HCR: Affordable Care Act Affordability Rate Effective January 1, 2020

Keenan Briefings


HCR: Affordable Care Act Affordability Rate Effective January 1, 2020

July 25, 2019

On July 23, 2019, the Internal Revenue Service issued Revenue Procedure 2019-29 to update the required contribution percentage used to determine whether an individual is being offered affordable employer-sponsored coverage. This percentage is particularly helpful in satisfying the Federal Poverty Level safe harbor percentage and planning for the upcoming Plan Year.

In 2019, an employer-sponsored group health plan that provided minimum essential coverage was deemed to be “affordable” if the required employee contribution for the lowest cost, self-only coverage with minimum value, was no more than 9.86% of the Federal Poverty Level. For Plan Years beginning on or after January 1, 2020, the percentage has been reduced to 9.78%.

Among other things, this means that employers who use the Federal Poverty Level safe harbor as a demonstration of affordability must adjust the amount that employees will pay. Because the amount has been reduced from 9.86% to 9.78%, the cost an employee can pay for the lowest cost self-only minimum essential coverage can be no greater than $101.79 per month ($12, 490/12 x 9.78%).

Please contact your Keenan Account Manager for questions regarding this Briefing.

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