AFFORDABLE COVERAGE
Back to GlossaryDefinition
Employer coverage considered affordable when the employee’s share of the premium for self-only coverage does not exceed a set percentage of household income.
Summary
Affordable coverage refers to employer-sponsored health insurance that meets federal affordability standards. Under the Affordable Care Act (ACA), employer coverage is considered 'affordable' when an employee's portion of the premium for individual (self-only) coverage costs no more than a specific percentage of their household income (typically around 9.5-10% as adjusted annually). This is a key threshold because if employer coverage is deemed unaffordable, employees may be eligible for premium tax credits when purchasing insurance through the Health Insurance Marketplace.
Usage Context
This term is crucial when studying ACA compliance, employee benefits administration, health insurance policy, and understanding eligibility for marketplace premium tax credits versus employer-sponsored insurance.
Common Confusions
- Thinking affordability applies to family coverage costs when it only considers self-only coverage
- Confusing employer affordability with individual marketplace affordability
- Not understanding that affordable employer coverage can block marketplace subsidies
- Mixing up the affordability percentage threshold with other ACA percentages
