Affordability Threshold

The affordability threshold is the maximum percentage of your household income that you're expected to pay for the lowest-cost employer-sponsored health plan available to you. If your employer's cheapest plan costs more than this threshold, the coverage is considered "unaffordable", and you may qualify for premium tax credits to buy a Marketplace plan instead.

For 2026, the affordability threshold is 9.96% of household income (adjusted annually by the IRS). If the employee-only premium for your employer's lowest-cost plan exceeds this percentage of your income, you can shop on the Marketplace and potentially qualify for subsidies.

This matters more than many people realize. Employer coverage is typically your first option, but if it's too expensive relative to your income, the ACA provides an escape route. The key is that affordability is based on the employee-only cost, not the cost of adding your spouse or children. So even if family coverage through your employer costs 20% of your income, if the employee-only plan is under the threshold, it's considered "affordable" and you won't qualify for Marketplace subsidies.

This is known as the "family glitch", and while the IRS issued a fix that broadened eligibility for family members starting in 2023, the specifics of that fix are subject to ongoing regulatory changes. If your employer coverage is eating up a large portion of your household income, it's worth checking whether your family qualifies for Marketplace help.