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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.

The Affordability Test for Families

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Question: If I include my wife and children on my employer’s health insurance, the annual premium will be above 9.5 percent. If i drop my employer’s plan and purchase my own for the family, am i still eligible for tax credit?

Answer: No. The 9.5% affordability test applies to the net employee-only cost of coverage. It does not include the cost of insuring spouse and or children. Therefore, you or your family members are not eligible for a subsidy in Covered California. This is not a Covered California decision. It is an IRS rule.


Credit any confusion to the folks who crafted the ACA.

However, as stated above, ONLY when an employer-sponsored plan is deemed “unaffordable” can the employee, his/her spouse, and children turn to the exchange for premium tax credits. The 9.5% test applies only to the employee’s “self-only” cost.

As long as the self-only cost is less than 9.5% of “household MAGI”, an employer-sponsored plan is considered affordable, and other members of the household may obtain coverage through the exchange, but they are not entitled to premium tax credits.

“Well, then I’ll file a separate tax return,” the spouse says. Sorry, but the IRC does not permit those spouses, except in extremely limited circumstances (such as the two spouses lived apart for the entire year), to claim the tax credit.

It sounds like the answer to the question according to the IRS guidelines is that if you are offered benefits through your employer and the cost of covering a spouse or children is unaffordable, you still do not get help in the exchange. However Comment from Max Herr, it sounds like there is help in the exchange. This is confusing. Which is it? there are a ton of dual income spouses who have coverage available through one spouse but the premiums are still too high. How do we help those people?

Add your income and your spouse’s income and multiply that by 0.095. If the answer is more than the “self-only” cost of your employer sponsored plan, that plan is “unaffordable” and you can obtain a plan on or off the exchange.

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