ACA – Affordability


 

Affordability criteria:

Insurance is deemed affordable if the cost of the insurance is less than a percentage of household income after applying any applicable Premium Tax Credit. The percentage varies by year:

2014 2015 2016 2017
Household income percentage 8.00% 8.05% 8.13% 8.16%
ACA Overview

Affordability tests:

1. Individual insurance from employer

If the employer provides individual insurance for the taxpayer (or spouse), this must be tested first to determine affordability.

  • If not affordable, use code A for the taxpayer (or spouse) alone.
  • If affordable, no exemption is available for the taxpayer, unless 2a below applies.

2. Family insurance from employer

If the employer offers a family insurance for the taxpayer (or spouse), this must be tested next to determine affordability for family members not offered individual insurance.

  • If not affordable, use code A for all family members not offered individual insurance by their employer and not already covered by insurance (e.g. Medicaid, Medicare, etc).
  • If affordable, no exemption is available.
  • If both taxpayer’s employers offer family insurance, use the least expensive one.

2a. Special case

If both taxpayers are offered individual insurance by their respective employers and both are affordable but the cost of both together (not a family policy) is unaffordable, and no affordable family insurance is offered, then use code G for the entire family.

3. Marketplace insurance

If the employer does not offer insurance, it must be purchased from the marketplace. The cost is that for the Lowest Cost Bronze Plan (LCBP) available less any PTC for which the taxpayer qualifies.

HINT: Use ages at the start of the tax year (1 less than used for the tax return) and,
use a high salary (100,000) to prevent calculation of “cost to taxpayer”.
  • LCBP is the cost of one or more policies that includes any family member not offered insurance from an employer and who does not already have another exemption. Persons having other insurance (e.g. Medicare, Medicaid) are included!
  • It may be advantageous to not include a dependent who does not have health coverage. See the Unclaimed dependents resource page.
  • PTC is determined by a percentage of the difference in cost between the LCBP and the Second Lowest Cost Silver Plan (SLCSP).
  • If not affordable, use code A for each family member for which other insurance is not available.
  • If affordable, no exemption is available to those family members.

Consider using the Affordability Calculator to make this calculation manageable.