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Covered California and Obamacare related questions from consumers, employers and agents are answered by Phil Daigle with the best information available at the time. Archived entries may no longer be accurate as the Covered California and Obamacare knowledge-base is evolving quickly. TO REQUEST A PERSONAL RESPONSE INCLUDE EMAIL ADDRESS.

Employee Affordability and Tax Penalties

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Question: Employer sponsored insurance is considered affordable if what the employee pays toward the employee-only premium does not exceed 9.5% of his income. But individuals are exempt from the individual mandate if the cost of insurance would exceed 8% of their income. Wouldn’t that mean that people who contribute more than 8% of their income to the employee-only premium of their group plan are exempt from the individual mandate?

Answer: Yes. Individuals are exempt from tax penalty if the premiums for a bronze policy cost more than 8 percent of their income or their income is below the tax filing limit. Your academic point, while accurate, would be applicable to a statistically negligible number of employed individuals who could decline employer-based coverage, remain uninsured and avoid paying a tax penalty. You must be an attorney :)


I thought people were exempt from the penalty if the employer health insurance cost more than 9.5% of their income? If the employer premium is above 9.5% doesn’t the employer pay the penalty instead of the individual? Why does the individual pay a penalty if the employer plan costs more than 9.5 % of income?

Employee health insurance costs typically are independent of employee income. Don’t we expect that for lower income employees employer health insurance will cost more than 9.5% of income?

No, just an astute broker!

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