How do employer-sponsored insurance offers and affordability rules interact with lost premium tax credits in 2026?
Executive summary
Employer-sponsored coverage will be treated as “affordable” for 2026 if the employee’s required contribution for the lowest‑cost self‑only plan does not exceed 9.96% of household income (IRS Revenue Procedure guidance reflected in multiple employer advisories) [1] [2]. At the same time, the enhanced ACA premium tax credits that sharply expanded Marketplace subsidies through 2025 are set to expire unless Congress acts, which federal analysts estimate could leave roughly 4.8–5 million people uninsured and drive big premium increases and economic losses in 2026 [3] [4].
1. Affordability rules give employers more room to charge premiums in 2026
The IRS adjusted the employer “affordability” percentage upward from 9.02% in 2025 to 9.96% for plan years beginning in 2026; employers may therefore meet ACA affordability tests so long as the employee share for the lowest‑cost self‑only option does not exceed 9.96% of household income [5] [2]. Advisers and payroll vendors note that the practical effect is higher safe‑harbor dollar thresholds (for example, the FPL safe‑harbor monthly cap rises), so employers that leave contribution rates unchanged may find they still satisfy the employer shared‑responsibility rules in 2026 [6] [7].
2. Marketplace subsidies are moving the other way: enhanced PTCs expire
Separate from employer rules, the enhanced premium tax credits (ePTCs) enacted in 2021 and extended through 2025 are scheduled to lapse at the end of 2025 unless Congress intervenes; the PTC itself remains but will revert to less generous, pre‑enhancement formulas in 2026 absent action [8] [9]. Analysts project large coverage and premium impacts if enhanced credits are not extended: estimates include 4.8 million people becoming uninsured and millions fewer receiving Marketplace subsidies in 2026 [3] [4].
3. Interaction: employer offers can bar employees from Marketplace subsidies — now with different thresholds
Under current law, an employee who has an offer of affordable, minimum‑value job‑based coverage cannot receive a Marketplace premium tax credit for months the offer is considered affordable (HealthCare.gov guidance). That same affordability standard for 2026 is the 9.96% threshold used by employers to determine whether an offer blocks Marketplace subsidies [10] [1]. In short: if an employer’s self‑only premium is no more than 9.96% of household income, affected employees generally will be ineligible for Marketplace credits in 2026 [10] [2].
4. The practical tension: higher employer affordability percentage vs. disappearing enhanced subsidies
These two trends pull in opposite directions. On one hand, the higher 9.96% affordability percentage gives employers more leeway to charge higher employee premiums and still claim their plans are “affordable” under ACA employer‑mandate rules [11] [6]. On the other hand, many Marketplace enrollees who now rely on enhanced credits will face much larger net premiums if those credits expire — and some who would have shifted to Marketplace coverage because employer offers were unaffordable may now be priced out [12] [13]. Analysts warn that expiration could raise gross premiums and shrink enrollment, compounding the coverage losses even where employers’ offers are borderline affordable [13] [12].
5. Who is most affected — employers, employees, and state markets
Applicable Large Employers (ALEs) face compliance risk if an employee obtains a premium tax credit because that can trigger employer penalties; with affordability set at 9.96%, fewer offers may trigger Marketplace subsidies, lowering employers’ penalty exposure but increasing employee cost burden [14] [5]. For employees, the loss of enhanced PTCs could cause sharp increases in out‑of‑pocket premiums (KFF and other analysts show examples where family premium obligations could more than triple without ePTCs) [12] [15]. States and providers face macroeconomic effects: multiple studies project billions in lost federal subsidies, tens of thousands of jobs cut, and large GDP and tax revenue impacts if enhanced credits expire [16] [4].
6. Policy and timing matter — marketplace filings and open enrollment were already moving
Insurers’ proposed 2026 rate filings and early state filings already incorporate the expected subsidy change; many filings attribute several percentage points of proposed premium increases directly to the anticipated expiration of enhanced credits, meaning marketplace premiums and required contribution formulas for 2026 are already shifting [13] [17]. Because plan year and open‑enrollment timing matters, any Congressional extension would need to be timely to blunt announced rate increases and enrollment disruptions [4] [8].
7. What employers and employees should watch and do now
Employers should recalculate affordability under the 9.96% figure, review ICHRA and contribution designs, and consider safe‑harbors to document compliance [18] [11]. Employees evaluating Marketplace plans must track Congress and insurer rate filings: if enhanced credits expire, Marketplace net premiums will rise sharply for many — but whether an employer offer blocks subsidy eligibility still depends on the 2026 affordability tests [12] [10].
Limitations and competing perspectives: reporting here relies on IRS‑derived affordability guidance and on economic and policy modeling from research groups; projections of coverage loss and economic impact vary across studies (Urban Institute vs. CBO vs. Commonwealth Fund) and depend on insurer behavior and potential legislative fixes — sources cited above present differing magnitudes but agree on direction [3] [8] [19]. Available sources do not mention the exact Congressional actions after publication dates; follow legislative developments for definitive outcomes (not found in current reporting).