Understanding ACA Affordability Rates for Your Health Plan

As we head into fall and Open Enrollment season for many employers, it is important to remember that the Affordable Care Act (ACA) is still in place. One of the important provisions of the employer mandate is offering “affordable coverage” to employees. But, what does affordable even mean?

According to the ACA rule for 2022, coverage is affordable if the lowest cost employee-only premium does not exceed 9.61% of an employee’s wages. This threshold is lower than the 2021 affordability percentage. The wages can be calculated by using Box 1 on Form W-2 or by rate of pay. Regardless of how you calculate it, it cannot exceed 9.61%.

It’s important to remember that this rule is just based on the lowest cost employee-only premium. Even if you have an employee select a higher-tier plan (i.e., preferred provider organization plan over high deductible plan) or family coverage, the affordability aspect only applies to the employee-only coverage. As long as you’re meeting the 9.61% in 2021, you’ll be good to go!

At FirstPerson, we work with our clients year round to ensure they’re meeting these and other standards set by the Affordable Care Act. Contact us or reach out to me directly to learn how we can help you stay on track with your health plan compliance.

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