ERIC Urges Obama Administration To Clarify Dependent Coverage Requirements

from Spencer’s Benefits Reports: The ERISA Industry Committee (ERIC) is urging the Obama Administration to clarify and support the interpretation that employers are not required to offer dependent coverage in order to meet their shared responsibility obligations under the Patient Protection and Affordable Care Act (ACA).

In an August 27 letter to Deputy Assistant to the President for Health Policy Jeanne Lambrew, ERIC expressed concern that the executive branch agencies might inappropriately interpret the ACA to require employers to offer dependent coverage regardless of whether the dependent coverage is affordable or sufficiently valuable. ERIC argued that this interpretation is not consistent with the statute and would have significant negative effects on the nation’s large employers without producing a meaningful increase in dependent coverage.

“We urge the President to support regulations or other guidance clarifying that employers are not obligated to offer dependent coverage and are not liable for a shared responsibility penalty if they decline to cover dependents,” said ERIC president and chief executive officer Scott Macey and senior vice president for health policy Gretchen Young.

ERIC’s letter explains that, although the shared responsibility provisions refer to health coverage for full-time employees and their dependents (the latter being referred to in a parenthetical), the penalties are based solely on the number of an employer’s full-time employees: dependents do not enter into the penalty calculation. An employer that offers affordable health coverage to all of its full-time employees is not subject to any shared responsibility penalty, regardless of whether the employer offers dependent coverage.

“If Congress had intended to create a dramatic new mandate that penalized employers for failing to offer dependent coverage, Congress would have done so much more directly (and more effectively) than the statute achieves with its parenthetical reference to dependents,” Macey and Young wrote. ERIC believes that the reference to dependents in the shared responsibility provisions is merely a drafting error (resulting from the legislative confusion during the passage of the ACA), one that should be corrected in agency guidance, they added.

The letter also warns that, while some commenters have suggested that the statute should be interpreted to require employers to offer dependent coverage on an employee-pay-all basis, a mandate to offer unsubsidized dependent coverage would impose substantial burdens and costs on the employer without increasing the dependents’ access to affordable health coverage.

ERIC contends that this suggestion misperceives the administrative burden that an employer must bear if it introduces dependent coverage, even on an employee-pay-all basis, and that such a mandate would not accomplish ACA’s central goal, which is to increase access to affordable health coverage.

“In fact, an employer might do its low-income employees a disservice by offering unsubsidized dependent coverage, since the availability of the coverage might make the employee ineligible for premium tax credits and other financial assistance with respect to the dependent,” ERIC argues.

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