When is health insurance considered "affordable" under the Affordable Care Act?

Health insurance is considered "affordable" under the Affordable Care Act when the employee's share of the premium for the lowest-cost individual plan available does not exceed 9.5% of the employee's household income. This threshold ensures that coverage remains financially accessible for individuals and families, preventing excessive financial strain when obtaining health insurance through their employer.

The 9.5% threshold applies specifically to employer-sponsored plans, guiding employers to ensure that the costs of health coverage are manageable for employees. An understanding of this percentage is crucial because it directly affects eligibility for premium tax credits and subsidies for individuals and families purchasing insurance from the Health Insurance Marketplace. If an employer's plan exceeds this percentage, employees may qualify for financial assistance when looking for health plans outside of their employer's offerings.

The other percentages provided in the options do not align with the established definition of affordability set by the ACA. Therefore, recognizing the correct benchmark is essential for both employers and employees navigating health insurance options.