Affordable Coverage

Employer coverage is considered affordable, as it relates to eligibility for the Advanced Premium Tax Credit, if the employee only cost of the lowest cost plan is less than 9.83% of the household income (changed from 9.78% in 2020 to 9.83% on January 1st, 2021).

Hourly employees can use this formula: Hourly rate x 130 = Monthly salary.  W2 calculations.

The 9.83% affordability factor only applies to employee-only premiums. Also, it doesn’t matter if the spouse and/or children are currently enrolled in the coverage or not. Even if the employer doesn’t pay anything to cover the spouse and/or children your family will not be eligible for the Advanced Premium Tax Credit if the employee-only premiums are affordable.

In other words, if your share of your premiums for a plan that covers only you (the employee)–not your family–is less than 9.83% of your family’s income, the plan is considered affordable. You may pay more than 9.83% of your income on premiums for spouse or family coverage from your employer. But affordability is determined only by the amount you’d pay for self-only coverage from your employer.

However, if the employer plan does not cover “minimum value” then the employee could be eligible for the Advanced Premium Tax Credit. A health plan meets the Minimum Value standard if it’s designed to pay at least 60% of the total cost of medical services for a standard population. Most comprehensive health insurance plans will meet this standard.