Affordable coverage

April 23, 2018 Posted by

A job-based health plan covering only the employee that costs 9.56% or less of the employee’s household income. If a job-based plan is “affordable,” and meets the “minimum value” standard, you’re not eligible for a premium tax credit if you buy a Marketplace insurance plan instead.

  • The plan used to define affordability is the lowest priced “self-only” plan the employer offers — meaning a plan covering onlythe employee, not dependents. This is true even if you’re enrolled in a plan that costs more or covers dependents.
  • The cost is the amount the employee would pay for the insurance, not the plan’s total premium.

The employee’s total household income is used. Total household income includes income from everybody in the household who’s required to file a tax return.

Example 1

  • Employee’s monthly household income = $4,083 (about $49,000 per year)
  • 9.56% of the employee’s monthly household income = $390
  • Monthly cost to the employee of the lowest-priced plan the employer offers for self-only coverage = $300
  • Is the plan affordable? YES. The employee’s share of the lowest cost self-only plan ($300) is less than 9.56% of the employee’s household income ($390).

Example 2

  • Employee’s monthly household income = $2,333 (about $28,000 per year)
  • 9.56% of the employee’s monthly household income = $223
  • Monthly cost to the employee of the lowest-priced plan the employer offers for self-only coverage = $275

Is the plan affordable? NO. The employee’s share of the lowest-cost self-only plan ($275) is more than 9.56% of the employee’s household income ($223).

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