Understanding the Affordability Thresholds in ACA Health Insurance

The Affordable Care Act (ACA) has made health insurance more accessible and affordable for millions of Americans. One of the key provisions of the ACA is the premium tax credit, which helps eligible individuals and families lower their monthly health insurance premiums. However, there are certain requirements that must be met to qualify for the premium tax credit, including the affordability of employer-sponsored health insurance.

What is the Affordability Threshold?

Under the ACA, employer-sponsored health insurance is considered affordable if the cost of employee-only coverage is less than 9.86% of the household income for the year. This means that if the cost of employee-only coverage is less than this percentage, the employee is not eligible for the premium tax credit.

Applying the Affordability Threshold to Families

While the affordability threshold generally applies to the cost of employee-only coverage, there is an exception for families. If an employer offers affordable coverage for the employee only, but not for the employee’s dependents, the employee may still receive the premium tax credit to cover the cost of the dependents’ coverage on the marketplace.

How to Determine Affordability

To determine if your employer-sponsored health insurance is affordable, you need to compare the cost of employee-only coverage to your household income. You can find the cost of employee-only coverage on your employer’s health insurance plan documents. Your household income is the total income of all household members, including yourself, your spouse, and any dependents.

Example:

Let’s say you have a household income of $95,000 and your employer offers health insurance coverage for $2,000 per month for employee-only coverage. To determine if this coverage is affordable, you would divide the cost of employee-only coverage ($2,000) by your household income ($95,000) and multiply by 100 to get a percentage. In this case, the percentage would be 2.1%, which is less than the 9.86% affordability threshold. Therefore, the employer-sponsored health insurance is considered affordable, and you would not be eligible for the premium tax credit.

Consequences of Claiming Unaffordable Coverage

It is important to accurately determine the affordability of your employer-sponsored health insurance before claiming the premium tax credit. If you claim the credit but your employer’s coverage is later determined to be affordable, you may be required to repay the credit.

Seek Professional Help

If you have any questions about the affordability of your employer-sponsored health insurance or your eligibility for the premium tax credit, it is advisable to seek help from a licensed agent. They can assist you in reviewing your plan and determining if you qualify for financial assistance.