2026 affordability percentage for employer health coverage increases 

July 22, 2025

The Affordable Care Act (ACA) benchmark for determining the affordability of employer-sponsored health coverage will increase significantly for the 2026 plan year according to IRS Rev. Proc. 2025-25 — to 9.96% of an employee's household income up from the 2025 plan-year level of 9.02%. This affordability percentage can affect individuals’ eligibility for federally subsidized coverage from a public exchange, as well as employers’ potential liability for shared-responsibility (or “play or pay”) assessments.

Under the ACA, employer-sponsored minimum essential coverage (MEC) is affordable if an employee’s required contribution for the lowest-cost, self-only option with minimum value does not exceed an annually indexed percentage of the employee’s household income. Employees and their family members who are eligible for minimum-value employer-sponsored MEC that meets the affordability standard cannot receive premium tax credits or cost-sharing reductions for public exchange coverage.

To determine liability for play-or-pay assessments, three employer safe harbors allow replacing household income in the affordability calculation with one of these figures:

• Form W-2 wages
• Rate of pay
• Federal poverty line (FPL)

The affordability percentage used in the employer safe harbors is indexed in the same manner as the household income percentage, according to 2015 IRS guidance (Notice 2015-87, Q&A-12).

As explained in Rev. Proc. 2014-37, the original 9.5% affordability percentage is annually adjusted after 2014. For calendar years 2026 and beyond, the final Department of Health and Human Services (HHS) Patient Protection and Affordable Care Act; Marketplace Integrity and Affordability rule modifies the methodology for calculating the “premium adjustment percentage,” creating a premium growth measure that reflects changes in both individual-market policies and employer-sponsored health coverage. HHS used this methodology temporarily in 2020 and 2021. From 2015 through to 2019, as well as 2022 through 2025, the adjustment captured the rate of premium growth for only employer-sponsored health coverage.

Indexing of the 2026 affordability percentage is based on premium growth rates relative to income growth rates from 2013 to 2025, using the most recent National Health Expenditure Accounts (NHEA) income and premium data projections. Consistent with those projections, the 2026 affordability percentage is significantly greater than the 2025 level.

Employers should review the required employee contribution for 2026 coverage if they plan to meet the ACA’s affordability limit under the applicable safe harbor. For the many plans using the FPL affordability safe harbor, the considerations differ for calendar- and non-calendar-year plans.

For 2026 calendar-year plans using the FPL affordability safe harbor, the required employee contribution cannot exceed 9.96% of the FPL for a particular area — $15,650 for mainland US — or $129.90 per month (up from $113.20 in 2025), calculated as (9.96% x $15,650 FPL for 2025) ÷ 12, rounded to the nearest penny. Note that the FPL affordability safe harbor contribution limits are greater for employees who work in Alaska ($162.27, calculated as (9.96% x $19,550 FPL for 2025) ÷ 12), and Hawaii ($149.32, calculated as (9.96% x $17,990 FPL for 2025) ÷ 12).

Non-calendar-year plans may use the FPL in effect within six months before the first day of the plan year. That means non-calendar-year plans starting in February through July 2026 (if the 2026 FPL is issued in January) or non-calendar-year plans starting in March through August 2026 (if the 2026 FPL is issued in February) may use either the 2025 FPL of $15,650 — resulting in an FPL affordability safe harbor of $129.90 per month — or the 2026 FPL. These non-calendar-year plans would likely benefit from waiting to use the 2026 FPL since it will almost certainly exceed the 2025 FPL and yield a higher FPL safe harbor contribution limit [(9.96% x 2026 FPL) ÷ 12]. On the other hand, depending on when the 2026 plan year starts and the 2026 FPL is issued, waiting for the 2026 FPL may not be possible.

The adjusted percentage applies on a plan-year — not calendar-year — basis. This means non-calendar-year plans starting in 2025 will continue to use 9.02% to determine affordability in 2026 until their new plan year starts. As described above, non-calendar-year plans won't be able to calculate the likely higher FPL safe harbor contribution limit for plan years beginning after Jan. 1, 2026, HHS issues the 2026 FPL guidelines. As a reminder, for 2025 non-calendar-year plans using the mainland US FPL affordability safe harbor, the required employee contribution cannot exceed $117.64 per month, calculated as (9.02% for 2025 x $15,650 FPL for 2025) ÷ 12, rounded to the nearest penny.

• Rev. Proc. 2025-25 (IRS, July 17, 2025)
• HHS poverty guidelines for 2025 (Federal Register, Jan. 17, 2025)
• Premium adjustment percentage, maximum annual limitation on cost sharing, reduced maximum annual limitation on cost sharing, and required contribution percentage for the 2026 benefit year (Centers for Medicare & Medicaid Services, Oct. 8, 2024)
• Notice 2015-87 (IRS, Dec. 16, 2015)
• Rev. Proc. 2014-37 (IRS, July 24, 2014)
• Employer shared-responsibility provisions (IRS, regularly updated)
• Q&As on employer shared-responsibility provisions under the Affordable Care Act — affordability (see Q&A-40) (IRS, regularly updated)

• 2025 federal poverty levels can impact ESR affordability (Jan. 21, 2025)
• 2025 quick benefit facts (Jan. 16, 2025)
• Top 10 health, leave benefit compliance and policy issues in 2025 (Section 10: Other ongoing ACA concerns) (Nov. 19, 2024)
• 2025 affordability percentage for employer health coverage increases (Sept. 9, 2024)
• Employers face ongoing liability for ACA play-or-pay assessments (March 2, 2020)
• IRS outlines how individual-coverage HRAs can meet ACA employer mandate (Oct. 29, 2019)