ACA Compliance: Group Plan Affordability Level Set for 2022

The IRS has announced the new affordability requirement test percentage that group health plans must comply with to conform to the Affordable Care Act. Starting in 2022, the cost of self-only group plans offered to workers by employers that are required to comply with the ACA, must not exceed 9.61% of each employee’s household income.

Under the ACA, “applicable large employers” – that is, those with 50 or more full-time and/or full-time equivalent employees – are required to provide health insurance that covers 10 essential benefits. Also, those benefits must be considered “affordable,” meaning that the employee’s share of premiums may not exceed a certain level (currently set at 9.83%).

The affordability threshold must apply to the least expensive plan that an employer offers its workers. The threshold has been reduced from the 2021 level because premiums for employer-sponsored health coverage increased at a lower rate than usual this year as many people stayed away from hospitals for routine procedures due to the pandemic.

Affordability example

The lowest-paid worker at Company A earns $25,987 per year. To meet the affordability requirement, the worker would have to pay no more than $2,497 a year in premium (or $208 a month).

Out-of-pocket maximums

The IRS also sets out-of-pocket maximum cost-sharing levels for every year. This covers plan deductibles, copayments and percentage-of-cost co-sharing payments. It does not cover premiums.

Penalty alert

Failing to offer a plan that meets the affordability requirement to 95% of full time employees will trigger penalties of $4,060 per worker receiving subsidized coverage through an exchange. That’s the full-year penalty, but it’s typically charged monthly.

Out-of-pocket limits for 2022

The new out-of-pocket limits for 2022 are as follows:

• Self-only plans – $8,700, up from $8,550 in 2021.
• Family plans – $17,400, up from $17,100 in 2021.
• Self-only HSA-qualified HDHPs – $7,050, up from $7,000 in 2021.
• Family HSA-qualified HDHPs – $14,100, up from $14,000 in 2021.