When job-based health coverage counts as "unaffordable"

The two tests: affordable and minimum value

If you have an offer of job-based coverage, you won't qualify for Marketplace savings if the offer is considered affordable and meets the minimum value standard (HealthCare.gov). The offer has to fail at least one of those tests for you to qualify for a premium tax credit.

What gets compared. The IRS test looks at the employee's share of the premium for the employer's lowest-cost self-only plan that meets minimum value, not the plan you would pick and not the cost of covering your family (IRS Q&A, Q11). That amount is compared with your household income, meaning the expected income of everyone in your tax household who is required to file a tax return (HealthCare.gov).

Which year's percentage applies. The IRS sets the percentage by the employer's plan year. Most plans start January 1, but if your employer's plan year starts on another date, the percentage for the year that plan year began applies (IRS Q&A, Q11).

Wellness discounts. The premium used is the one you would pay with the maximum discount for any tobacco cessation program, but without other wellness discounts (IRS Q&A, Q11).

Minimum value (60%). A plan meets the minimum value standard if it is designed to pay at least 60% of the total cost of medical services for a standard population and includes substantial coverage of doctor and inpatient hospital services (HealthCare.gov). Most job-based plans meet it. Your plan's Summary of Benefits and Coverage says whether it does (IRS Q&A, Q15).

The income range still applies. Even with an unaffordable offer, premium tax credits are for household incomes between 100% and 400% of the federal poverty level (HealthCare.gov). For 2027 coverage, HealthCare.gov uses the 2026 figures: $15,960 for one person and $33,000 for a family of four.

Two illustrative examples

These examples are illustrative only. The people and premiums are made up; the percentages and poverty-level figures are the official ones cited on this page.

Example 1: a single employee, 2027 plan year

• Household of one, expected 2027 household income of $40,000 (about 251% of the $15,960 poverty level HealthCare.gov lists for one person, used for 2027 coverage).
• Threshold: $40,000 × 10.22% ÷ 12 = $340.67 a month.
• The employer's cheapest self-only plan that meets minimum value costs the employee $380 a month, which is 11.40% of household income.
• Result: the offer is likely unaffordable. The employee can turn it down and may qualify for premium tax credits on a Marketplace plan.

Example 2: a family, 2027 plan year (family glitch fix)

• Married couple filing jointly with two children (household of four), expected 2027 household income of $70,000 (about 212% of the $33,000 poverty level HealthCare.gov lists for a family of four).
• Threshold: $70,000 × 10.22% ÷ 12 = $596.17 a month.
• The employee's self-only premium is $150 a month (2.57% of income), so the offer is affordable for the employee, who can't get a tax credit.
• Covering the whole family costs the employee $900 a month (15.43% of income), which is more than $596.17.
• Result: the spouse and children are tested on the $900 family cost, so the offer is likely unaffordable for them. They may qualify for premium tax credits on a Marketplace plan while the employee stays on the job plan.

The family glitch fix: family members are tested on the family price

Before 2023, family members were judged on the employee's self-only premium, so a cheap employee-only plan could block a spouse and children from tax credits even when family coverage cost far more. Final IRS rules published October 13, 2022 changed that (Federal Register, TD 9968).

• The employee is still tested on the cost of self-only coverage.
• Family members offered the plan are tested on what the employee must pay to cover the employee and all of those family members, compared with the same percentage of household income (IRS Q&A, Q12; HealthCare.gov).
• The family coverage also has to meet a minimum value rule based on the benefits it gives family members (Federal Register).

The result can be a split household: the employee stays on the job plan, and the spouse and children enroll in a Marketplace plan with tax credits. HealthCare.gov puts it this way: if the premium is affordable for the employee but not for other household members, only the other household members may qualify for savings (HealthCare.gov).

A spouse's job offer counts too

An offer doesn't have to come from your own employer. If you can enroll in a spouse's (or parent's) job-based plan as a family member, that offer is tested on the cost of family coverage against the household's income (IRS Q&A, Q12). If you have more than one offer, from your job and a spouse's job, you are generally treated as having an affordable offer if any one of them is affordable and meets minimum value (IRS Q&A, Q13).

An offer only counts if you can actually enroll in it. If your spouse's plan doesn't cover spouses, it doesn't block you.

ICHRA and QSEHRA offers, in brief

Some employers give a monthly allowance instead of a group plan. An individual coverage HRA (ICHRA) is affordable if the cost of the lowest-cost silver plan where you live, minus the employer's monthly self-only allowance, is no more than the same percentage of household income. If an ICHRA is affordable, you can't get a tax credit; if it isn't, you choose between the allowance and the credit. With a QSEHRA, an affordable offer means no credit, and an unaffordable one reduces the credit by the QSEHRA amount. HealthCare.gov links to an HRA affordability explainer and a QSEHRA worksheet (HealthCare.gov). Read our ICHRA guide for Tennessee for the details.

What to do if you think your offer is unaffordable

1. Get the numbers. Find the monthly employee premium for the cheapest self-only plan (and the cheapest family plan, if your family is offered coverage) in your benefits portal or enrollment materials, or ask your employer to fill out the HealthCare.gov Employer Coverage Tool (PDF) (HealthCare.gov).
2. Estimate your household income for the coverage year, not last year. Our post on monthly vs. annual income explains how.
3. Apply and report the offer. Answer the job-coverage questions on the Marketplace application, whether you apply on HealthCare.gov or through HealthSherpa, using the details from the Employer Coverage Tool. The Marketplace checks whether the offer is affordable for the employee and for others in the household and tells you who qualifies (HealthCare.gov). There's no risk in applying to see if you qualify (HealthCare.gov).
4. Don't enroll in the job plan if you want tax credits. You won't qualify for savings for months you're enrolled in a job-based plan (HealthCare.gov). If you have a Marketplace plan and later accept job coverage, cancel the Marketplace plan for everyone who moves to the job plan.
5. Know what happens if you're wrong. Advance credits are reconciled on IRS Form 8962 when you file. If you gave the Marketplace accurate information about the job plan's cost and it found the offer unaffordable, the IRS treats it as unaffordable even if your actual income later makes it affordable; that protection doesn't apply if incorrect information was given with reckless disregard for the facts (IRS Q&A, Q14). Income changes still count: starting with tax year 2026, excess advance credit must be repaid in full (IRS).

If your offer is affordable: you can still buy a Marketplace plan, but at full price. You won't get a premium tax credit, and your employer won't help pay the premium (HealthCare.gov).

When you can switch

Outside Open Enrollment you need a Special Enrollment Period. Ones that often apply to people with job offers (HealthCare.gov):

• Losing job-based coverage, for you or a family member, in the past 60 days or expected in the next 60 days. Choosing to drop coverage on your own generally doesn't qualify by itself.
• Being offered an ICHRA or QSEHRA in the past 60 days or expected in the next 60 days. HealthCare.gov says to complete this enrollment through the Marketplace Call Center.
• Becoming newly eligible for tax credits while enrolled in a job plan, for example because the plan is no longer affordable or no longer meets minimum value (45 CFR 155.420(d)(6)(iii)).

Your employer's plan may also have its own rules about when you can drop coverage mid-year, so check with HR. See our Open Enrollment 2027 guide for deadlines and a checklist.

This page is general information, not tax or legal advice. For questions about your tax return or Form 8962, talk with a qualified tax professional. For official Marketplace rules, visit HealthCare.gov.