the individual who would pay the 
required contribution, but that the individual enrolling in the QHP 
could be the employee or someone related to the employee. This 
commenter further argued that in either case, the only information 
required by section 18081(b)(4)(C) is the lowest cost option for self-
only coverage and the required contribution for the applicable 
employee.
    The Treasury Department and the IRS agree with the commenter who 
noted that section 18081(b)(4)(C) requires the submission of 
information on the required contribution solely for the employee who is 
offered employer coverage and that the individual enrolling in the QHP 
could be the employee or someone related to the employee. However, the 
Treasury Department and the IRS disagree with the conclusion of both 
commenters that section 18081(b)(4)(C) requires Exchanges to collect 
information on only the portion of the annual premium that would be 
paid by the employee for self-only coverage under the employer-
sponsored plan.
    Section 18081 requires Exchanges to collect information from 
enrollees who are offered coverage under an employer plan on ``the 
lowest cost option'' that the employee, whether the enrollee or an 
individual related to the enrollee, must contribute for the employee's 
or individual's enrollment status. The language ``lowest cost option 
for the . . . enrollment status'' indicates that the amount may vary 
depending on whether the employee's enrollment status would be for 
self-only or family coverage. Otherwise, section 18081(b)(4)(C) would 
refer to ``the lowest cost option for the enrollee for self-only 
coverage.'' Thus, the Treasury Department and the IRS are of the view 
that the amendment to Sec.  1.36B-2(c)(3)(v)(A)(2) in these final 
regulations and the similar affordability rule in Sec.  1.5000A-
3(e)(3)(ii)(B) are consistent with the QHP applicant information rule 
in section 18081(b)(4)(C).
G. Coordination With Section 4980H
    One commenter asserted that the framework of section 4980H supports 
the view that a separate affordability test under section 36B for 
related individuals is not warranted. Section 4980H provides that an 
applicable large employer (ALE) generally must offer coverage to full-
time employees and their dependents or potentially be subject to an 
employer shared responsibility payment. As the commenter noted, 
although ALEs are required to offer coverage to full-time employees and 
dependents, only the coverage offered to the full-time employees is 
required to be affordable. There is no comparable affordability rule 
for the coverage offered to dependents. In addition, an employer's 
obligation to make a payment under section 4980H is triggered only when 
a full-time employee is allowed a PTC.
    The commenter stated that the affordability of self-only coverage 
is the key determinant in whether an employer of a full-time employee 
must make a section 4980H payment and in whether the full-time employee 
and his or her dependents are allowed a PTC. The commenter argued that 
this framework shows Congress's intent that section 36B and section 
4980H have just one affordability test based on the cost of self-only 
coverage to the employee and that providing an affordability test for 
related individuals based on the cost of family coverage is not 
consistent with that framework.
    The Treasury Department and the IRS disagree. Section 36B and 
section 4980H apply to different types of taxpayers and have different 
purposes. Section 36B provides a PTC to taxpayers and their families 
who meet certain requirements, one of which is that they are not 
eligible for affordable, minimum value coverage from their employer. 
The amount of the PTC is determined based on family size and household 
income, among other factors, in recognition of the fact that 
affordability of coverage depends on the cost to the family. The PTC is 
integral to ensuring that individuals and their families can access 
affordable coverage through an Exchange. In contrast, section 4980H 
imposes a payment on ALEs if they fail to offer minimum essential 
coverage to their full-time employees and their dependents, and at 
least one full-time employee is allowed a PTC. Section 4980H does not 
require that employer coverage be offered to an employee's spouse, and 
it does not require that any coverage offered to spouses or dependents 
be affordable. Further, employers do not owe a payment under section 
4980H if a PTC is allowed for an employee's spouse or dependent. The 
purpose of this provision is to ensure that large employers share 
responsibility under the ACA for providing affordable health coverage 
to employees, but this responsibility does not extend to affordable 
coverage for spouses or dependents. Given these differing purposes, 
there is nothing in this framework that suggests Congress intended for 
section 36B and section 4980H to have a single affordability test based 
on the cost of self-only coverage to the employee.
    In addition, the goal of the ACA is to provide affordable, quality 
health care for all Americans,\19\ not just to full-time employees of 
ALEs, and these final regulations further that goal. In light of that 
goal, and contrary to the suggestion of the commenter, the lack of any 
requirement under section 4980H for ALEs to offer affordable coverage 
to family members of employees indicates that a PTC should be allowed 
for family members offered unaffordable coverage.
---------------------------------------------------------------------------

    \19\ See H.R. Rep. No. 111-443 (2009).
---------------------------------------------------------------------------

H. Minimum Value Rule
    As noted in the Background section of this preamble, an employee 
generally is not treated as eligible for coverage under an eligible 
employer-sponsored plan unless the coverage provides minimum value, as 
defined in section 36B(c)(2)(C)(ii). Under section 36B(c)(2)(C)(ii) and 
Sec.  1.36B-6(a)(1), an eligible employer-sponsored plan provides 
minimum value if the plan's share of the total allowed costs of 
benefits provided to an employee is at least 60 percent, regardless of 
the total allowed costs of benefits.
    The proposed regulations provided a minimum value rule for related

[[Page 61987]]

individuals that is based on the plan's share of the total allowed cost 
of benefits provided to the related individuals. Under the proposed 
regulations, an eligible employer-sponsored plan satisfies the minimum 
value requirement for related individuals only if the plan's share of 
the total allowed costs of benefits provided to related individuals is 
at least 60 percent, similar to the existing rule in Sec.  1.36B-
6(a)(1) for employees.
    The vast majority of commenters supported the separate minimum 
value rule for related individuals in the proposed regulations. 
However, two commenters stated that the minimum value requirement in 
section 36B applies only to employees and that the Treasury Department 
and the IRS have no authority to provide a minimum value rule for 
related individuals. In the view of these commenters, related 
individuals are eligible for employer coverage if the coverage is 
affordable, even if the plan's share of the total allowed costs of 
benefits provided to related individuals is below 60 percent. This 
approach, however, is contrary to the approach taken in current Sec.  
1.36B-2(c)(3)(i)(A), which was promulgated in final regulations in 
2012. See TD 9590 (77 FR 30377). Section 1.36B-2(c)(3)(i)(A) clarifies 
that there is a minimum value requirement for both employees and 
related individuals, stating that ``an employee who may enroll in an 
eligible employer-sponsored plan . . . that is minimum essential 
coverage, and an individual who may enroll in the plan because of a 
relationship to the employee (a related individual), are eligible for 
minimum essential coverage under the plan for any month only if the 
plan is affordable and provides minimum value.'' Under this long-
standing rule, a related individual who receives an offer of employer 
coverage that does not provide minimum value is deemed to be ineligible 
for the coverage, and a PTC may be allowed for the related individual 
provided that the related individual does not enroll in the coverage. 
The proposed regulations did not propose to revisit this long-standing 
rule.
    Further, as stated in the preamble to the proposed regulations, 
without a separate minimum value rule for related individuals based on 
the costs of benefits provided to related individuals, a PTC would not 
be allowed for a related individual offered coverage under a plan that 
was affordable but provided minimum value only to employees and not to 
related individuals. This outcome would diminish the benefit a related 
individual would derive from the amendment of the affordability rule 
for related individuals. That is, the affordability of employer 
coverage for related individuals would be based on the employee's cost 
of covering the related individuals, but there would be no assurance 
that the affordable coverage offered to the related individuals 
provided a minimum value of benefits to the related individuals.
    Moreover, as described by commenters supportive of the minimum 
value rule for related individuals, it is extremely rare for an 
employer plan to provide a different level of coverage for family 
members than the coverage level provided to the employee enrolled in 
the plan. This is because most employers that offer multiple benefits 
packages offer family coverage on the condition that the employee and 
the employee's family must enroll in the same benefits package, which 
will then have the same minimum value for the entire family. Thus, if 
an employer plan offered to employees provides minimum value, and that 
plan is also offered to related individuals, the plan generally will 
also provide minimum value to the family members. Nevertheless, because 
the lack of a separate minimum value rule for related individuals would 
be inconsistent with the goals of the ACA in providing comprehensive 
health coverage and improving access to quality and affordable health 
care, the final regulations provide that an eligible employer-sponsored 
plan provides minimum value for related individuals only if the plan's 
share of the total allowed costs of benefits provided to related 
individuals is at least 60 percent and the plan benefits include 
substantial coverage of inpatient hospital services and physician 
services.

III. Rationale for Change

    At the time that the Treasury Department and the IRS promulgated 
the 2013 regulations, limited information was available to model the 
effects of an affordability rule for related individuals based on the 
cost of family coverage. In the years since the 2013 regulations became 
effective in 2014, however, the Treasury Department and the IRS have 
learned more about how the ACA is affecting individuals, families, 
employers, group health plans, health insurance markets, and other 
stakeholders. For example, in 2017, the Congressional Budget Office 
(CBO) determined that 2010 reports by CBO and JCT on the budgetary 
effects of the ACA dramatically overstated the cost of the PTC.\20\ In 
the 2017 report, the CBO noted that, to a great extent, the differences 
arose because actual results deviated from the agencies' expectations 
about how the economy would change and how people and employers would 
respond to the law, and that, to a lesser extent, the differences were 
caused by judicial decisions, statutory changes, and administrative 
actions that followed the ACA's enactment.
---------------------------------------------------------------------------

    \20\ See https://www.cbo.gov/system/files/115th-congress-2017-2018/reports/53094-acaprojections.pdf.
---------------------------------------------------------------------------

    Despite the initial uncertainty about the ACA's effects, there has 
been substantial progress over the past several years toward meeting 
the goal of the ACA to give all Americans the opportunity to enroll in 
comprehensive health insurance at an affordable price. For individuals 
who were previously uninsured, the ACA expanded eligibility for 
Medicaid and created new Exchanges for eligible individuals to purchase 
QHPs subsidized by the PTC. Research has shown that these policies 
increased access to affordable health insurance and helped reduce the 
share of the population that was uninsured.\21\
---------------------------------------------------------------------------

    \21\ https://onlinelibrary.wiley.com/doi/epdf/10.1002/pam.22158.
---------------------------------------------------------------------------

    Despite this progress, roughly 26 million people still lack health 
insurance coverage. About 8 percent of the population is still 
uninsured.\22\ Because these people without health coverage face large, 
unpredictable bills when they seek medical care, many forgo necessary 
treatments. The key challenge for these families in obtaining coverage 
is the cost of coverage. According to the National Health Interview 
Survey, nearly 75 percent of uninsured adults reported the main reason 
they were uninsured was because the coverage options available to them 
were not affordable.\23\ Additionally, millions of adults reported that 
in order to save money, they did not get needed medical care or take 
medication as prescribed.\24\
---------------------------------------------------------------------------

    \22\ https://aspe.hhs.gov/reports/2022-uninsurance-at-all-time-low.
    \23\ https://www.cdc.gov/nchs/data/databriefs/db382-H.pdf.
    \24\ https://www.cdc.gov/nchs/data/nhis/earlyrelease/earlyrelease202204.pdf.
---------------------------------------------------------------------------

    Premium costs are particularly challenging for families enrolling 
in employer coverage. Since the 2013 regulations were promulgated, the 
average annual employee contribution for family coverage has increased 
by over 30 percent--a growth rate that is nearly double the rate at 
which the Consumer Price Index increased over the same period.\25\ In 
2021, the average

[[Page 61988]]

annual employee contribution for a family plan offered by the employer 
was $5,969. Contributions were even higher for employees at small firms 
who faced an average cost of $7,710. Roughly 12 percent of workers 
offered health coverage would have had to pay over $10,000 to cover 
their entire family.\26\ Under the 2013 regulations, these families are 
not eligible for the PTC if the self-only coverage offer is affordable, 
even if the cost of family coverage exceeds their annual income. 
Without access to affordable coverage from either their employer or the 
Exchange, some low- and middle-income families are unable to obtain 
coverage and must go uninsured.
---------------------------------------------------------------------------

    \25\ https://www.bls.gov/cpi/data.htm.
    \26\ https://www.kff.org/health-costs/report/2021-employer-health-benefits-survey/.
---------------------------------------------------------------------------

    For families that can afford employer coverage, the coverage is 
sometimes of limited value because of high levels of cost-sharing. In 
2020, roughly 90 percent of employer plans had a deductible.\27\ Among 
family plans offered by employers with a deductible, the average amount 
of the deductible was roughly $3,722. After families reach their 
deductible, they are usually liable for co-insurance or co-payments 
until they hit their out-of-pocket maximum. For 2020, the average out-
of-pocket maximum for a family plan offered by employers was $8,867. 
There is also clear evidence that high levels of cost-sharing can 
restrict access to necessary medical care and lead to adverse health 
outcomes.\28\
---------------------------------------------------------------------------

    \27\ https://www.meps.ahrq.gov/data_files/publications/cb25/cb25.pdf.
    \28\ https://academic.oup.com/qje/article-abstract/132/3/1261/3769421;
    https://www.nber.org/papers/w28439.
---------------------------------------------------------------------------

    Thus, although the ACA has succeeded in providing affordable health 
care to millions of Americans, some still cannot afford coverage. With 
increasingly higher premiums and out-of-pocket costs, the cost of 
family coverage offered by employers has become particularly 
unaffordable for some employees' family members. The self-only 
affordability rule for related individuals in the 2013 regulations 
exacerbates that problem. Although the Treasury Department and the IRS 
could speculate in 2010-2013 that the self-only affordability rule 
might adversely affect certain families, the data and subsequent 
analysis have now borne out those adverse effects.
    In addition to the data provided in the studies cited above, 
numerous health care advocates have written articles over the years 
describing the adverse effects of the 2013 affordability rule and 
recommending a rule change.\29\ Most recently, the proposed regulations 
themselves generated over 3,800 comments in support of the proposed 
rule. As noted earlier in this preamble, many of these commenters 
recounted personal stories of family members being uninsured due to the 
unaffordability of family coverage offered by an employer and the 
unavailability of a PTC for Exchange coverage. Finally, individuals 
have shared stories in other forums regarding the negative impact of 
the 2013 affordability rule on their lives. For example, one married 
couple testified to a state legislature that they divorced solely to 
retain the husband's eligibility for the PTC after his wife got a new 
job with an offer of family coverage at a cost of $16,000, over half of 
the husband's annual earnings.\30\
---------------------------------------------------------------------------

    \29\ See, for example, Trapped by the Firewall: Policy Changes 
Are Needed to Improve Health Coverage for Low-Income Workers 
[verbar] Center on Budget and Policy Priorities (cbpp.org); https:/
www.healthaffairs.org/do/10.1377/forefront.20210520.564880/.
    \30\ See https://legislature.maine.gov/legis/bills/getTestimonyDoc.asp?id=161949.
---------------------------------------------------------------------------

    Consistent with E.O. 14009, issued in January 2021, the Treasury 
Department and the IRS undertook a review of the affordability rule for 
family members in the 2013 regulations at Sec.  1.36B-2(c)(3)(v)(A)(2). 
As part of this review, the Treasury Department and the IRS 
reconsidered the text of the relevant statutes and whether the 2013 
affordability rule represents the best reading of that text. As 
explained above, the Treasury Department and the IRS now believe (in 
contrast to their view in 2013) that the 2013 affordability rule did 
not represent the best reading of the statutory text. The Treasury 
Department and the IRS also considered the evidence described above 
from the intervening years and evaluated whether the 2013 affordability 
rule is inconsistent with the overall goal of the ACA in providing 
comprehensive, affordable health coverage, as well as the goal of 
improving access to quality and affordable health care.\31\ This 
evaluation was informed by the experience of the intervening years 
since Exchange coverage and the PTC first became available. The 
evaluation demonstrated adverse impacts of the 2013 regulations on 
families and prompted the Treasury Department and the IRS to issue the 
proposed regulations and solicit public comments.
---------------------------------------------------------------------------

    \31\ See H.R. Rep. No. 111-443 (2009).
---------------------------------------------------------------------------

    In addition, the Treasury Department and the IRS now have a clearer 
idea of the potential cost and the coverage benefits of changing the 
affordability rule, in part because of the time that has elapsed since 
the issue was last considered and the experiences of different 
insurance markets during that time. For example, analysis has shown how 
adopting the policies in the final rule would increase access to 
affordable Exchange coverage.\32\ Newly insured individuals will 
receive substantial benefits. Recent academic research suggests that 
enrollment in Exchange coverage provides financial protection and 
improves health outcomes.\33\ Several commenters on the proposed 
regulations also cited publicly available studies that estimate the 
impact of the proposed affordability rule for related individuals on 
Federal outlays and revenues.
---------------------------------------------------------------------------

    \32\ https://www.healthaffairs.org/do/10.1377/forefront.20220420.498595/.
    \33\ https://academic.oup.com/qje/article/136/1/1/5911132; 
https://www.sciencedirect.com/science/article/abs/pii/S0047272718302408.
---------------------------------------------------------------------------

    In addition, several commenters cited publicly available studies 
that estimate how changing the affordability rule for related 
individuals could affect the number of people with health insurance 
coverage.\34\ One commenter presented estimates based on their own 
simulation of health insurance coverage decisions. Another commenter 
cited a study that focused specifically on the state of California.\35\ 
Since the comment period on the proposed regulations ended, analysts 
have continued to estimate the impact of changing the affordability 
rule.\36\
---------------------------------------------------------------------------

    \34\ See https://www.kff.org/health-reform/issue-brief/the-aca-family-glitch-and-affordability-of-employer-coverage/; https://www.kff.org/health-reform/issue-brief/many-workers-particularly-at-small-firms-face-high-premiums-to-enroll-in-family-coverage-leaving-many-in-the-family-glitch/; https://www.cbo.gov/system/files/2020-06/Patient_Protection_and_Affordable_Care_Enhancement_Act_0.pdf; 
https://www.urban.org/research/publication/changing-family-glitch-would-make-health-coverage-more-affordable-many-families; https://www.urban.org/research/publication/marketplace-subsidies-changing-family-glitch-reduces-family-health-spending-increases-government-costs; https://www.rand.org/pubs/research_reports/RR1296.html; 
https://www.healthaffairs.org/doi/10.1377/hlthaff.2015.1491.
    \35\ https://laborcenter.berkeley.edu/wp-content/uploads/2022/06/Fact-Sheet-Family-Glitch.pdf.
    \36\ https://www.cbo.gov/system/files?file=2022-07/58313-Crapo_letter.pdf.
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    The studies cited by commenters found that implementing a policy 
similar to the affordability rule described in the proposed regulations 
would increase the number of individuals eligible for financial 
assistance by between 3 million and 5.1 million. Other studies project 
that, out of those newly eligible, between 600,000 and 2.3 million 
individuals would

[[Page 61989]]

choose to enroll in Exchange coverage.\37\ Estimates of the number of 
people who would be newly insured range from 80,000 to 700,000. These 
studies estimate that this change in eligibility and subsequent 
enrollment would increase the Federal deficit by between approximately 
$2.6 billion and $4.5 billion per year on average.
---------------------------------------------------------------------------

    \37\ Some studies estimated any Exchange enrollment while other 
studies estimated only subsidized Exchange enrollment.
---------------------------------------------------------------------------

    The studies also discussed which types of families would be most 
likely to benefit from the proposed affordability rule for related 
individuals. Families with incomes below 250 percent of the Federal 
poverty level and families with employees who work for small employers 
were expected to benefit the most. One study found that workers in 
industries such as service, agriculture, mining, and construction were 
more likely to be eligible for a PTC.\38\ Another study estimated that 
families switching from employer coverage to Exchange coverage would 
save an average of about $400 per person in premiums per year.\39\ The 
studies also discussed how certain qualifying individuals would benefit 
from cost-sharing reductions that are available for certain qualified 
individuals enrolling in Exchange coverage.
---------------------------------------------------------------------------

    \38\ https://www.kff.org/health-reform/issue-brief/many-workers-particularly-at-small-firms-face-high-premiums-to-enroll-in-family-coverage-leaving-many-in-the-family-glitch/.
    \39\ https://www.urban.org/sites/default/files/publication/104223/changing-the-family-glitch-would-make-health-coverage-more-affordable-for-many-families_1.pdf.
---------------------------------------------------------------------------

    These studies provide a range of estimated impacts on health 
coverage status and the Federal deficit. Each study relies on different 
data sources, modeling techniques, behavioral assumptions, and 
budgetary baselines. Additionally, the policies they simulate are 
different than the exact set of policies being adopted in the final 
regulations. The Treasury Department and the IRS also note that there 
is a substantial amount of uncertainty in estimating the impact of the 
policy change.\40\
---------------------------------------------------------------------------

    \40\ None of the studies reviewed by the Treasury Department and 
the IRS provided a quantitative measure of the level of uncertainty 
associated with their estimates. For example, the studies did not 
report sensitivity checks describing how their results would change 
under different modeling assumptions. Additionally, none of the 
studies reported standard errors, a statistic that researchers use 
to quantify sampling error and the significance of any differences.
---------------------------------------------------------------------------

    In addition to these studies--those cited by commenters, as well as 
others reviewed by the Treasury Department and the IRS--the Treasury 
Department's Office of Tax Analysis has conducted its own analysis as 
to the effect of the policy change on health insurance coverage 
decisions and the Federal deficit. The policy change is projected to 
increase the number of individuals with PTC-subsidized Exchange 
coverage by about 1 million and increase the Federal deficit by an 
average of $3.8 billion per year over the next 10 years. The 
projections from this analysis are within the range of predictions 
reported in the cited studies. The evaluation focused on direct, 
predictable effects of the regulation. Although some studies predict 
the affordability rule may incidentally increase enrollment in Medicaid 
or CHIP, these effects are indirect and speculative. Taken as whole, 
the Treasury Department and the IRS conclude that these analyses 
provide compelling evidence that the new affordability rule for related 
individuals will increase the affordability and accessibility of health 
insurance. Although the range of numbers indicate there is uncertainty 
in the precise number of individuals who will be affected, the studies 
suggest that the final regulations will succeed in achieving two key 
policy goals of the ACA: increasing coverage and reducing costs for 
consumers. These studies, and the Treasury Department's own analysis, 
lead the Treasury Department and the IRS to believe that the proposed 
affordability rule, as finalized in these regulations, is consistent 
with the overall goals of the ACA and is based on sound reasons for a 
revision to the affordability rule. Further, as explained in section II 
of this Summary of Comments and Explanation of Revisions, the Treasury 
Department and the IRS are of the view that section 36B(c)(2)(C)(i) is 
better interpreted in a manner that requires consideration of the 
premium cost to the employee to cover not just the employee, but also 
other members of the employee's family who may enroll in the employer 
coverage. Thus, the Treasury Department and the IRS adopt in these 
final regulations the proposed affordability rule for related 
individuals that is based on the cost of family coverage because they 
have concluded that such a rule is the better reading of the statute. 
For the reasons stated in section II of this Summary of Comments and 
Explanation of Revisions, the Treasury Department and the IRS have also 
concluded that, to the extent there is ambiguity in the statute, the 
proposed affordability rule would be the better alternative to resolve 
that ambiguity and to implement the statute in a way consistent with 
Congress's purposes in enacting the ACA.

IV. Recommended Amendments to Proposed Rules

A. Cost of Family Coverage
    Under the proposed regulations, an eligible employer-sponsored plan 
would be treated as affordable for related individuals if the portion 
of the annual premium the employee must pay for family coverage, that 
is, the employee's required contribution, does not exceed 9.5 percent 
of household income. For this purpose, Sec.  1.36B-2(c)(3)(v)(A)(2) of 
the proposed regulations provided that an employee's required 
contribution for family coverage is the portion of the annual premium 
the employee must pay for coverage of the employee and all other 
individuals included in the employee's family, as defined in Sec.  
1.36B-1(d), who are offered coverage under the eligible employer-
sponsored plan. Under Sec.  1.36B-1(d), an employee's family consists 
of the employee, the employee's spouse filing a joint return with the 
employee, and the employee's dependents.
    A few commenters requested a change to Sec.  1.36B-2(c)(3)(v)(A)(2) 
of the proposed regulations. Under the rule suggested by the 
commenters, an employee's required contribution for family coverage 
under Sec.  1.36B-2(c)(3)(v)(A)(2) would be the portion of the annual 
premium the employee must pay for coverage of the employee and all 
other individuals offered the employer coverage as a result of their 
relationship to the employee, including non-dependents of the employee 
who may enroll in the employer coverage (non-family members). As noted 
by the commenters, many employers offer coverage to employees' children 
up to age 26 without regard to whether a child is a dependent of the 
employee.\41\ The commenters argued that including the cost to cover 
all individuals offered the coverage in an employee's required 
contribution will ensure that all of these individuals, including non-
family members, have access to affordable coverage.
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    \41\ Under Public Health Service Act section 2714, which is 
incorporated into the Code through Code section 9815 and into the 
Employee Retirement Income Security Act (ERISA) through section 715 
of ERISA, group health plans and health insurance issuers offering 
group or individual health insurance coverage that offer dependent 
coverage for children must make that coverage available to 
employees' children until they attain age 26. See 26 CFR 54.9815-
2714, 29 CFR 2590.715-2714, and 45 CFR 147.120.
---------------------------------------------------------------------------

    The Treasury Department and the IRS do not adopt this comment. 
Under the final regulations, as in the proposed

[[Page 61990]]

regulations, the cost of covering individuals who are offered the 
coverage but are non-family members is not considered in determining 
whether the employee's family members have an offer of affordable 
employer coverage. Under Sec.  1.36B-2(c)(4)(i), an individual who may 
enroll in employer coverage as a result of the individual's 
relationship to an employee, but who is a non-family member, is treated 
as eligible for the employer coverage only if he or she is enrolled in 
the coverage. Consequently, an individual who may enroll in employer 
coverage, but who is a non-family member, does not need a determination 
of unaffordable coverage to enroll in a QHP and be eligible for the 
PTC, if the individual otherwise qualifies. Unlike family members, a 
non-family member may enroll in a QHP and be eligible for the PTC, if 
the individual is otherwise eligible, by simply not enrolling in the 
offered employer coverage. Accordingly, the cost of covering non-family 
members should not be considered in determining whether other related 
individuals have an offer of affordable employer coverage.
B. Determine Affordability for Employees Based on the Cost of Family 
Coverage
    Under Sec.  1.36B-2(c)(3)(v)(A)(1), an eligible employer-sponsored 
plan is considered affordable for an employee offered coverage under 
the plan if the employee's required contribution for self-only coverage 
does not exceed 9.5 percent of household income. The proposed 
regulations do not change the affordability rule for employees.
    Several commenters requested that the final regulations amend the 
affordability rule for employees to provide that, if an offer of 
employer coverage is unaffordable for an employee's family members, the 
offer would also be considered unaffordable for the employee. The 
commenters noted that separate affordability rules for employees and 
family members will sometimes result in a spouse or dependent of an 
employee having an offer of employer coverage that is unaffordable even 
though the employee has an affordable offer of self-only coverage. This 
could cause families to enroll in multiple plans or policies, the 
employee in the employer plan and the family members in a QHP, which 
would be burdensome and costly for families who must navigate different 
provider networks and drug formularies and incur separate deductibles 
and caps on out-of-pocket spending.
    Although the Treasury Department and the IRS understand the 
concerns raised by the commenters, the affordability rule for employees 
is specifically provided in section 36B(c)(2)(C)(i) and cannot be 
changed by regulation. Under section 36B(c)(2)(C)(i), an employee is 
not eligible for minimum essential coverage under an employer plan if 
the employee's required contribution (within the meaning of section 
5000A(e)(1)(B)) with respect to the plan exceeds 9.5 percent of 
household income. Section 5000A(e)(1)(B) provides that the term 
``required contribution'' means, ``in the case of an individual 
eligible to purchase minimum essential coverage consisting of coverage 
through an eligible employer-sponsored plan, the portion of the annual 
premium which would be paid by the individual (without regard to 
whether paid through salary reduction or otherwise) for self-only 
coverage.'' Further, the affordability rule in section 5000A(e)(1)(C) 
applies only to related individuals and not to employees. Consequently, 
the final regulations do not amend the affordability rule for 
employees.
C. Multiple Offers of Coverage
    The proposed regulations provided that an individual who has offers 
of employer coverage from multiple employers has an offer of affordable 
coverage if at least one of the offers of coverage is affordable. For 
example, if X has an offer of employer coverage from X's employer and 
also from the employer of X's spouse, Y, for a year for which X and Y 
file a joint return, X has an offer of affordable coverage if either 
X's required contribution for self-only coverage under X's employer's 
plan does not exceed 9.5 percent of X's and Y's household income, or if 
Y's required contribution for family coverage under Y's employer's plan 
does not exceed 9.5 percent of X's and Y's household income. One 
commenter suggested that the Treasury Department and the IRS reconsider 
this multiple coverage rule as it may be confusing for individuals with 
multiple offers of coverage; however, the commenter did not include a 
recommendation for a specific change to the regulations.
    The final regulations do not change the rule provided in the 
proposed regulations regarding affordability for individuals with 
multiple offers of coverage. Although the current section 36B 
regulations do not explicitly address situations involving multiple 
offers of employer coverage, as noted in the Background section of this 
preamble, a month is a coverage month for an individual only if the 
individual is not eligible for MEC, other than individual market 
coverage, for the month. Therefore, under the current regulations, an 
individual with multiple employer coverage offers for a month is 
eligible for MEC for that month if at least one of the offers of 
coverage is affordable and provides minimum value. The rule in the 
proposed regulations relating to multiple offers of coverage simply 
states expressly how the affordability rule in the current regulations 
applies to an individual with multiple offers of employer coverage.
    Furthermore, an individual with multiple offers of employer 
coverage seeking to enroll in a QHP with APTC would provide information 
to the applicable Exchange concerning the required contribution for 
each coverage offer. The Exchange will determine if at least one of the 
offers is affordable, in which case APTC would not be allowed for the 
individual's Exchange coverage. This process should minimize any burden 
or confusion relating to whether an individual with multiple offers of 
coverage has an affordable offer that would deny the individual APTC 
and PTC for his or her Exchange coverage. In addition, for taxpayers 
for whom APTC is not paid for their or their family's QHP coverage, the 
IRS will update the instructions for Form 8962, Premium Tax Credit 
(PTC), and Publication 974, Premium Tax Credit (PTC), to address 
multiple offers of employer coverage.
D. Comments Requiring Legislative Changes
    One commenter suggested that the final regulations include a rule 
under which an employee and the employee's family members are not 
considered to have an offer of affordable coverage if the cost of 
coverage for the entire family is more than 15 percent of household 
income. One commenter asked that the rule in section 36B(c)(2)(B) be 
amended and that all individuals offered coverage under an employer 
plan be permitted to choose between the employer coverage and Exchange 
coverage with a PTC. Another commenter requested that the Treasury 
Department and the IRS make permanent the rule in section 36B(c)(1)(E) 
under which taxpayers with household income above 400 percent of the 
applicable Federal poverty line may qualify for a PTC for taxable years 
beginning in 2021 and 2022.\42\ One

[[Page 61991]]

commenter requested that the rules of section 36B be amended so that a 
PTC for a child may be claimed by the taxpayer who pays for the health 
insurance coverage of the child, not to the taxpayer claiming the child 
as a dependent. Finally, one commenter suggested that the final 
regulations include a rule under which excess APTC repayments would be 
waived for taxable year 2023 while the Exchanges adjust and reeducate 
consumers on the affordability calculation for family members.
---------------------------------------------------------------------------

    \42\ Section 12001 of Public Law 117-169, 136 Stat. 1818 (August 
16, 2022), commonly known as the Inflation Reduction Act of 2022 
(IRA), extended through 2025 the rule in section 36B(c)(1)(E) under 
which taxpayers with household income above 400 percent of the 
applicable Federal poverty line may qualify for a PTC.
---------------------------------------------------------------------------

    The Treasury Department and the IRS appreciate these comments but 
note that these changes would require legislative action and cannot be 
made by regulation. Thus, the final regulations do not include these 
recommended rules.
E. ICHRA and QSEHRA Comments
    In general, Sec.  1.36B-2(c)(3)(i)(B) provides affordability rules 
related to employees who are offered a health reimbursement arrangement 
(HRA) or other account-based group health plan that would be integrated 
with individual health insurance coverage if the employee enrolls in 
individual health insurance coverage (an individual coverage health 
reimbursement arrangement or ICHRA). Those rules provide that an 
individual who is offered an ICHRA because of a relationship to the 
employee (a related HRA individual) is eligible for minimum essential 
coverage under an eligible employer-sponsored plan for any month for 
which the ICHRA is offered if (1) the ICHRA is affordable, or (2) the 
employee does not opt out of and waive future reimbursements from the 
ICHRA, regardless of whether the ICHRA is affordable. Under Sec.  
1.36B-2(c)(5), an ICHRA is affordable for a month if the employee's 
required HRA contribution does not exceed 9.5 percent of the employee's 
household income for the taxable year, divided by 12. An employee's 
required HRA contribution is the excess of the monthly premium for the 
lowest cost silver plan for self-only coverage of the employee offered 
in the Exchange for the rating area in which the employee resides, over 
the monthly self-only ICHRA amount (or the monthly maximum amount 
available to the employee under the ICHRA if the ICHRA provides for 
reimbursements up to a single dollar amount regardless of whether an 
employee has self-only or other-than-self-only coverage).
    One commenter stated it was unclear whether the affordability rule 
for related individuals in the proposed regulations applies to ICHRAs. 
The commenter also suggested that the final regulations include a rule 
under which family coverage amounts, not self-only coverage amounts, 
are used to determine whether an ICHRA offer to a related HRA 
individual is affordable.
    The proposed regulations do not address the affordability rules 
relating to an ICHRA offer, and, consequently, the final regulations 
also do not address ICHRAs. Therefore, the rules for determining 
affordability of an ICHRA remain unchanged. However, the Treasury 
Department and the IRS, in coordination with HHS and the U.S. 
Department of Labor (DOL), will consider whether future guidance should 
be issued to change the ICHRA affordability rules for related HRA 
individuals in the manner suggested by the commenter.
    Other commenters suggested that a PTC be allowed for family members 
in situations in which an employee is offered an affordable HRA, 
whether an ICHRA or a QSEHRA, and does not opt-out of the HRA. The 
commenters recommended that, in these situations, the employee and the 
family members would enroll in an Exchange family plan and the employee 
would not be allowed a PTC because of the affordable HRA, but the 
family members would be allowed a PTC.
    The rules relating to QSEHRAs are specifically provided by statute 
in section 36B(c)(4). Because the Treasury Department and the IRS 
cannot amend those rules by regulation, QSEHRAs are not addressed in 
these final regulations.
    Under the rules for ICHRAs, if the terms of the ICHRA provide that 
reimbursements are allowed only for the medical expenses of the 
employee and not for the expenses of related individuals, a PTC may be 
allowed for the Exchange coverage of the related individuals, 
irrespective of whether the ICHRA is considered affordable under Sec.  
1.36B-2(c)(5), or whether the employee opts out of the ICHRA. However, 
if the ICHRA offer includes reimbursements of the medical expenses of 
related HRA individuals, a PTC is generally not allowed for the 
Exchange coverage of the employee or the related HRA individuals if the 
ICHRA offer is affordable or if the employee does not opt out of the 
ICHRA. This is because an ICHRA is an eligible employer-sponsored plan 
under section 5000A(f)(2) and, therefore, under section 36B(c)(2)(C), 
if the coverage is affordable and provides minimum value, a PTC is 
generally not allowed for the Exchange coverage of an individual to 
whom the ICHRA offer extends or who does not opt out of the ICHRA. 
Consequently, this rule relating to offers of employer coverage in 
section 36B(c)(2)(C) cannot be amended by regulation. However, as noted 
in connection with the prior comment concerning ICHRAs, the Treasury 
Department and the IRS, in coordination with HHS and DOL, will consider 
whether future guidance should be issued to provide an ICHRA 
affordability rule for related individuals that is separate from the 
affordability rule for employees.
F. Minimum Value
1. Minimum Value Rule for Related Individuals
    The proposed regulations provided that an employer plan meets the 
minimum value requirement for related individuals if the plan's share 
of the total allowed costs of benefits provided to related individuals 
is at least 60 percent, similar to the minimum value requirement for 
employees. One commenter requested that the final regulations include a 
minimum value safe harbor rule under which an employer plan is 
considered to provide minimum value to related individuals if the 
coverage provided to employees under the plan meets minimum value 
requirements and the same benefits are provided to employees and family 
members. Other commenters recommended that the final regulations allow 
for the calculation of minimum value using a standard population that 
includes both employees and dependents to calculate a single, 
composite, minimum value for an employee and dependents, and that 
separate populations not be required for coverage provided to employees 
and coverage provided to related individuals.
    As in the proposed regulations, the final regulations provide a 
minimum value rule for related individuals that is separate from the 
minimum value rule for employees, and that requires a plan's share of 
the total allowed costs of benefits provided to related individuals to 
be at least 60 percent. This minimum value rule for related individuals 
is not intended to require the use of a standard population for family 
members that is separate from the standard population for employees. 
Rather, the intent of the rule is to ensure that employers continue to 
provide a plan that has the same benefit design for employees and 
related individuals, and not to burden employers with having to offer 
different benefit packages for employees and related individuals. 
Consequently, the final regulations include a rule providing that an 
employer plan that provides minimum value to an

[[Page 61992]]

employee also provides minimum value to related individuals if the 
scope of benefits and cost sharing (including deductibles, co-payments, 
coinsurance, and out-of-pocket maximums) under the plan are the same 
for employees and family members. If cost sharing varies based on 
whether related individuals are enrolled and/or the number of related 
individuals enrolled (that is, the tier of coverage), minimum value for 
related individuals is based on the tier of coverage that would, if 
elected, cover the employee and all related individuals (disregarding 
any differences in deductibles or out-of-pocket maximums that are 
attributable to a different tier of coverage, such as self plus one 
versus family coverage.) In addition, the final regulations do not 
require a departure from the practice of computing minimum value for 
employees and related individuals based on the provision of benefits to 
a standard population that includes both employees and related 
individuals.
2. Require Coverage of All Essential Health Benefits
    The proposed regulations provided that, to be considered to provide 
minimum value, an eligible employer-sponsored plan must include 
substantial coverage of inpatient hospital services and physician 
services. One commenter asked that final regulations provide that an 
employer plan does not meet the minimum value requirements unless it 
provides coverage of all 10 essential health benefits that, under the 
ACA, certain plans must cover, not just inpatient hospital services and 
physician services. This comment requesting an expansion of the minimum 
value rule is outside the scope of these final regulations. Thus, as in 
the proposed regulations, the final regulations provide that an 
eligible employer-sponsored plan does not meet minimum value 
requirements unless it includes substantial coverage of inpatient 
hospital services and physician services.
3. Minimum Value Calculator
    Under 45 CFR 156.145(a)(1), a minimum value calculator is to be 
made available by HHS and the IRS that an employer plan may use to 
determine whether the percentage of total allowed costs under the plan 
is at least 60 percent. Several commenters requested that the minimum 
value calculator be updated to reflect more current large group data 
and to incorporate appropriate model changes that have been made to the 
actuarial value calculator.\43\ Although the commenters' request 
concerning the minimum value calculator is outside the scope of the 
final regulations, the Treasury Department and the IRS have shared 
these comments with HHS to determine the best way to address these 
comments relating to the calculator.
---------------------------------------------------------------------------

    \43\ Under 45 CFR 156.135, HHS is responsible for developing and 
updating an actuarial value calculator that issuers may use to 
determine the actuarial value of a health plan.
---------------------------------------------------------------------------

G. Applicability Date of Final Regulations
    The proposed regulations provided that the changes to Sec. Sec.  
1.36B-2, 1.36B-3, and 1.36B-6(a)(2) in the proposed regulations, if 
finalized, were expected to apply for taxable years beginning after 
December 31, 2022. Several commenters requested instead that the final 
regulations apply for taxable years beginning after December 31, 2023. 
These commenters expressed concern that taxpayers will be faced with a 
number of health care-related changes in 2022, including the end of the 
temporary applicable percentages for 2021 and 2022 in section 
36B(b)(3)(A)(iii) that increased PTC amounts.\44\ Commenters also noted 
that at the end of the COVID-19 public health emergency, states will no 
longer be required to comply with a Medicaid continuous enrollment 
requirement in order to receive a temporary increase in Federal 
Medicaid matching funds under the Families First Coronavirus Response 
Act. The commenters stated that these changes, along with the changes 
in the proposed regulations, will result in much uncertainty for QHP 
enrollees for the open enrollment period that begins on November 1, 
2022, and will lead to substantial confusion for QHP enrollees and 
likely inaccurate APTC determinations by Exchanges.
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    \44\ Under section 12001 of the IRA, the temporary applicable 
percentages for 2021 and 2022 in section 36B(b)(3)(A)(iii) were 
extended through 2025 so taxpayers will not see a change in their 
PTC amount due to the potential policy change described by 
commenters.
---------------------------------------------------------------------------

    Although the commenters' concerns are appreciated, the Treasury 
Department and the IRS are of the view that those concerns are 
outweighed by the goal of allowing spouses and dependents, some of whom 
have been negatively affected by the 2013 affordability rule, to be 
able to access affordable Exchange coverage beginning in the 2023 plan 
year. For this reason, many commenters urged the Treasury Department 
and the IRS to implement the changes to the affordability rule for 
related individuals in time for QHP open enrollment for the 2023 plan 
year. Although 2023 QHP enrollment may present some new challenges, as 
discussed more fully in section IV of this Summary of Comments and 
Explanation of Revisions, HHS has informed the Treasury Department and 
the IRS that HHS will engage in thorough implementation efforts, 
including revising the Exchange application and providing resources and 
technical assistance education for State Exchanges, Navigators, agents, 
brokers, and other assisters to help enrollees understand their options 
for 2023. In addition, the IRS will be making changes to its forms, 
instructions, publications, and website, in an effort to educate 
taxpayers about any changes for the 2023 plan year. Therefore, the 
Treasury Department and the IRS do not adopt the commenters' request 
that the applicability date of the final regulations be delayed until 
taxable years beginning after December 31, 2023. Instead, the final 
regulations apply for taxable years beginning after December 31, 2022.
    Another commenter urged that the Treasury Department and the IRS 
consider the effective date implications of this rule for the State 
Innovation Waiver program under section 1332 of the ACA (section 1332 
waivers). The commenter requested that the Administration consider the 
implications of the final regulations on states with approved section 
1332 waivers and, if necessary, identify a plan to mitigate potential 
harm to accessing affordable coverage for individuals. For example, the 
commenter expressed concern that states would need to develop and 
update actuarial analyses for section 1332 waivers and that there would 
be an impact on states leveraging Federal pass-through funding under 
section 1332 waivers, mostly through reinsurance programs, given that 
the proposed regulations would modify who is eligible for the PTC and 
APTC. The commenter also was concerned that there may be implications 
for states exploring other innovative opportunities, such as public 
health insurance options that enhance affordable options by leveraging 
section 1332 Federal pass-through funding.
    The section 1332 waiver program permits states to apply to waive 
certain provisions of the ACA, including section 36B of the Code, to 
undertake their own state-specific reforms to provide residents with 
access to high quality, affordable health insurance while retaining the 
basic protections of the ACA. A state applying for a section 1332 
waiver must include in its application actuarial and economic analyses 
that demonstrate that the

[[Page 61993]]

waiver proposal meets the statutory requirements for section 1332 
waivers.45 46 If a waiver yields Federal savings on certain 
forms of Federal financial assistance under the ACA (such as the PTC), 
those savings are passed through to the state to help implement the 
state's approved waiver plan. Federal pass-through funding amounts are 
calculated annually by the Treasury Department and HHS. Pass-through 
amounts reflect current law and policy at the time of the calculation 
but can be updated, as necessary, to reflect applicable changes in 
Federal or state law.\47\ The Treasury Department plans to work with 
HHS to communicate any implications of these final regulations, 
including any associated requirements for states, to affected 
stakeholders and to states that have approved section 1332 waivers or 
that are considering section 1332 waivers. The Treasury Department and 
the IRS recognize that the final regulations may affect states in 
different ways but believe that any negative effects related to the 
effective date are outweighed by the goal, supported by numerous 
commenters, of allowing more spouses and dependents to be able to 
access affordable Exchange coverage beginning in 2023. The Treasury 
Department and the IRS also note that further innovation under section 
1332 of the ACA is speculative, and that, in any event, section 1332 
waiver policies are outside the scope of these regulations.
---------------------------------------------------------------------------

    \45\ See 31 CFR 33.108(f)(4)(i) and (ii); 45 CFR 
155.1308(f)(4)(i) and (ii).
    \46\ Section 1332(b)(1)(A)-(D) of the ACA.
    \47\ 31 CFR 33.122 and 45 CFR 155.1322.
---------------------------------------------------------------------------

V. Comments Regarding Outreach

    Several commenters requested that HHS, the Treasury Department, and 
the IRS provide clear resources aimed at helping various individuals 
and employers. Many of the commenters who requested that HHS, the 
Treasury Department, and the IRS provide outreach about the new rules 
were concerned about families understanding the trade-offs if they are 
considering ``split coverage,'' meaning that the employee would enroll 
in employer coverage and the family members would enroll in Exchange 
coverage. Some commenters noted that split coverage could lead to lower 
premiums for the family or could lead to uninsured individuals gaining 
coverage. Those commenters also noted, however, that some families with 
split coverage will need to contend with different provider networks, 
deductibles, out-of-pocket limits, open enrollment periods, appeals and 
grievance procedures, and other parameters unique to their different 
health plans. Another commenter added that for some families, moving 
family members from employer coverage to Exchange coverage could mean 
lower HRA or health savings account contributions from employers. One 
commenter stated that confusion about split coverage could present 
particular difficulties for those with limited English proficiency or 
lower rates of health literacy.
    The commenters who raised these concerns all supported the 
affordability rule for related individuals provided in the proposed 
regulations, but requested that the Treasury Department and the IRS 
work with HHS to help ensure that families who choose to enroll in 
split coverage will benefit from doing so. One commenter stated that 
families considering whether to enroll in Exchange coverage with a PTC 
in lieu of enrolling in employer coverage would greatly benefit from 
resources and guidance that help them make an informed purchasing 
decision. That commenter urged the Treasury Department and the IRS to 
work with HHS on how to best communicate that information in an 
accessible fashion to consumers both generally and as part of the 
Exchange application. Finally, one commenter noted that numerous 
studies show there is a correlation between advertising about the ACA 
and an increase in individuals shopping for, and enrolling in, Exchange 
coverage. Thus, that commenter suggested that the IRS and HHS should 
reinvigorate efforts to educate the American public about Exchange open 
enrollment (Open Enrollment), specifically focusing on this change to 
the affordability rule for related individuals.
    The Treasury Department and the IRS understand that the new 
affordability rule in these final regulations will present families 
with additional coverage options they will need to understand, 
evaluate, and compare to determine the type of coverage that is best 
for them. The Treasury Department and the IRS have been working with 
HHS, and will continue to work with HHS, to ensure that the agencies 
communicate information about the new rules in an accessible fashion to 
individuals both generally and as part of the Exchange application. 
Specifically, HHS has informed the Treasury Department and the IRS that 
HHS will work to revise the Exchange application on HealthCare.gov in 
advance of Open Enrollment for the 2023 plan year to include new 
information that will assist consumers in filling out their 
applications. Those revisions will include (1) new questions on the 
application about employer coverage offers for family members, and (2) 
revised materials for consumers to gather information from their 
employer about the coverage being offered. To assist those with limited 
English proficiency, HealthCare.gov offers language services upon 
request through the Marketplace Call Center, and the HealthCare.gov 
application is available in both English and Spanish.
    The Treasury Department and the IRS also understand that HHS will 
provide resources and technical assistance to State Exchanges that will 
need to make similar changes on their websites and Exchange application 
experiences. More generally, HHS is working regularly with State 
Exchanges to provide technical assistance on implementation of the new 
rules. HHS continues to track State Exchange planning and take all 
necessary steps to support efforts by State Exchanges to implement the 
new rules, with necessary outreach and education efforts, for Open 
Enrollment for the 2023 plan year.
    In addition, the Treasury Department and the IRS understand that 
HHS will provide training on the new rules to agents, brokers, and 
other assisters (for example, Navigators) so applicants will better 
understand their options before enrolling, including the trade-offs if 
applicants are considering split coverage. This training is 
particularly important because over half of the applicants who apply 
for Exchange coverage through HealthCare.gov are assisted by an agent, 
broker, or other assister. HHS also will share available resources with 
State Exchanges to leverage for use in training customer support 
personnel in their states.
    Finally, HHS has informed the Treasury Department and the IRS that 
HHS is considering outreach to specific consumers. HHS has data from 
prior years on applicants who applied through a Federally-facilitated 
Exchange, were denied APTC at enrollment, and might benefit from the 
new rules. HHS is evaluating opportunities for direct outreach to these 
individuals.
    The IRS also will need to implement the new rules for the 2023 
taxable year. In particular, the IRS will update relevant forms, 
instructions, and publications prior to the tax filing season for 2023, 
to include the instructions for Form 8962 and Publication 974. In 
addition, the IRS will update relevant materials on IRS.gov to provide 
taxpayers with additional information about the new rules.
    In addition to the commenters requesting that HHS, the Treasury 
Department, and the IRS provide

[[Page 61994]]

outreach to individuals, a few commenters provided specific 
recommendations related to employers. One commenter stated that 
employers are thinking about ways to educate employees affected by this 
new change but suggested that resources be made available from HHS, the 
Treasury Department, and the IRS that could be shared with employees. 
One commenter suggested that the Treasury Department, in coordination 
with HHS and the U.S. Department of Labor, issue tri-agency guidance 
and consumer-friendly resources to help employees navigate challenges 
that arise from split coverage. One commenter stated that the Treasury 
Department and the IRS should require employers to provide notification 
to their employees about the new affordability test, including 
information about Exchange coverage, the availability of financial 
assistance, and how an individual may enroll in coverage. The commenter 
also recommended that the Treasury Department and the IRS invite 
stakeholder feedback on a draft of a model notice that employers could 
share with employees. Finally, one commenter stated that the new rules 
will create new requirements for plan sponsors and administrators to 
ensure compliance with the rules and recommended that the Treasury 
Department and the IRS issue a Request for Information to better 
understand the recordkeeping and compliance needs of stakeholders who 
will be affected by the final rule.
    The Treasury Department and the IRS appreciate that employers are 
interested in providing information to their employees about the new 
rules and encourage employers to provide employees with resources 
published by DOL, HHS, the Treasury Department, and the IRS relating to 
the new rules. Regarding the suggestion to impose a notification 
requirement on employers, such a requirement is outside the scope of 
section 36B and these final regulations. Thus, the Treasury Department 
and the IRS cannot impose a notification requirement on employers 
through these final regulations. In addition, the Treasury Department 
does not intend to issue formal tri-agency guidance with HHS and DOL or 
publish a model notice. However, the agencies understand the need to 
provide clear, consumer-friendly resources that can be accessed by 
individuals in various ways, including through employers who want to 
provide those resources directly to employees. Therefore, the Treasury 
Department and the IRS, in coordination with HHS and DOL, will work to 
ensure that outreach materials about these final regulations can be 
accessed by individuals or by employers who choose to share the 
materials with their employees. In addition, the agencies plan to 
coordinate in conducting open door forums with employers, employer 
associations, and employee benefits managers to educate them about the 
new rules.
    As noted earlier, one commenter stated that the new rules will 
create new recordkeeping and compliance requirements for plan sponsors 
and administrators. However, nothing in the proposed rules specifically 
imposed any new requirements on plan sponsors or administrators and any 
such requirements would be outside the scope of section 36B. In 
addition, as discussed later, the new rules in these final regulations 
do not create, even indirectly, any new recordkeeping or compliance 
requirements for plan sponsors or administrators.

VI. Issues for Employers

A. Information Reporting
    Multiple commenters pointed out that the proposed regulations did 
not address whether the regulations would impose new information 
reporting obligations on employers and other providers of minimum 
essential coverage under sections 6055 and 6056. Section 6055 requires 
providers of minimum essential coverage to report coverage information 
by filing information returns with the IRS and furnishing statements to 
individuals. Section 6056 requires ALEs to file information returns 
with the IRS and furnish statements to full-time employees relating to 
health coverage offered by an ALE to its full-time employees and their 
dependents. Some commenters noted that the composition of an employee's 
tax family is not readily ascertainable by an employer, no employer 
collects the type of information that would allow them to make 
determinations about the employment status and health coverage of 
family members, and this data would be costly and burdensome to collect 
and report.
    The Treasury Department and the IRS clarify that nothing in these 
final regulations affects any information reporting requirements for 
employers, including the reporting required under sections 6055 and 
6056, which is done on Form 1095-B, Health Coverage, and Form 1095-C, 
Employer-Provided Health Insurance Offer and Coverage, respectively. 
Further, these final regulations do not amend the regulations under 
section 6055 or 6056, and the IRS does not intend to revise Form 1095-B 
or Form 1095-C to require any additional data elements related to the 
new rules. Additionally, the safe harbors that an employer may use to 
determine affordability for purposes of the employer shared 
responsibility provisions under section 4980H continue to be available 
for employers.
B. Non-Calendar Year Plans
    One commenter expressed concern about how the affordability rule 
for related individuals would affect family members enrolled in non-
calendar year employer plans, especially individuals enrolled in 
employer coverage through section 125 cafeteria plans (cafeteria 
plans). The commenter noted that under current rules, spouses and 
dependents of employees cannot, without a qualifying event, discontinue 
their employer coverage during a plan year if the employee has elected 
under the cafeteria plan to cover the spouse or dependent under the 
employer plan.\48\ Thus, under current rules, if as of January 1, 2023, 
a spouse or dependent enrolled in a non-calendar year employer plan 
through a cafeteria plan wants to enroll in a QHP as of that date, no 
PTC would be allowed for the period from January 1, 2023, until the 
close of the employer plan year in 2023 because the spouse and 
dependents would have to continue their enrollment in the employer 
plan. The commenter opined that, because of this issue, the Treasury 
Department and the IRS should consider making the final regulations 
effective beginning in 2024 rather than 2023.
---------------------------------------------------------------------------

    \48\ Although current cafeteria plan rules generally prohibit 
employees, spouses, and dependents from discontinuing their employer 
coverage during a plan year, Notice 2014-55, 2014-41 I.R.B. 672, 
permits a cafeteria plan to allow an employee to revoke his or her 
election under the cafeteria plan for coverage under the employer 
plan if certain conditions are met. The notice does not allow an 
employee to revoke an election solely for coverage of the employee's 
spouse or dependents under the employer plan.
---------------------------------------------------------------------------

    Spouses and dependents enrolled in non-calendar year employer plans 
not associated with cafeteria plans may, subject to the plan rules, 
disenroll from the employer plan effective on January 1, 2023, and 
enroll in a QHP with coverage beginning on January 1, 2023. In that 
situation, a PTC would be allowed for the Exchange coverage of the 
spouse and dependents if the requirements for a PTC are met, including 
that the employer plan is not affordable for the spouse and dependents 
under the rules in Sec.  1.36B-2(c)(3)(v)(A). The rules in Sec.  1.36B-
2(c)(3)(v)(B) apply in determining whether the employer plan is 
affordable for the spouse and dependents for the

[[Page 61995]]

period from January 1, 2023, until the end of the plan year.
    For employer plans associated with cafeteria plans, the Treasury 
Department and the IRS agree with the commenter that, as with 
employees, spouses and dependents should be able to discontinue their 
employer coverage during a plan year and enroll in a QHP, and that a 
PTC should be allowed for their Exchange coverage if the other 
requirements of section 36B are met. Consequently, simultaneous with 
the issuance of these final regulations, Notice 2022-41 is being issued 
to allow employees to revoke coverage in an employer plan associated 
with a cafeteria plan for family members to allow them to enroll in a 
QHP.\49\ The notice is effective for elections that are effective on or 
after January 1, 2023. Thus, because employees will be permitted under 
the notice to revoke coverage in an employer plan associated with a 
cafeteria plan beginning in 2023, the issuance of the notice addresses 
the commenter's concern about the effective date of the final 
regulations.
---------------------------------------------------------------------------

    \49\ Employees who revoke coverage in an employer plan 
associated with a cafeteria plan for themselves or for family 
members will be eligible for a Special Enrollment Period to enroll 
in a QHP if a family member becomes newly eligible for APTC. See 45 
CFR 155.420(d)(6)(iii).
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C. Section 4980H Liability
    One commenter that supported the proposed regulations noted in a 
footnote that the proposed regulations would not have a direct effect 
on an ALE's liability for an employer shared responsibility payment 
with respect to the employees of that ALE. The Treasury Department and 
the IRS agree with that comment; the employer shared responsibility 
payment is triggered by the allowance of a PTC with respect to a full-
time employee of the ALE. These final regulations may affect a related 
individual's eligibility for a PTC, but they do not affect an 
employee's eligibility for a PTC, and thus these final regulations do 
not affect the liability of the ALE of the employee.
    The commenter also noted that the proposed regulations could have 
an indirect impact on an ALE's liability for an employer shared 
responsibility payment. That is, an ALE that does not offer affordable, 
minimum value coverage to some of its full-time employees could have an 
increase in its payment under section 4980H for full-time employees who 
were previously ineligible for a PTC based on an offer of coverage from 
their spouse's employer. The commenter did not request any change in 
the proposed regulations, but merely noted this scenario. Certainly, an 
ALE that has chosen not to offer affordable, minimum value coverage to 
the requisite number of its full-time employees may have a potential 
liability for a payment under section 4980H--a risk that the ALE 
knowingly accepts. Whenever more employees of such an ALE are allowed a 
PTC, for any reason, the ALE's liability may grow. The Treasury 
Department and the IRS have considered the interests such an employer 
might have in retaining the affordability rule in the 2013 regulations, 
but do not believe that any such ALE would have a meaningful reliance 
interest in the 2013 affordability rule. Such an ALE is already risking 
liability under section 4980H due to its failure to offer affordable 
self-only coverage to its employees, and has avoided or limited that 
liability solely through the happenstance that one or more of its 
employees has received an offer of coverage through a family member 
that the 2013 affordability rule deemed to be affordable. After careful 
consideration of this potential interest and broader policy 
considerations, the Treasury Department and the IRS are adopting these 
final rules to give full effect to the statutory language and to 
promote the ACA's goal of providing affordable, quality health care for 
all Americans.

VII. Procedural Requirements for Regulations and Cost of New Rules

    A few commenters argued that the proposed affordability rule for 
related individuals would be too costly, producing an inefficient use 
of Federal resources. These commenters all cited a report from the CBO 
estimating the costs of H.R. 1425, introduced during the 116th 
Congress, which included provisions that would have amended section 36B 
to provide an affordability rule for related individuals similar to the 
one in the proposed regulations. See section 103 of H.R. 1425. 
According to the CBO analysis, that provision would have increased 
Federal deficits by $45 billion over ten years.\50\
---------------------------------------------------------------------------

    \50\ https://www.cbo.gov/system/files/2020-06/Combined%20Tables.pdf.
---------------------------------------------------------------------------

    The Treasury Department and the IRS acknowledge that multiple 
analyses have been undertaken since 2013 that analyze the impact of the 
2013 interpretation and estimate any impact of changing the policy of 
the affordability rule. These analyses consider several aspects of the 
policy change, including the estimated impact on the Federal deficit, 
the change in individuals' health coverage status, and the estimated 
increase in PTC. The Treasury Department and the IRS reviewed the CBO 
analysis of H.R. 1425, more recent CBO analyses, and other studies that 
were cited by commenters. In addition to the CBO analysis referred to 
by commenters, CBO has released an updated analysis estimating that the 
proposed affordability rule for related individuals, if finalized, 
would increase the deficit by approximately $3.4 billion annually on 
average.\51\ Further, the Treasury Department analysis indicates a 
potential increase in the Federal deficit by an average of $3.8 billion 
per year over the next 10 years. These analyses are discussed in 
section III of this Summary of Comments and Explanation of Revisions. 
However, the Treasury Department and the IRS disagree that the benefits 
of the policy change are insufficient to justify the impact on the 
Federal deficit. As discussed in section III, these studies 
consistently project an increase in coverage and affordability for a 
substantial number of individuals. The Treasury Department and the IRS 
have determined that adding to the Federal deficit to this extent is a 
worthwhile tradeoff to achieve these policy goals.
---------------------------------------------------------------------------

    \51\ https://www.cbo.gov/system/files?file=2022-07/58313-Crapo_letter.pdf.
---------------------------------------------------------------------------

    Some of those commenters also criticized the Treasury Department 
and the IRS for not including specific cost estimates in the preamble 
to the proposed regulations. One commenter argued that the failure to 
include a cost-benefit analysis in the proposed affordability rule for 
related individuals violates the Administrative Procedure Act \52\ 
because it deprives the public of an opportunity for meaningful notice 
and comment and demonstrates the lack of a reasoned explanation for the 
rule change.
---------------------------------------------------------------------------

    \52\ 5 U.S.C. 551-559.
---------------------------------------------------------------------------

    The Treasury Department and the IRS have provided analysis in 
accord with the 2018 Memorandum of Agreement between the Treasury 
Department and the Office of Management and Budget (OMB) (2018 
MOA),\53\ which specifies that the Treasury Department and the IRS will 
provide qualitative analysis of the potential costs and benefits of tax 
regulatory actions determined to raise novel legal or policy issues, as 
described in section 6(a)(3)(B) of E.O. 12866.
---------------------------------------------------------------------------

    \53\ The Department of the Treasury and the Office of Management 
and Budget, Memorandum of Agreement, Review of Tax Regulations under 
Executive Order 12866, April 11, 2018, https://home.treasury.gov/sites/default/files/2018-04/04-11%20Signed%20Treasury%20OIRA%20MOA.pdf.
---------------------------------------------------------------------------

    Another commenter asserted that the Treasury Department and the IRS 
did not provide the analyses required by E.O. 12866, E.O. 13563, and 
the Regulatory Flexibility Act when it

[[Page 61996]]

issued the proposed regulations. EOs 12866 and 13563 direct agencies to 
assess costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits to the American public. The Regulatory Flexibility Act 
requires the assessment of the numbers of small businesses potentially 
impacted by the proposed rule. The commenter argued that the analysis 
contained in the proposed rule lacks quantifiable data and thus is 
inadequate to satisfy the procedural requirements in E.O. 12866, E.O. 
13563, and the Regulatory Flexibility Act.
    The commenter first argued that the Treasury Department and the IRS 
failed to satisfy the requirements of EOs 12866 and 13563 because they 
did not provide a reasoned explanation of the need for regulatory 
action or an assessment of the costs and benefits of all alternatives. 
The commenter stated that studies or surveys should have been conducted 
to assess a more precise number of persons impacted and that the 
Treasury Department and the IRS failed to quantify the costs of the 
proposed rule. The commenter asserted that the Treasury Department and 
the IRS are required to conduct research and assess the costs of all 
the regulatory alternatives, including the alternative of no action.
    The Treasury Department and the IRS disagree. The preamble to the 
proposed regulations provided a detailed qualitative analysis of the 
proposed rule's benefits, costs, and transfers. In addition, the 
Treasury Department and the IRS requested comments regarding data, 
other evidence, or models. In response to comments, the Special 
Analyses section of this preamble includes further explanation of the 
qualitative analysis used by the Treasury Department and the IRS. This 
analysis meets the requirements of EOs 12866 and 13563 applicable to 
tax regulatory actions and was issued after coordination with and 
review by OMB under the 2018 MOA.
    As noted by the commenter, the Regulatory Flexibility Act generally 
requires the assessment of the numbers of small businesses potentially 
impacted by a proposed rule. However, section 605 of the Regulatory 
Flexibility Act provides an exception under which an assessment is not 
required if the agency certifies that the rule will not, if 
promulgated, have a significant economic impact on a substantial number 
of small entities. If the exception applies, the agency must publish 
the certification in the Federal Register at the time of publication of 
the proposed rule, along with a statement providing the factual basis 
for such certification. The agency also must provide the certification 
and statement to the Chief Counsel for Advocacy of the Small Business 
Administration.
    In the preamble to the proposed regulations, the Treasury 
Department and the IRS certified that the proposed regulations would 
not have a significant economic effect on a substantial number of small 
entities. The preamble stated that the certification is based on the 
fact that the majority of the effect of the proposed regulations falls 
on individual taxpayers, and that entities will experience only small 
changes. The preamble further noted that the proposed regulations have 
been submitted to the Chief Counsel for the Office of Advocacy of the 
Small Business Administration for comment on their impact on small 
business. Thus, the Treasury Department and the IRS fully complied with 
the Regulatory Flexibility Act in promulgating the proposed 
regulations. Further, the Treasury Department and the IRS did not 
receive any comments from the Small Business Administration regarding 
the proposed rule's impact on small business. Accordingly, as stated in 
the Special Analyses section of this preamble, the Treasury Department 
and the IRS certify that, as with the proposed regulations, these final 
regulations will not have a significant economic impact on a 
substantial number of small entities.

VIII. Effect of New Rules on Other Stakeholders

A. Effect of New Rules on Insurance Markets
    Several commenters opined that the affordability rule for related 
individuals provided in the proposed regulations will have an adverse 
effect on the employer insurance market. In the view of the commenters, 
one result of changing the affordability rule for related individuals 
will be that a substantial number of dependents of employees, who are 
generally younger and healthier than the employees, will shift from 
employer plans to Exchange coverage. The commenters stated that this 
shifting of younger, healthier individuals from employer plans to 
Exchange coverage will result in increased premiums for employer plans. 
One commenter, however, opined that it is unlikely that the magnitude 
of the impact on premiums for employer plans would be large. Some 
commenters pointed out that the shift also will result in decreased 
premiums for Exchange coverage, but one commenter asserted that the 
potential impact on the individual market is likely to be minor. 
Finally, a few commenters expressed concern that the affordability rule 
for related individuals will cause employers to discontinue or reduce 
insurance contributions for the coverage of related individuals. One 
commenter also mentioned this concern but opined that relatively few 
employers would take this approach.
    The Treasury Department and the IRS do not expect the affordability 
rule will have a meaningful effect on average premiums for employer 
plans. Overall, the aggregate amount that employers spend on family 
coverage is expected to decrease by a small amount because some 
individuals who would otherwise enroll in employer coverage will prefer 
to enroll in Exchange coverage with a PTC. Commenters are correct that 
individuals enrolled in Exchange coverage and individuals enrolled in 
employer coverage have, on average, different levels of morbidity. 
However, the Treasury Department and the IRS do not expect that the 
morbidity of the marginal individual--rather than average individual--
is significantly different such that there would be large effects on 
premiums. In some cases, individuals who would have otherwise enrolled 
in employer plans may have higher than average costs while in other 
cases those individuals will have lower than average costs. 
Furthermore, the number of individuals who are expected to switch plans 
based on this affordability rule will be modest relative to the over 
170 million individuals enrolled in employer health plans. As a result, 
the net effect on employer premiums--if any--is likely to be 
negligible.
    Because the rule is not expected to have a meaningful impact on 
premiums for employer coverage, the Treasury Department and the IRS 
disagree that changes in morbidity would result in employers 
discontinuing coverage or reducing their contributions to that 
coverage. Additionally, there are several reasons the Treasury 
Department and the IRS expect that employers will continue to have 
strong incentives to offer family coverage. The exclusion of employer 
coverage from taxable income encourages employers to compensate 
employees with (and increases employees' demand for) generous health 
coverage in lieu of taxable wages. In addition, employers face 
competitive pressure to offer generous family coverage to their 
employees at a relatively low cost. Employers who reduce their 
contributions for family coverage may find it difficult to recruit or 
retain employees. Thus, competitive forces in the labor market will

[[Page 61997]]

discourage employers from reducing contributions.
B. Effect of New Rules on Individuals
    Some commenters asserted that the proposed affordability rule for 
related individuals would harm individuals and families in various 
ways. In particular, commenters argued that individuals and families 
would face increased complexity as they navigate multiple plan choices, 
including the choice to enroll in ``split coverage'' in which the 
employee with an affordable offer enrolls in self-only employer 
coverage and the employee's family members separately enroll in 
Exchange coverage. Some commenters asserted that the shift to Exchange 
coverage caused by the proposed rule would be a poor trade-off for 
individuals and would harm individuals because Exchange coverage in 
general provides coverage that is inferior to and less generous than 
employer plans. These commenters asserted, for example, that Exchange 
coverage may be less expensive than an available employer plan but 
provide significantly higher deductibles, narrower networks, or lower 
actuarial value than the available employer plan.
    The Treasury Department and the IRS are of the view that providing 
individuals and families with more choices for health coverage is a 
positive aspect of the new affordability rule, especially if those 
additional choices include options for more affordable coverage. The 
new affordability rule for related individuals does not change the 
availability of any current coverage options for individuals, nor does 
it change any aspect of those coverage options. Specifically, family 
members of employees for whom a PTC may now be allowed as a result of 
the new affordability rule are free to retain their current coverage, 
or continue to go without coverage, based on their particular 
circumstances. Because the coverage decision is voluntary, families who 
would have enrolled in employer coverage will likely enroll in the 
Exchange if they expect the benefit of split coverage exceeds the 
monetary or other cost. As detailed in the Special Analyses section of 
this preamble, the Treasury Department and the IRS expect that only a 
limited number of families--relative to the population enrolled in 
employer coverage and relative to those newly eligible for the PTC--
will choose to shift their coverage. Only family members for whom it is 
advantageous, based on their personal and family circumstances, will 
choose to shift their coverage.
    Further, the Treasury Department and the IRS disagree with 
commenters who suggest that Exchange coverage is necessarily inferior 
to employer plans. The cost and quality of employer coverage compared 
to Exchange coverage will depend on what plans are available to the 
family and the family's particular circumstances. The Treasury 
Department and the IRS agree, however, that individuals and families 
could face new, more complex choices under the new rules as they 
navigate multiple plan choices, including the choice to enroll in split 
coverage. Individuals and families will need to assess their current 
situation and determine whether they want to enroll family members in 
Exchange coverage with a PTC or in an available employer plan. In 
comparing their options, these families will need to consider the 
factors noted by the commenters, including the cost of premiums, the 
amount of deductibles, the available networks, and the actuarial value 
of the plans, as well as the various trade-offs if the family is 
considering split coverage. The Treasury Department and the IRS 
understand these concerns and are working closely with HHS to ensure 
that individuals and families have clear and accurate information about 
the new rules so they can make informed decisions about their health 
coverage and choose their optimal health coverage. Accordingly, as 
further explained in section V of this Summary of Comments and 
Explanation of Revisions, the Treasury Department and the IRS have been 
working with HHS, and will continue to work with HHS, to ensure that 
information about the new rules is provided in an accessible fashion to 
individuals both generally and as part of the Exchange application. In 
addition, HHS, the Treasury Department, and the IRS encourage 
individuals to work with agents, brokers, and other assisters when 
applying for Exchange coverage, whether applying through an Exchange 
using the Federal eligibility and enrollment platform or a State 
Exchange using its own platform. Those agents, brokers, and other 
assisters can help families understand their health coverage options 
and help them determine which option will best meet their particular 
needs. The Treasury Department and the IRS also encourage employers to 
provide employees with resources published by HHS, the Treasury 
Department, and the IRS relating to the new rules.
C. Effect of New Rules on States
    A few commenters asserted that states will face adverse 
consequences because family members who seek Exchange coverage under 
the new affordability rule for related individuals may find instead 
that they qualify for Medicaid or the Children's Health Insurance 
Program (CHIP). The commenters asserted that people may switch from 
employer coverage, where states bear no cost, to public programs, the 
most significant items on state budgets, which will impose new burdens 
on states. Some of these commenters stated that the new affordability 
rule will increase costs on state Medicaid programs by increasing the 
number of people who apply for coverage through the Exchange and then 
enroll in Medicaid. These commenters cited an analysis by the Urban 
Institute estimating that 90,000 family members--mainly children--would 
newly enroll in Medicaid or CHIP owing to their parents seeking 
Exchange coverage.\54\ The Treasury Department and the IRS did not 
receive comments from any states expressing concern about potential 
adverse consequences.
---------------------------------------------------------------------------

    \54\ See Changing the ``Family Glitch'' Would Make Health 
Coverage More Affordable for Many Families [bond] Urban Institute.
---------------------------------------------------------------------------

    As an initial matter, the Treasury Department and the IRS note that 
Congressional legislation established the Medicaid and CHIP programs 
prior to, and independent of, the ACA and these final regulations. 
States have knowingly and consistently elected to participate in the 
Medicaid and CHIP programs since these programs were adopted. These 
final regulations have no effect on the Federal standards for those 
programs, nor do they affect how states determine eligibility for 
enrollment in their Medicaid or CHIP programs.\55\ The Federal 
government provides the majority of the funding for State Medicaid and 
CHIP programs. (The exact share varies based on factors such as the 
state's economic characteristics and the types of beneficiaries who 
enroll.) In general, states pay no more than half of the costs of 
additional children who enroll in these programs. Additionally, per 
capita costs to insure children in these programs are substantially 
lower than costs for adults.
---------------------------------------------------------------------------

    \55\ Although the Federal government imposes certain mandatory 
coverage requirements, states primarily determine eligibility 
standards for these programs. See https://crsreports.congress.gov/product/pdf/R/R43357/16 and https://crsreports.congress.gov/product/pdf/R/R43949/19.
---------------------------------------------------------------------------

    In addition, despite the commenters' assertions that the final 
regulations will increase costs to states by increasing enrollment in 
state programs, the Treasury Department and the IRS view these effects 
as highly uncertain. Any changes in Medicaid or CHIP enrollment would 
be second-order

[[Page 61998]]

effects that would not stem from changes in Medicaid or CHIP 
eligibility. Although it is possible the rule may indirectly lead to 
higher state Medicaid or CHIP spending, there are other factors that 
will reduce costs for state and local governments. In particular, the 
analysis cited by the commenters finds that over 75 percent of states' 
higher Medicaid and CHIP costs will be offset by less spending on 
uncompensated care for the uninsured. The study projects the potential 
``tiny'' increase in state spending would also be at least partially 
offset by additional tax revenue.\56\ Because employers are assumed to 
hold total compensation constant, the Federal government is projected 
to receive more tax revenue as employers shift compensation from health 
coverage towards taxable wages; states may receive more tax revenue for 
the same reason. The combined effect of increased state tax revenue and 
decreased spending on uncompensated care may completely offset any 
increase in Medicaid spending. Research has shown that Medicaid 
expansions under the ACA increased hospital revenue and reduced 
spending on locally-funded safety net programs, and it is likely that 
any increase in enrollment in Medicaid and CHIP enrollment that 
indirectly arises from the rule would have similar effects.\57\ Over 
the long-term, Medicaid and CHIP beneficiaries may also have higher 
earnings and pay more in taxes.\58\ Although it is difficult to 
quantify the combined effect of these factors on state and local 
budgets, the Treasury Department and the IRS expect any net impact 
(whether positive or negative) to be small relative to states' total 
Medicaid spending.\59\
---------------------------------------------------------------------------

    \56\ See https://www.urban.org/sites/default/files/publication/104223/changing-the-family-glitch-would-make-health-coverage-more-affordable-for-many-families_1.pdf at pg. 12.
    \57\ https://www.aeaweb.org/articles?id=10.1257/pol.20190279.
    \58\ https://academic.oup.com/restud/article/87/2/792/5538992?login=false.
    \59\ For context, as of May 2022, there were nearly 89 million 
individuals enrolled in Medicaid or CHIP. The change of 90,000 
people predicted by the Urban Institute analysis is a change of 0.1 
percent. See https://www.medicaid.gov/medicaid/national-medicaid-chip-program-information/downloads/may-2022-medicaid-chip-enrollment-trend-snapshot.pdf.
---------------------------------------------------------------------------

    One commenter asserted that Medicaid and CHIP are associated with 
narrow networks of medical providers, making it harder for families to 
find pediatricians and other primary care physicians, dentists, and 
medical specialists. The Treasury Department and the IRS again note 
that the final regulations do not require individuals to enroll in any 
particular type of coverage. Family members who currently are enrolled 
in an employer plan and are determined eligible for Medicaid or CHIP 
when they apply for Exchange coverage are not required to leave the 
employer plan and enroll in Medicaid or CHIP. These family members 
always have a choice to stay in the employer plan if they prefer the 
network of medical providers or other aspects of the employer plan to 
what is provided under Medicaid or CHIP.

IX. Comments Exceeding Scope of Final Regulations

    A number of commenters submitted comments on matters not within the 
purview of the Treasury Department and the IRS. For example, several 
commenters suggested that the U.S. adopt a Medicare-for-all style of 
health coverage or offer universal health coverage in a manner similar 
to the health coverage provided by other countries. Other commenters 
requested that coverage rules be changed so that children over age 25 
could remain enrolled on a parent's health insurance policies, while 
others recommended that health care providers be required to accept 
Medicare and Medicaid insurance. These comments are outside the scope 
of matters handled by the Treasury Department and the IRS and thus are 
not addressed in the final regulations.

X. Severability

    If any provision in this rulemaking is held to be invalid or 
unenforceable facially, or as applied to any person or circumstance, it 
shall be severable from the remainder of this rulemaking, and shall not 
affect the remainder thereof, or the application of the provision to 
other persons not similarly situated or to other dissimilar 
circumstances.

Special Analyses

I. Regulatory Planning and Review--Economic Analysis

    EOs 12866 and 13563 direct agencies to assess costs and benefits of 
available regulatory alternatives and, if regulation is necessary, to 
select regulatory approaches that maximize net benefits (including 
potential economic, environmental, public health and safety effects, 
distributive impacts, and equity). E.O. 13563 emphasizes the importance 
of quantifying both costs and benefits, of reducing costs, of 
harmonizing rules, and of promoting flexibility.
    These final regulations have been designated as subject to review 
under E.O. 12866 pursuant to the 2018 MOA between the Treasury 
Department and OMB regarding review of tax regulations.
A. Background
1. Affordability of Employer Coverage for Family Members of an Employee
    As noted earlier in this preamble, section 36B provides a PTC for 
applicable taxpayers who meet certain eligibility requirements, 
including that the taxpayer or one or more family members is enrolled 
in a QHP for one or more months in which they are not eligible for 
other MEC. However, an individual who is eligible to enroll in employer 
coverage, but chooses not to, is not considered eligible for the 
employer coverage if it is ``unaffordable.'' Section 36B defines 
employer coverage as unaffordable for an employee if the employee's 
share of the self-only premium is more than 9.5 percent of the 
employee's household income.
    Section 1.36B-2(c)(3)(v)(A)(2) provides that affordability of 
employer coverage for each related individual of the employee is 
determined by the cost of self-only coverage. Thus, the employee and 
any related individuals included in the employee's family, within the 
meaning of Sec.  1.36B-1(d), are eligible for MEC and are ineligible 
for the PTC if (1) the plan provides minimum value and (2) the 
employee's share of the self-only coverage is not more than 9.5 percent 
of household income (that is, the self-only coverage for the employee 
is ``affordable'').
2. Description of the Final Regulations
    The final regulations revise Sec.  1.36B-2(c)(3)(v)(A)(2) to 
provide a separate affordability test for related individuals based on 
the cost to the employee of family coverage. The final regulations do 
not change the affordability test for the employee. When a family 
applies for Exchange coverage, the Exchange will ask for information 
concerning which of the family members are offered coverage by their 
own employer, and the family members to whom the employer's coverage 
offer extends. When an applicant for whom APTC is otherwise allowed 
indicates that their employer offers them coverage, the Exchange will 
ask for the premium for self-only coverage for the applicant and make 
an affordability determination for the applicant on that basis. When an 
applicant for whom APTC is otherwise allowed indicates an offer of 
coverage through an employer of another family member, the Exchange 
will ask for the premium for family coverage and make an affordability 
determination for the applicant on that basis. It is therefore

[[Page 61999]]

possible that family members would be eligible for APTC but the 
employee would not. In this case, if the entire family chooses to 
enroll in Exchange coverage with APTC, the APTC would be paid only for 
coverage of the employee's family members but would not be paid for 
coverage of the employee.
B. Baseline
    The Treasury Department and the IRS have assessed the benefits and 
costs of the final regulations relative to a no-action baseline 
reflecting anticipated Federal income tax-related behavior in the 
absence of these regulations.
C. Affected Entities
    Some families with an offer of employer coverage to the employee 
and at least one other family member would be newly eligible for the 
PTC for the Exchange coverage of the non-employee family members. The 
final regulations will have no effect on families for whom self-only 
employer coverage costs more than 9.5 percent of household income--as 
family coverage is more expensive than self-only coverage--because the 
affordability status of their employer coverage is unchanged. 
Similarly, the final regulations will not affect families for whom the 
cost of family employer coverage does not exceed 9.5 percent of 
household income because their coverage is determined to be affordable 
either way. In contrast, the final regulations will affect only family 
members--other than the employee--for whom the employee's cost for the 
available employer coverage does not exceed 9.5 percent of household 
income for a self-only plan but does exceed 9.5 percent of household 
income for a family plan or for whom the offer of the family plan is 
affordable but does not provide minimum value.
    Employers may see some of their employees shift from family 
coverage to self-only coverage when family members newly qualify for 
the PTC. The cost per enrollee could increase or decrease depending on 
the characteristics of those that remain covered. However, this shift 
will likely lead to a small decrease in the total amount employers are 
spending on health coverage--due to covering fewer total people--as the 
Federal government increases spending on PTC for the non-employee 
family members who move from employer coverage to Exchange coverage.
D. Economic Analysis of the Final Regulations
1. Overview
    For some families, the final regulations will lower the premium 
contributions required to purchase coverage for all family members by 
allowing family members other than the employee to receive a PTC. For 
some families with offers of employer coverage who will be newly 
eligible for the PTC, the combined cost of split coverage (self-only 
employer coverage for the employee plus PTC-subsidized Exchange 
coverage for related individuals) will be lower than what they pay for 
family coverage through the employer. Some low-income families with 
uninsured individuals where the employee is offered low-cost, self-only 
employer coverage and relatively high-cost family employer coverage 
will gain access to a lower-cost option through eligibility for the PTC 
on behalf of one or more related individuals.
    However, the cost for families to purchase Exchange coverage with 
PTC is determined in part by the applicable percentage and household 
income, which are the same regardless of the number of individuals 
actually covered. Therefore, if the number of individuals needing 
Exchange coverage is small--such as when some family members have 
access to other MEC--the cost of Exchange coverage per enrollee is 
relatively high when added to the cost of the employee share of self-
only employer coverage. Furthermore, split coverage also means multiple 
deductibles and maximum out-of-pocket limits for the family, which 
potentially increases out-of-pocket costs for families. As a result of 
these features, many families with offers of employer coverage who will 
be newly eligible for the PTC under the final regulations--including 
families with some uninsured individuals--would not see any savings in 
the combined cost of out-of-pocket premiums and cost sharing. Lastly, 
many families may prefer the benefits and provider networks of employer 
coverage, compared to Exchange coverage.
    Taking all these factors into account, the Treasury Department and 
the IRS expect new take-up of Exchange coverage may be modest relative 
to the size of the newly eligible population and relative to the total 
number of individuals who are either uninsured or covered by employer 
coverage because many will either still prefer employer coverage or 
prefer to purchase other goods and services, or save or invest, rather 
than insure all family members.
    The Office of Tax Analysis has evaluated the effect of the policy 
change on health insurance coverage decisions and the Federal deficit. 
The policy change is predicted to increase the number of individuals 
with PTC-subsidized Exchange coverage by approximately 1 million and 
increase the Federal deficit by an average of $3.8 billion per year 
over the next 10 years. The deficit increases as enrollment in PTC-
subsidized Exchange coverage increases, offset by a modest decrease in 
the tax exclusion for employer coverage.\60\ These changes to the 
revenue effect associated with the PTC as well as the tax exclusion for 
employer coverage are transfer payments. Transfer payments are neither 
a cost nor a benefit. The analysis relied on tax data as well as the 
Medical Expenditure Panel Survey. The Medical Expenditure Panel Survey 
dataset includes several variables that are not observed in the tax 
data such as employee contribution amounts for family coverage as well 
as health care utilization.
---------------------------------------------------------------------------

    \60\ The predictions rely on various assumptions including, but 
not limited to, the economic and technical assumptions from the 2023 
Mid-Session Review. The assumptions are based on the current law 
baseline as of August 31, 2022. The baseline includes the PTC 
changes enacted under the IRA.
---------------------------------------------------------------------------

2. Benefits
    Gain of health insurance coverage. For those individuals who are 
uninsured because the premiums for family coverage through a family 
member's employer are unaffordable, gaining access to the PTC for the 
purchase of Exchange coverage may make coverage more affordable and may 
prompt some of them to take up coverage.
    Additional health insurance option. For those individuals who are 
covered by family coverage through a family member's employer that 
costs more than 9.5 percent of their household income, the final 
regulations will, by providing access to a PTC, give them an additional 
option that could provide coverage at a lower cost or with more 
comprehensive benefits.
3. Costs
    Administrative costs. Adding this new option for eligibility for 
PTC increases the cost to the IRS to evaluate PTC claims. The IRS's PTC 
infrastructure will require one-time changes to certain processes, 
forms, and instructions to be implemented in time for the 2023 taxable 
year, and the cost of these changes is expected to be negligible. The 
Centers for Medicare & Medicaid Services (CMS), as the administrator of

[[Page 62000]]

the Federally-facilitated Exchanges and the Federal Exchange 
eligibility and enrollment platform, and the State Exchanges that 
operate their own Exchange eligibility and enrollment platforms will 
also incur administrative costs as the Exchanges will have primary 
responsibility for implementing the rule as part of the eligibility and 
enrollment process when families are applying for Exchange coverage 
with APTC. Exchanges will incur one-time costs to update Exchange 
eligibility systems to account for the new treatment of family 
contribution amounts for employer coverage for purposes of determining 
eligibility for APTC. In addition, CMS, State Exchanges, State Medicaid 
Agencies, and CMS-approved Enhanced Direct Enrollment partners will 
incur administrative costs to make conforming updates to their 
respective consumer applications and consumer-facing affordability 
tools. The Treasury Department and the IRS anticipate total 
administrative costs to CMS, the Exchanges, State Medicaid Agencies, 
and Enhanced Direct Enrollment partners associated with the final 
regulation to be modest.
    The Treasury Department and the IRS do not expect any new 
administrative costs for employers because the final regulations do not 
impose new reporting requirements. Under current regulations, ALEs must 
report the cost of self-only coverage on Form 1095-C. The primary 
purpose of this reporting is to collect information relevant for the 
administration of the employer shared responsibility provisions in 
section 4980H. Because the cost of family coverage is not relevant for 
computing the employer shared responsibility payment, the final 
regulations do not require ALEs to report the cost of family coverage 
on Form 1095-C. Further, as noted earlier in this preamble, these final 
regulations do not amend the regulations under section 6055 or 6056, 
and the IRS does not intend to revise Form 1095-B or Form 1095-C to 
require any additional data elements related to the new rules.
4. Transfer Payments
    Increased PTC costs for new Exchange enrollees. Because some 
individuals may be newly eligible for the PTC, some individuals may 
move from employer coverage or uninsured status to Exchange coverage. 
Thus, the final regulations may increase the amount of PTC being paid 
by the government and reduce employer contributions.
    Decreased employer exclusion for people who drop employer coverage. 
If individuals drop their employer coverage, or do not enroll when they 
otherwise would have, to take up Exchange coverage, the amount of money 
that was going toward their employer coverage, which provides tax-
preferred health benefits, will go into the employee's wages, other 
employees' wages, and/or employer profits and will no longer be tax 
exempt. Thus, the final regulations may increase the amount of tax 
revenue received from income and payroll taxes.

II. Paperwork Reduction Act

    This final rule does not include information collections under the 
Paperwork Reduction Act (5 U.S.C. chapter 35).

III. Regulatory Flexibility Act

    It is hereby certified that these final regulations will not have a 
significant economic impact on a substantial number of small entities 
within the meaning of section 601(6) of the Regulatory Flexibility Act 
(5 U.S.C. chapter 6).
    As mentioned in the response to commenters, the Treasury Department 
and the IRS hereby certify that these final regulations will not have a 
significant economic impact on a substantial number of small entities. 
This certification is based on the fact that the majority of the effect 
of the final regulations falls on individual taxpayers, and entities 
will experience only small changes.
    Pursuant to section 7805(f) of the Code, these final regulations 
were submitted to the Chief Counsel for the Office of Advocacy of the 
Small Business Administration for comment on their impact on small 
business, and no comments were received.

IV. Unfunded Mandates Reform Act

    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) 
requires that agencies assess anticipated costs and benefits and take 
certain other actions before issuing a final rule that includes any 
Federal mandate that may result in expenditures in any one year by a 
state, local, or tribal government, in the aggregate, or by the private 
sector, of $100 million (updated annually for inflation). This rule 
does not include any Federal mandate that may result in expenditures by 
state, local, or tribal governments, or by the private sector in excess 
of that threshold.

V. Executive Order 13132: Federalism

    E.O. 13132 (Federalism) prohibits an agency from publishing any 
rule that has Federalism implications if the rule either imposes 
substantial, direct compliance costs on state and local governments, 
and is not required by statute, or preempts state law, unless the 
agency meets the consultation and funding requirements of section 6 of 
the E.O. This rule does not have Federalism implications and does not 
impose substantial direct compliance costs on state and local 
governments or preempt state law within the meaning of the E.O.

VI. Congressional Review Act

    Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.), 
the Office of Information and Regulatory Affairs designated this rule 
as a major rule as defined by 5 U.S.C. 804(2).

Statement of Availability of IRS Documents

    Guidance cited in this preamble is published in the Internal 
Revenue Bulletin and is available from the Superintendent of Documents, 
U.S. Government Publishing Office, Washington, DC 20402, or by visiting 
the IRS website at https://www.irs.gov.

Drafting Information

    The principal author of these regulations is Clara L. Raymond of 
the Office of Associate Chief Counsel (Income Tax and Accounting). 
However, other personnel from the Treasury Department and the IRS 
participated in the development of these regulations.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Adoption of Amendments to the Regulations

    Accordingly, the Treasury Department and the IRS amend 26 CFR part 
1 as follows:

PART 1--INCOME TAXES

0
Paragraph 1. The authority citation for part 1 continues to read in 
part as follows:

    Authority:  26 U.S.C. 7805 * * *


0
Par. 2. Section 1.36B-0 is amended by:
0
a. Adding an entry for Sec.  1.36B-2(c)(3)(v)(A)(8);
0
b. Adding entries for Sec.  1.36B-6(a)(1) and (2) and (a)(2)(i) and 
(ii); and
0
c. Revising the entry for Sec.  1.36B-6(g)(2).
    The additions and revisions read as follows:


Sec.  1.36B-0  Table of contents.

* * * * *


Sec.  1.36B-2   Eligibility for premium tax credit.

* * * * *

[[Page 62001]]

    (c) * * *
    (3) * * *
    (v) * * *
    (A) * * *
    (8) Multiple offers of coverage.
* * * * *


Sec.  1.36B-6  Premium tax credit definitions.

    (a) * * *
    (1) Employees.
    (2) Related individuals
    (i) In general.
    (ii) Plans providing MV to employees.
* * * * *
    (g) * * *
    (2) Exceptions.

0
Par. 3. Section 1.36B-2 is amended by:
0
a. Revising the first sentence and adding a new second sentence in 
paragraph (c)(3)(v)(A)(2).
0
b. Adding paragraph (c)(3)(v)(A)(8).
0
c. Revising the second sentence of paragraph (c)(3)(v)(B).
0
d. In paragraph (c)(3)(v)(D), Examples 1 through 9 are designated as 
paragraphs (c)(3)(v)(D)(1) through (9), respectively.
0
e. In newly designated paragraphs (c)(3)(v)(D)(3), (5), (6), (7), and 
(9), redesignating the paragraphs in the first column as the paragraphs 
in the second column:

------------------------------------------------------------------------
              Old paragraphs                       New paragraphs
------------------------------------------------------------------------
(c)(3)(v)(D)(3)(i) through (ii)...........  (c)(3)(v)(D)(3)(i) through
                                             (ii)
(c)(3)(v)(D)(5)(i) through (ii)...........  (c)(3)(v)(D)(5)(i) through
                                             (ii)
(c)(3)(v)(D)(6)(i) through (ii)...........  (c)(3)(v)(D)(6)(i) through
                                             (ii)
(c)(3)(v)(D)(7)(i) through (iv)...........  (c)(3)(v)(D)(7)(i) through
                                             (iv)
(c)(3)(v)(D)(9)(i) through (ii)...........  (c)(3)(v)(D)(9)(i) through
                                             (ii)
------------------------------------------------------------------------

0
f. Revising newly redesignated paragraphs (c)(3)(v)(D)(1) and (2).
0
g. Redesignating paragraphs (c)(3)(v)(D)(3) through (9) as paragraphs 
(c)(3)(v)(D)(7) through (13), respectively.
0
h. Adding new paragraphs (c)(3)(v)(D)(3) through (6).
0
i. Revising the heading for newly redesignated paragraph 
(c)(3)(v)(D)(7), the heading and first sentence of newly redesignated 
paragraph (c)(3)(v)(D)(8), the heading of newly redesignated paragraph 
(c)(3)(v)(D)(9), and the first sentence of newly redesignated paragraph 
(c)(3)(v)(D)(9)(i).
0
j. In the headings for newly redesignated paragraphs (c)(3)(v)(D)(10) 
through (13), removing the first period and adding a colon in its 
place.
0
k. Revising paragraph (e)(1).
0
l. Adding paragraph (e)(5).
    The revisions and additions read as follows:


Sec.  1.36B-2  Eligibility for premium tax credit.

* * * * *
    (c) * * *
    (3) * * *
    (v) * * *
    (A) * * *
    (2) * * * Except as provided in paragraph (c)(3)(v)(A)(3) of this 
section, an eligible employer-sponsored plan is affordable for a 
related individual if the employee's required contribution for family 
coverage under the plan does not exceed the required contribution 
percentage, as defined in paragraph (c)(3)(v)(C) of this section, of 
the applicable taxpayer's household income for the taxable year. For 
purposes of this paragraph (c)(3)(v)(A)(2), an employee's required 
contribution for family coverage is the portion of the annual premium 
the employee must pay for coverage of the employee and all other 
individuals included in the employee's family, as defined in Sec.  
1.36B-1(d), who are offered coverage under the eligible employer-
sponsored plan. * * *
* * * * *
    (8) Multiple offers of coverage. An individual who has offers of 
coverage under eligible employer-sponsored plans from multiple 
employers, either as an employee or a related individual, has an offer 
of affordable coverage if at least one of the offers of coverage is 
affordable under paragraph (c)(3)(v)(A)(1) or (2) of this section.
    (B) * * * Coverage under an eligible employer-sponsored plan is 
affordable for a part-year period if the annualized required 
contribution for self-only coverage, in the case of an employee, or 
family coverage, in the case of a related individual, under the plan 
for the part-year period does not exceed the required contribution 
percentage of the applicable taxpayer's household income for the 
taxable year. * * *
* * * * *
    (D) * * *
    (1) Example 1: Basic determination of affordability. For all of 
2023, taxpayer C works for an employer, X, that offers its employees 
and their spouses a health insurance plan under which, to enroll in 
self-only coverage, C must contribute an amount for 2023 that does not 
exceed the required contribution percentage of C's 2023 household 
income. Because C's required contribution for self-only coverage does 
not exceed the required contribution percentage of C's household 
income, under paragraph (c)(3)(v)(A)(1) of this section, X's plan is 
affordable for C, and C is eligible for minimum essential coverage for 
all months in 2023.
    (2) Example 2: Basic determination of affordability for a related 
individual. (i) The facts are the same as in paragraph (c)(3)(v)(D)(1) 
of this section (Example 1), except that C is married to J, they file a 
joint return, and to enroll C and J, X's plan requires C to contribute 
an amount for coverage for C and J for 2023 that exceeds the required 
contribution percentage of C's and J's household income. J does not 
work for an employer that offers employer-sponsored coverage.
    (ii) J is a member of C's family as defined in Sec.  1.36B-1(d). 
Because C's required contribution for coverage of C and J exceeds the 
required contribution percentage of C's and J's household income, under 
paragraph (c)(3)(v)(A)(2) of this section, X's plan is unaffordable for 
J. Accordingly, J is not eligible for minimum essential coverage for 
2023. However, under paragraph (c)(3)(v)(A)(1) of this section, X's 
plan is affordable for C, and C is eligible for minimum essential 
coverage for all months in 2023.
    (3) Example 3: Multiple offers of coverage. The facts are the same 
as in paragraph (c)(3)(v)(D)(2) of this section (Example 2), except 
that J works all year for an employer that offers employer-sponsored 
coverage to employees. J's required contribution for the cost of self-
only coverage from J's employer does not exceed the required 
contribution percentage of C's and J's household income. Although the 
coverage offered by C's employer for C and J is unaffordable for J, the 
coverage offered by J's employer is affordable for J. Consequently, 
under paragraphs (c)(3)(v)(A)(1) and (8) of this section, J is eligible 
for minimum essential coverage for all months in 2023.
    (4) Example 4: Cost of covering individuals not part of taxpayer's 
family. (i) D and E are married, file a joint return, and have two 
children, F and G, under age 26. F is a dependent of D and E, but G is 
not. D works all year for an employer that offers employer-sponsored 
coverage to employees, their spouses, and their children under age 26. 
E, F, and G do not work for employers offering coverage. D's required 
contribution for self-only coverage under D's employer's coverage does 
not exceed the required contribution percentage of D's and E's 
household income. D's required contribution for coverage of D, E, F, 
and G exceeds the required contribution percentage of D's and E's 
household income, but D's required contribution for coverage of D, E, 
and F does not exceed the required contribution percentage of the 
household income.
    (ii) E and F are members of D's family as defined in Sec.  1.36B-
1(d). G is not a member of D's family under Sec.  1.36B-

[[Page 62002]]

1(d), because G is not D's dependent. Under paragraph (c)(3)(v)(A)(1) 
of this section, D's employer's coverage is affordable for D because 
D's required contribution for self-only coverage does not exceed the 
required contribution percentage of D's and E's household income. D's 
employer's coverage also is affordable for E and F, because, under 
paragraph (c)(3)(v)(A)(2) of this section, D's required contribution 
for coverage of D, E, and F does not exceed the required contribution 
percentage of D's and E's household income. Although D's cost to cover 
D, E, F, and G exceeds the required contribution percentage of D's and 
E's household income, under paragraph (c)(3)(v)(A)(2) of this section, 
the cost to cover G is not considered in determining whether D's 
employer's coverage is affordable for E and F, regardless of whether G 
actually enrolls in the plan, because G is not in D's family. D, E, and 
F are eligible for minimum essential coverage for all months in 2023. 
Under paragraph (c)(4)(i) of this section, G is considered eligible for 
the coverage offered by D's employer only if G enrolls in the coverage.
    (5) Example 5: More than one family member with an employer 
offering coverage. (i) K and L are married, file a joint return, and 
have one dependent child, M. K works all year for an employer that 
offers coverage to employees, spouses, and children under age 26. L 
works all year for an employer that offers coverage to employees only. 
K's required contribution for self-only coverage under K's employer's 
coverage does not exceed the required contribution percentage of K's 
and L's household income. Likewise, L's required contribution for self-
only coverage under L's employer's coverage does not exceed the 
required contribution percentage of K's and L's household income. 
However, K's required contribution for coverage of K, L, and M exceeds 
the required contribution percentage of K's and L's household income.
    (ii) L and M are members of K's family as defined in Sec.  1.36B-
1(d). Under paragraph (c)(3)(v)(A)(1) of this section, K's employer's 
coverage is affordable for K because K's required contribution for 
self-only coverage does not exceed the required contribution percentage 
of K's and L's household income. Similarly, L's employer's coverage is 
affordable for L, because L's required contribution for self-only 
coverage does not exceed the required contribution percentage of K's 
and L's household income. Thus, K and L are eligible for minimum 
essential coverage for all months in 2023. However, under paragraph 
(c)(3)(v)(A)(2) of this section, K's employer's coverage is 
unaffordable for M, because K's required contribution for coverage of 
K, L, and M exceeds the required contribution percentage of K's and L's 
household income. Accordingly, M is not eligible for minimum essential 
coverage for 2023.
    (6) Example 6: Multiple offers of coverage for a related 
individual. (i) The facts are the same as in paragraph (c)(3)(v)(D)(5) 
of this section (Example 5), except that L works all year for an 
employer that offers coverage to employees, spouses, and children under 
age 26. L's required contribution for coverage of K, L, and M does not 
exceed the required contribution percentage of K's and L's household 
income.
    (ii) Although M is not eligible for affordable employer coverage 
under K's employer's coverage, paragraph (c)(3)(v)(A)(8) of this 
section dictates that L's employer coverage must be evaluated to 
determine whether L's employer coverage is affordable for M. Under 
paragraph (c)(3)(v)(A)(2) of this section, L's employer's coverage is 
affordable for M, because L's required contribution for K, L, and M 
does not exceed the required contribution percentage of K's and L's 
household income. Accordingly, M is eligible for minimum essential 
coverage for all months in 2023.
    (7) Example 7: Determination of unaffordability at enrollment. * * 
*
    (8) Example 8: Determination of unaffordability for plan year. The 
facts are the same as in paragraph (c)(3)(v)(D)(7) of this section 
(Example 7), except that X's employee health insurance plan year is 
September 1 to August 31. * * *
    (9) Example 9: No affordability information affirmatively provided 
for annual redetermination. (i) The facts are the same as in paragraph 
(c)(3)(v)(D)(7) of this section (Example 7), except the Exchange 
redetermines D's eligibility for advance credit payments for 2015. * * 
*
* * * * *
    (e) * * *
    (1) Except as provided in paragraphs (e)(2) through (5) of this 
section, this section applies to taxable years ending after December 
31, 2013.
* * * * *
    (5) The first two sentences of paragraph (c)(3)(v)(A)(2), paragraph 
(c)(3)(v)(A)(8), the second sentence of paragraph (c)(3)(v)(B), 
paragraphs (c)(3)(v)(D)(1) through (6), and the first sentences of 
paragraphs (c)(3)(v)(D)(8) and (9) of this section apply to taxable 
years beginning after December 31, 2022.

0
Par. 4. Section 1.36B-3 is amended by revising paragraphs (d)(1)(i) and 
(n)(1) and adding paragraph (n)(3) to read as follows:


Sec.  1.36B-3   Computing the premium assistance credit amount.

* * * * *
    (d) * * *
    (1) * * *
    (i) The premiums for the month, reduced by any amounts that were 
refunded in the same taxable year as the premium liability is incurred, 
for one or more qualified health plans in which a taxpayer or a member 
of the taxpayer's family enrolls (enrollment premiums); or
* * * * *
    (n) * * *
    (1) Except as provided in paragraphs (n)(2) and (3) of this 
section, this section applies to taxable years ending after December 
31, 2013.
* * * * *
    (3) Paragraph (d)(1)(i) of this section applies to taxable years 
beginning after December 31, 2022.

0
Par. 5. Section 1.36B-6 is amended by revising paragraphs (a) and 
(g)(2) to read as follows:


Sec.  1.36B-6   Minimum value.

    (a) In general--(1) Employees. An eligible employer-sponsored plan 
provides minimum value (MV) for an employee of the employer offering 
the coverage only if--
    (i) The plan's MV percentage, as defined in paragraph (c) of this 
section, is at least 60 percent based on the plan's share of the total 
allowed costs of benefits provided to the employee; and
    (ii) The plan provides substantial coverage of inpatient hospital 
services and physician services.
    (2) Related individuals--(i) In general. An eligible employer-
sponsored plan provides MV for an individual who may enroll in the plan 
because of a relationship to an employee of the employer offering the 
coverage (a related individual) only if--
    (A) The plan's MV percentage, as defined in paragraph (c) of this 
section, is at least 60 percent based on the plan's share of the total 
allowed costs of benefits provided to the related individual; and
    (B) The plan provides substantial coverage of inpatient hospital 
services and physician services.
    (ii) Plans providing MV to employees. If an eligible employer-
sponsored plan provides MV to an employee under paragraph (a)(1) of 
this section, the plan also provides MV for related individuals if--

[[Page 62003]]

    (A) The scope of benefits is the same for the employee and related 
individuals; and
    (B) Cost sharing (including deductibles, co-payments, coinsurance, 
and out-of-pocket maximums) under the plan is the same for the employee 
and related individuals under the tier of coverage that would, if 
elected, include the employee and all related individuals (disregarding 
any differences in deductibles or out-of-pocket maximums that are 
attributable to a different tier of coverage, such as self plus one 
versus family coverage).
* * * * *
    (g) * * *
    (2) Exceptions. (i) Paragraph (a)(1)(ii) of this section applies 
for plan years beginning after November 3, 2014; and
    (ii) Paragraph (a)(2) of this section applies to taxable years 
beginning after December 31, 2022.

Douglas W. O'Donnell,
Deputy Commissioner for Services and Enforcement.
    Approved: October 1, 2022.
Lily Batchelder,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2022-22184 Filed 10-11-22; 8:45 am]
BILLING CODE 4830-01-P