---
title: IRS lowers ACA affordability rate for 2023
description: The proposed IRS rule expands premium tax credit eligibility for family members with a new formula to determine affordability for family coverage.
image: https://insights.bukaty.com/hubfs/medical%20money-Aug-15-2022-06-31-45-66-PM.jpg
---

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# IRS lowers ACA affordability rate for 2023

Authored by  Bukaty Companies on August 15, 2022

The IRS recently issued [Revenue Procedure 2022-34](https://www.irs.gov/pub/irs-drop/rp-22-34.pdf), lowering the affordability threshold for the 2023 calendar year to 9.12% of annual household income from the 2022 threshold of 9.61%. This percentage is used to determine an individual’s eligibility for a premium tax credit (PTC) through Healthcare.gov and the affordability of employer-sponsored health coverage. Failure to provide a benefit-eligible employee with affordable coverage can result in an employer shared responsibility penalty under the Affordable Care Act (ACA).

| YEAR | AFFORDABILITY % | MAXIMUM MONTHLY PREMIUM CONTRIBUTION\* | PRIOR YEAR FEDERAL POVERTY LEVEL (FPL) |
| --- | --- | --- | --- |
| 2023 | 9.12% | $103.28 | $13,590 |
| 2022 | 9.61% | $103.15 | $12,880 |
| 2021 | 9.83% | $104.52 | $12,760 |

\* Maximum an employee could pay for employer-sponsored, self-only coverage using the FPL affordability safe harbor.

 

*New formula to determine affordability for family coverage*

Earlier this year, the IRS released a [proposed rule](https://www.federalregister.gov/documents/2022/04/07/2022-07158/affordability-of-employer-coverage-for-family-members-of-employees) that addresses the long-criticized “family glitch” in the ACA, which determines family eligibility for PTCs based on what an employee must pay for employer-sponsored, self-only coverage. While the employee’s coverage may be affordable based on affordability thresholds, the higher cost of family coverage is not considered for purposes of PTC eligibility. This “glitch” blocks family members from receiving a premium tax credit for individual coverage through Healthcare.gov.

Should the proposed rule be adopted before open enrollment begins November 1 on Healthcare.gov, families who pay more than the 9.12% of their household income for employer-sponsored family health insurance could be eligible for a PTC.

 

The example below illustrates how some members in a family of four with a $75,000 combined household income could receive subsidized health care coverage.

 

 

| **Family size** | **Household income** | **Employee cost of employer-sponsored employee-only coverage** | **Annual employee-only premium cost as a % of employee’s $43,000 annual income** | **Employee cost of employer-sponsored family coverage** | **Annual premium cost as a % of household income** |
| --- | --- | --- | --- | --- | --- |
| 4 | $75,000 *(2 working family members*) | $120 mo / $1,440 yr | 3.3% of employee’s annual income. *Employer meets ACA affordability standard* | $750 mo / $9,000 yr | 12% |

 

The $1,440 annual cost of employee-only coverage is well below the 9.12% affordability threshold set by the IRS. While the employee receiving employer-sponsored coverage would not be entitled to a PTC, the other three family members would, given the cost of family coverage exceeds the 9.12% affordability threshold.

 

Employers will want to consider how this proposed IRS rule could affect health plan membership for 2023.

 

For more information, contact your Bukaty benefits consultant at 913.345.0440.

 

 Blog Category: [Affordable Care Act](https://insights.bukaty.com/bulletins/topic/affordable-care-act), [Health Care Reform](https://insights.bukaty.com/bulletins/topic/health-care-reform)

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