ACA Affordability Threshold Rises in 2019

June 04, 2018

The Internal Revenue Service (IRS) announced has affordability requirements for 2019 under the Affordable Care Act (ACA) . Based on the affordability standard as adjusted for inflation, health coverage will satisfy the requirement to be affordable if the lowest-cost self-only coverage option available to employees does not exceed 9.86percent of an employee's household income, up from 9.56 percent in 2018. For 2019 calendar-year plans using the federal poverty level (FPL) safe harbor to determine affordability, an employee's premium payment can't exceed $99.75 per month, up from $96.08 per month in 2018.

The affordability standard is the highest percentage of household income an employee can be required to pay for monthly plan premiums, based on the least-expensive employer-sponsored plan offered that meets the ACA's minimum essential coverage requirements.

Affordability Safe Harbors

Since employers don't know their workers' household incomes, to which the affordability threshold applies, the ACA created three safe harbors, any of which can be used in place of household income:

The employee's W-2 wages—as reported in box 1—generally as of the first day of the plan year.
The employee's rate of pay—hourly wage rate multiplied by 130 hours per month—as of the first day of the plan year.
The individual federal poverty level as of six months prior to the beginning of the plan year, since the FPL isn't published for a given year until January.

Shared-Responsibility Penalty

The IRS can impose a shared-responsibility penalty when an employer with 50 or more full-time or equivalent employees—known as an applicable large employer (ALE)—"fails to offer minimum essential coverage to substantially all of its full-time employees and their dependent children during a month and at least one full-time employee receives a premium tax credit" through the ACA's public marketplace exchange. An ALE satisfies the "substantially all" standard for any given month if it offered coverage to at least 95 percent of its full-time employees and their dependent children during that month.

For 2019, actuaries estimate that the penalty for failure to offer affordable, minimum-value coverage will be $3,750 per employee (or $312.50 per month), up from $3,480 (or $290 per month) in 2018.