The Internal Revenue Service (IRS) has started giving more details about the help individuals are supposed to get when they buy minimum essential health coverage in 2014.

The IRS has described program details in a batch of Health Insurance Premium Tax Credit draft regulations set to appear in the Federal Register Aug. 17. The PPACA sections are supposed to create a new, exchange-based health insurance distribution system and a refundable premium tax credit that individuals and families can use to buy coverage from exchanges.

The U.S. Department of Health and Human Services (HHS) released a second batch of draft regulations, concerning exchange eligibility determination procedures and employer exchange standards. The HHS regulations describe the tasks an exchange would perform to help determine whether applicants were eligible for Medicaid, Children’s Health Insurance Program (CHIP) coverage, the tax credits aimed at moderate-income taxpayers, or other programs or subsidies.

If act provisions take effect as written and work as drafters expect, new “affordable insurance exchanges” are supposed to start selling standardized health plans to individuals starting in 2014, and Small Business Health Options Program (SHOP) exchanges are supposed to start making subsidized coverage available to small employers that same year. States could choose to combine the individual and small group exchanges or set up separate exchange systems.

The IRS deals in its draft regulations with matters such as the possibility an individual’s marital status or income could change during a tax year.

A worker eligible to participate in an employer-sponsored plan could buy exchange coverage instead if the worker could show that participating in the employer plan would cost more than 9.5% of the worker’s household income.

If a worker’s income increased during the course of a tax year, participating in the employer’s plan could suddenly become affordable, officials say.

To keep workers in that situation from facing big tax bills, the IRS has proposed creating an “employee affordability safe harbor.”

“Under the safe harbor, an eligible employer-sponsored plan is treated as unaffordable for an entire plan year,” IRS officials say in the preamble to their draft regulations. “Thus, for the months during the plan year (which may coincide or overlap with the taxable year) a taxpayer will not lose credit eligibility because, as a result of changes during the taxable year, the employer coverage would have been affordable based on the household income for that taxable year.”

The taxpayer could still lose tax credit eligibility for other reasons, such as an increase in household income for the 400% of the federal poverty limit, officials say.

PPACA will require a large employer that fails to offer employees affordable coverage to pay a penalty for each employee who buys exchange coverage.

Commenters have suggested that some employees might somehow turn out to be eligible for refundable tax credits even if the employers offer affordable, high-quality coverage. In those cases, even employers that offer affordable, high-quality coverage could end up paying penalties, the commenters have told the IRS.

The IRS wants to keep the employee affordability safe harbor from increasing that risk. The IRS will be developing regulations that make it clear that employee use of the affordability safe harbor will not result in the employer paying a penalty, officials say.

The IRS also is responding to concerns about employer plan affordability calculations for a worker with a household income that happens to be lower than the worker’s W-2 income, due to factors such as deductions or a spouse’s business losses.

The IRS intends to develop a safe harbor that will keep an employer in that situation from having to pay penalties, officials say.

“Notwithstanding this safe harbor, employees’ eligibility for a premium tax credit would continue to be based on affordability of employer-sponsored coverage relative to employees’ household income,” officials say.