n-17-74.pdf

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Section 5000A Guidance for Individuals with No Available Marketplace Bronze-Level
Plan

Notice 2017-74

PURPOSE
This notice provides guidance on computing the affordability exemption under
§ 5000A(e)(1) of the Internal Revenue Code (Code) and § 1.5000A-3(e) of the Income
Tax Regulations (Regulations) for taxpayers with a family member who (i) is not eligible
for coverage under an eligible employer-sponsored plan, and (ii) resides in an area in
which the Health Insurance Marketplace (Marketplace) serving the area does not offer a
bronze-level qualified health plan.
BACKGROUND
For each month beginning after December 31, 2013, § 5000A of the Code
requires individuals to do one of the following: (i) maintain minimum essential coverage
for themselves and any family members who are not exempt under § 5000A and
§ 1.5000A-3 of the Regulations, (ii) qualify for a coverage exemption, or (iii) include an
individual shared responsibility payment with their Federal income tax return for the
taxable year.
Section 5000A(e)(1) of the Code provides that an individual qualifies for an
exemption for a month for which the individual lacks access to affordable minimum
essential coverage. An individual lacks access to affordable coverage if the individual's
required contribution (determined on an annual basis) for minimum essential coverage

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exceeds a percentage (8.16 percent for 2017) of the individual's household income for
the taxable year.
For individuals who are ineligible to purchase coverage under an eligible
employer-sponsored plan, the required contribution is the annual premium for the
applicable plan, reduced by the maximum amount of any credit allowable under § 36B
of the Code for the taxable year, determined as if the individual were covered for the
entire taxable year by a qualified health plan offered through the Marketplace serving
the rating area where the individual resides. In general, an applicable plan means the
lowest cost bronze plan available through the Marketplace serving the rating area in
which the individual resides that would cover all nonexempt members of the individual’s
family on one policy. However, if the Marketplace serving the rating area where the
individual resides does not offer a single bronze plan covering all nonexempt members
of the individual’s family, the premium for the applicable plan is the sum of the
premiums for the lowest cost bronze plans that are offered through the Marketplaces
serving the rating areas where one or more of the family members reside that would
cover, in the aggregate, all the nonexempt members of the family. A nonexempt family
member is an individual in the family who is not otherwise exempt under § 1.5000A-3 of
the Regulations and is ineligible for coverage under an eligible employer-sponsored
plan under § 1.5000A-3(e)(3)(i).
GUIDANCE
Market instability has resulted in limited offerings of plans on the Marketplaces in
some regions, and, as a result, there are some individuals who live in rating areas
where no bronze plan was offered for 2017. Thus, affected taxpayers would not be able

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to make a determination as to whether an individual not eligible for employer-sponsored
coverage who lives in a rating area without a bronze plan is eligible for the affordability
exemption.
Individuals who are not eligible for coverage under an eligible employer-
sponsored plan and who lack access to affordable coverage should not be denied the
use of the affordability exemption under § 5000A(e)(1) of the Code and § 1.5000A-3(e)
of the Regulations merely because they reside in an area served by a Marketplace that
does not offer a bronze-level plan. Consequently, for purposes of the affordability
exemption under § 5000A(e)(1) and § 1.5000A-3(e), if an individual resides in a rating
area served by a Marketplace that does not offer a bronze plan, the individual generally
should use as his or her applicable plan the lowest cost metal-level plan available in the
Marketplace serving the rating area in which the individual resides that would cover all
nonexempt members of the individual's family. However, if the Marketplace serving the
rating area where an affected taxpayer resides does not offer a single bronze plan (or, if
no bronze plan is available through the Marketplace, any lowest cost metal-level plan)
that would cover all nonexempt members of the affected taxpayer’s family, the affected
taxpayer should determine the applicable plan by adding the premiums for the lowest
cost bronze plans, or the lowest cost metal-level plans if a bronze plan is not offered,
that would cover in the aggregate all of the nonexempt members of the affected
taxpayer’s family.
Example 1. Individual K resides in an area served by a Marketplace that does
not offer a bronze plan but does offer several silver plans. K is not eligible for employer-
sponsored coverage. To determine if he qualifies for the affordability exemption under

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§ 5000A(e)(1) of the Code and § 1.5000A-3(e) of the Regulations, K should use as his
applicable plan the lowest cost silver plan available in the Marketplace that would cover
K.
Example 2. Individual J has three dependents, A, B, and C. None of the four
family members is eligible for employer-sponsored coverage. A and B reside with J in
an area served by a Marketplace that offers bronze plans. C resides with J’s former
spouse in an area served by a Marketplace that does not offer a bronze plan but does
offer a silver plan. The Marketplace serving the area where J resides offers bronze
plans that cover J and her three dependents. Thus, J uses the lowest cost bronze plan
offered by the Marketplace serving the area where J resides as her applicable plan to
determine if J qualifies for the affordability exemption under § 5000A(e)(1) of the Code
and § 1.5000A-3(e) of the Regulations.
Example 3. Same facts as Example 2 except, although the Marketplace where J
resides offers bronze plans covering J, A, and B under one policy, none of these plans
also cover C. Because no bronze plan in the Marketplace serving the area where J
resides covers all nonexempt members of J’s family, J must aggregate the cost of more
than one plan to determine the premium for J’s applicable plan. J adds the cost of the
lowest cost bronze plan covering J, A, and B and, because the Marketplace where C
resides offers no bronze plans, the cost of the lowest cost silver plan offered by the
Marketplace serving the area where C resides, to determine if J qualifies for the
affordability exemption under § 5000A(e)(1) of the Code and § 1.5000A-3(e) of the
Regulations.

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EFFECTIVE DATE
This notice applies for taxable years ending after December 31, 2016.
CONTACT INFORMATION
The further information regarding this notice, contact Steve Toomey at (202) 317-
4718 or Shareen Pflanz at (202) 317-7006 (not a toll-free call).