Affordability Exemptions and the Family Affordability Glitch for 2017 Plans

Below we present the affordability exemptions for 2017 for employer and non-employer coverage and explain the family affordability glitch.

Affordability exemptions are one of the more complex aspects of the ACA, so make sure you understand all the specifics below before claiming one on form 8965 or from HealthCare.Gov.

I’ll start by saying in basic terms:

  • If the cheapest employer plan per-member or marketplace plan for the family costs more than 8.13% of household income for the year, the member or family qualifies for an exemption from the fee.
  • If the cheapest employer plan costs more than 9.66% for self-only coverage for the employee, then that family can use marketplace and is eligible for cost assistance.

TIP: The numbers change each year, see IRS Releases 2017 ACA Required Contribution Percentages for more information.

Below are all the details pertaining to the above two statements.

NOTE: All the points below pertaining to employer coverage generally apply to employee-only coverage, the coverage of an employee’s dependent’s or spouse’s self-only coverage, and the aggregate price of coverage for one or more dependent or spouse (the average price for one or more dependents, not the combined price, and not including the employee). Meanwhile, all the points applying to non-employee coverage apply to individual plans and family health plans on the marketplace and not to specific family members.

  • If the minimum amount you would have paid for employer-sponsored coverage or a bronze level health plan on your state’s official health insurance marketplace is more than a certain percentage (8.13% for 2017) of your actual household income for the year as computed on your tax return, then you are exempt from the monthly fee for not having coverage. The fee is known as the individual mandate penalty or the individual shared responsibility payment.
  • The above exempts employees and their families, but it does not allow them to use the marketplace.
  • If the minimum amount you would have paid for employer-sponsored coverage is more than a certain percentage (9.66% for 2017) of your actual household income for the year as computed on your tax return, then you are exempt from the fee and can apply to use the marketplace and get tax credits. This typically requires the employer to fill out an “employer coverage tool” and employee to fill out an “employee coverage tool.”
  • It is important to note that there is a thing called “the Family Affordability Glitch” regarding spousal and dependent coverage on employer health plans. This “glitch” describes the fact that employers don’t need to pay a portion of a dependent’s premium; there is a gap between the 8.16% and 9.66% exemptions; and that the exemptions for employee’s dependents look at self-only or aggregate coverage for non-employee family members and not at just the family rate. This leads some families to either owe high rates or to be exempting from coverage, while not qualifying for marketplace assistance. It is well documented that this is confusing. None-the-less. it’s generally the case. It’s likely that, in 2017 Trump and Congress will address this issue, but it hasn’t happened yet.
  • The above is complicated by the fact that all of this needs to be calculated well before taxes are filed for 2017 and the calendar year has ended in many cases. Due to this, many will need to project their income to see if they qualify for an exemption from the fee and to use the marketplace in advance. If your projections are off, you may still be liable for the fee. Exemptions based on projections are only granted by the marketplace, while exemptions officially taken at tax time based on actual income can be taken directly on your taxes using form 8965.
  • Thus, if you are very confident you’ll be exempt, you can wait until you file to do the paperwork. Otherwise, and I would suggest this for everyone, it would be easier to coordinate this with HealthCare.Gov or your state’s marketplace.
  • 8.13% and 9.66% are the key numbers. To be exempt as a non-employee the lowest cost bronze plan in your region must exceed these rates; to be exempt as an employee it must be self-only coverage after the employer’s contribution. Calculations for the dependents and spouse of an employee are a bit more complicated, but generally they have to be individual only or an aggregate of two or more individuals.
  • Remember, if you have a different health plan than your family you’ll be up against two separate deductibles and maximums. Also, keep in mind that going without coverage means risking big costs in the case of a catastrophic accident.

Learn more from HealthCare.Gov.

TIP: A person can shop wherever they want for 2017 coverage if they aren’t going to access subsidies that includes the marketplace. However, to get cost assistance the above rules apply.

What do you think?

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Eugenie Debs on

This is a nightmare. Really.
I am married, unemployed and have a 21 year old college student still living with us. I try to bring in some money, but I have some health issues that prevents me from taking the food service jobs I have had in the past. As I am older, ( but a ways from Medicare) I do not get called back for office positions.
Ever since the ACA was born, the insurance (CareFirst) my husband’s employer offers has risen steadily and now it is crazy expensive. But it is still considered “affordable”, even though my husband only makes $16 an hour. The first year of Obamacare we took the employer’s offer of helping with 60% of the premium of a plan (CareFirst) we found on the exchange. Big mistake. The 60% was in the form of a wage increase, so his W-2 at the end of the year was artificially inflated. This affected our son’s FAFSA and I am still giving myself noogies for doing this. We did it because I thought I was going to need major surgery, and the employer plan had a large deductible. Looking back, even though the plan we got was better and cost just a tad more with the 60% help, the tax issue and the FAFSA issue tipped the scales the other way. It also made me itemize for the first time ever. Not fun.
The next year we did the same, only we got a Bronze plan with CareFirst. Our son was going to take 2017 as a gap year, so we didn’t need to worry about FAFSA for that year. The Bronze plan was pretty affordable! With 60% help from the employer, it was doable. Yes, the deductibles were sky high, but at that point we chose to pay the ‘allowable’ amount directly to the providers which can be quite low, instead of paying premiums. With an out of pocket cap, it didn’t seem too bad. The taxes will suffer, but whatever. NOW the premium has gone up 87%!!!!!!!! IT IS UNAFFORDABLE. CareFirst seem to have alchemized the Bronze plan into Silver plan premiums!
We are now forced to either take the employer’s plan (we did not get the cost yet, but it will be high) OR a lousy costly Bronze plan with the 60% help.We do NOT want to mess with the wage this year. I have looked at other carriers and they all seem similar—-it looks like no one wants to honor the traditional Bronze prices.I will continue to look for other possibilities, but it’s pretty dim.
I sure hope this glitch is worked on, but from what I have read, I shouldn’t hold my breath. I am a lifelong Democrat and I think that these obstructionist Republicans and DemCons prevented a public option that would have made it easier for people like us. And to pass a bill that ignored millions of people was unconscionable. The ACA was noble, but it ended up just becoming an opportunity that the insurance giants used an an excuse for their runaway premiums.When I do start working again, it will be to pay for health care, as we are both low wage earners. (I have worked all my life since I was 16) Thank you for any response. And btw, I cannot go on Medicaid. $16 an hour for a family of 3 is too much, as our son is over age 19. He also has a weekend job. This is a nightmare. Really. Grossly unfair–it almost pays to be self-employed now and unmarried. Everything that was once held in high regard–employer healthcare, being married—being made a mockery of now—sad.

IRENE SOLESKY on

I have a nightmare story as well. I wrote this in response to an Article – Premiums Expected to soar 22%. The news editor contacted me for my story and you can see it in this link posted on CNN Money http://money.cnn.com/2016/11/04/news/economy/obamacare-affordable/index.html

I am responding to your article as titled above. First off, the title is a lie. Other reports saying it is misleading is putting it mildly. Increases have been at least 50%.
I recently received a notice in MD Health Connection website that my family coverage will increase almost $500/mo and deductible will raise from $6000 to $6550. I will have to satisfy a $6550 deductible first before insurance coverage kicks in, all while paying $1351 per month. Insane.

It is far cheaper to fund my own medical savings account. I am basically already doing that anyway. I realize that this subjects you to a penalty if you are not proven to meet any of the Obamacare exemptions, however, I may even be exempt according to their Affordability test due to this ridiculous increase.

I emailed my carrier Carefirst to ask why such an increase when my age bracket hasn’t changed and only one small claim was put in (preventative care) out of all 4 people in my family plan. From what I am reading now, I realize that my premium is going to fund other people’s healthcare due to insurance carrier losses resulting from more older, sick people enrolling. This deductible is fit for a catastrophic plan but the premium is as if the plan is a ZERO deductible plan.

It appears that Carefirst is losing so much money they are trying to price themselves out of the market and exit just like so many others. Medical insurance was meant to keep medical expenses from driving you in financial ruin, NOT for the medical insurance to drive you in financial ruin. I am being penalized for making above the poverty level and refuse to have medical insurance put me IN the poverty level.

The oxymoron is that Obamacare hikes will never improve because these hikes will force more people out of the exchange which will keep the vicious circle going.

Rob Hagerstrom on

My family has been caught in the family glitch now for nearly 3 years. The democrats knew about it going in and know it needs to be fixed. The republicans want a full repeal. I have been complaining to both parties in Minnesota and there is only finger pointing verses working on a solution. With the 2017 increases now it is actually cheaper for me to take the employer insurance with with subsidies. For what it is worth I would love to have our insurance that we had as a family three years ago as it was affordable and the deductibles were a fraction of what they are today

Randy S Kessler on

I am 61 and have NEVER had enough medical expenses to deduct from my income taxes. WHY must I buy $1 Million worth of insurance with a $5000 deductible? I think I’d be just fine with 1/10th this amount of insurance. How about a plan that would provide a maximum of $100,000 in health care coverage with 20% co-pays, a $500 deductible for $50/month ? That would be Affordable Care.

CNHW on

Hi,

I’m hoping someone has some experience with this problem and can help me. I believe that our household will fall into the “unaffordable” category in 2017 because we make a little too much for tax credits but the premiums exceed 8.16% of our household income, and thus we will be eligible for an exemption from the ACA requirements. However, I don’t just want to be exempt, I want to apply for a catastrophic plan, but understand I need an Exemption Certificate Number (ECN) to give the insurer in order to enroll in one of these plans. I understand that we need to apply for a hardship exemption to get the ECN, but the hardship form confuses me as there seems to be no clear category for this “unaffordable” hardship. Also, the only hardship exemption forms seem to be for 2016 and earlier. Can I use a 2016 form to apply for a hardship exemption to get a ECN, in order to get a catastrophic plan, to use beginning 2017? I called our local ACA Navigator and she did not know. If anyone has any guidance, I would appreciate it. I also just found out that you have to apply for a hardship by mail and it takes four weeks for them to make a determination. I am concerned that I will be out of the open enrollment period, if the determination process does not go smoothly, and I will lose my opportunity to apply for the catastrophic plan.

Thanks for any help anyone can provide.

Best,
CNHW

ObamaCareFacts.com on

In this case you would contact the marketplace and fill out a form, they would then grant you an ECN. There are two types of exemptions, one that needs an ECN and one that doesn’t. Typically exemptions that can be proved with a tax return don’t need the ECN.

To your other point, the wait time seems excessive. You could look into short term plans in the meantime (but that isn’t much help). I would try calling again and seeing if there is a way to expedite the process. If anyone else has ideas i’m sure they would be appreciated.

CNHW on

Thank you for the reply. I’ve called the Marketplace and the local Navigator and neither have been able to identify for me the form I need to complete for an affordability hardship. I found this form on the CMS website (https://marketplace.cms.gov/applications-and-forms/affordability-ffm-exemption.pdf) which is different than the hardship form with the 14 categories that is most easily found on the Healthcare.gov website. I think this is the one I need to fill out. If anyone can verify that this is the correct form, I would appreciate it. I just cannot believe that it is so difficult to get accurate information on how to apply for the hardship exemption because the premiums are technically unaffordable under the ACA definition. Also, when I called the one provider in our area that offers these catastrophic plans, they told me that I had to be under 30 to qualify, which is not true. I had to contact our state insurance commissioner about this, who then contacted the provider. A supervisor from the provider called me to let me know I was correct and that the staff was not well trained on this point. I did get a quote for the catastrophic plan which is about $200 cheaper per month. Good luck everyone!

Pat on

I filed the form found at https://marketplace.cms.gov/applications-and-forms/affordability-ffm-exemption.pdf to get an affordability exemption. It has been 31 days since the form was entered into my 2017 application with the Marketplace. I call every day and am told the exemption request is still “in process”.

But time is quickly running out on open enrollment. I need the excemption certificate number (ECN) before I’m allowed to buy a catastrophic plan from the Marketplace.

I wonder why this affordability exemption wasn’t built into the online application process instead of creating a cumbersome process with a 14 page application and unacceptable turnaround times.

Laura on

I’m in a similar situation: I need a hardship exemption so I can buy catastrophic insurance.
I just succeeded in getting a hardship exemption for 2017.
I mailed in the hardship exemption application form, and I put a big note on the front of it, saying I need a hardship exemption for 2017.
And it worked!
I mailed it on Nov. 21.
Previously, I mailed in the application on Nov. 5, and all I got back was a hardship exemption for 2016.
So I think the earliest you can apply for 2017 might be Nov 15, 2016.

Laura on

Also, there’s a hardship exemption hotline at 866 8370677.
They should be able to help you with how to apply for the “affordability hardship exemption” vs. just a “hardship exemption”. What I got was a plain “hardship exemption”.

Bert Merle on

For 2017 the cheapest Bronze individual plan available in Brazoria Co., Texas is over 10% of my projected income of $50K/yr., which is what I need to withdraw from my IRA to keep my house and pay expenses. (I am laid off work, can’t find any decent employment at even 1/3 of my prior salary and living off of my retirement fund, a large portion of which I have to pay a 10% early withdrawal penalty on in addition to regular income tax.) I know that I can get an exemption for the penalty this year because the lowest premium is over 8.16% of my income, but since I can’t afford the premium, am not eligible for a subsidy and don’t qualify for short term policies I will not have ANY insurance to protect my retirement assets if something bad happens to me. The more I pull out to pay the rising premiums the more taxes and early withdrawal penalties I pay and the higher my “reported income” goes up because of having to pull more from my IRA! I paid more than $7K this year for a decent Silver policy which broke my budget completely … now it’s nearly the same amount for Bronze policy with an outrageous deductible that is not worth even buying.

I tried calling private insurers to get a “Major Medical” or “catastrophic” policy to protect myself but found out they can’t offer them.

NOW what am I supposed to do? Luckily I am in very good health, but if something bad happens I could lose 36 years worth of retirement savings! I can’t justify paying more in monthly health insurance premiums than my mortgage for something I’ll likely never get any benefit from because of the high deductibles …. but I can’t buy major medical!

Brock on

Here is my Obamacare horror story. I supported that bill from conception up to this point two years ago. When I was providing coverage for my family yearly premiums rose from 5000 for all of us with only a 1500 deductible and 3000 out of pocket, and in two years following Obamacare inception that plans price tag rose to over 8000 with 2500 deductible and 5000 out of pocket max… all of that was quite expensive, but are you kidding me with today’s rates on the exchange? I am a stay at home dad so my only two choices are spending over 3000 to cover me on my wife’s plan or double that almost on the exchange. We pay over 6500 just to cover my wife and our three kids, doesn’t even include me and it is for terrible insurance, i.e. 12000 deductible , 15000 out of pocket max…obama should be on trial for destroying the middle class with this! Though what better way to drum up votes than by bankrupting the middle class into the welfare class do they’ll get subsidies and food stamps and vote democratic.. He up and gave our country away at the expense of the middle class, and I voted for the guy twice , man if we could redo that 2012 election.

Anne Strandberg on

I am not on welfare. I am trying to go back to school and am not working. I am paying for my mortgage and school bills from my savings. Why am I required to pay at $600 per month for a BCBS of NC monopoly when I have no income. Do I have to go on Welfare to get help. I am a single women over 50 years old with no kids. I seem to get overlooked all the time. I am probably just going to take the penalty. It’s cheaper than insurance. I go to the doctor once per year and watch my health. I am a nurse. I know about healthcare. I have seen those getting free healthcare eat junk food and smoke. I don’t thing much of Obamacare anymore. It is not affordable for me. Why would I pay have the price of my monthly mortgage for crappy insurance?

Patty on

This is wrong I am on the edge of the 8.16 guide lines so I might be fined and I can’t get help for affordable coverage. I can barely make my bills and feed my daughter but you want me to spend over $200 a month on insurane that has a $6,000 deductible. That’s insane!

Karen Brougham on

I live in Utah. No expanded Medicaid so I don’t qualify. I do not make enough thru social security to qualify for Obama care with the tax exemption. I cannot afford straight health ins. I am 64 soon and just need exemption for 1yr. I do get aid through the local community health center

Erin on

If your income is less than 138% of the Federal Poverty Level then you can apply for Medicaid in Utah and get denied. This would qualify you for a exemption because you would have qualified if your state had expanded. If you do not make enough to qualify for cost assistance on the marketplace, than you are below 100% of Federal Poverty Level because that is the minimum threshold for being eligible for cost assistance through the marketplace.

Jerry White on

Looking for 2017 insurance for only my wife via the Marketplace website….The cheapest Bronze plan in Texas is $441 per month (before the subsidy is applied) thru a company named “Ambetter”. In 2016 my wife’s affordable care insurance was via Blue Cross/Blue Shield of Texas for $520 per month (before the subsidy was applied). This same BCBS/TX insurance is now $770 per month (before the subsidy is applied). Counter to this increase in premiums was, with the same income and deductions as in 2016, a 2017 subsidy decrease from $252 per month to $43 per month. So even if I change companies, my out of pocket premium cost would increase $138 per month/$1656 year, for a $6,000 deductible policy, thru a company that I have never heard of.

Jennifer on

I am in Maryland. My employer has less than 50 full time employees, they are not obligated to provide insurance, but they do, and it is quite expensive/unaffordable, so only 1 or 2 employees at the job purchase the insurance through the job.

From my understanding, for year 2017, since my employer-based insurance is more than 8.16% for self-only, I and my husband (unemployed) can claim for code A (Coverage considered unaffordable) on Form 8965 for penalty exemption. And, since my employer-based insurance is more than 9.69% for self-only, I and my husband can still get an penalty exemption (code A on From 8965), but are qualified to use Maryland marketplace cost subsidies. The question is for any reason, can I & my husband decide not to buy any insurance through workplace (expensive/unaffordable) and through Maryland marketplace subsides (even though it will become affordable after subsides), and still claim an exemption of code A on form 8965 ???

How can IRS verify my employer-offered insurance premium when they (less than 50 full time employee) do not issue 1095-c?
Thank you.

Erin on

If your employer is offering Minimal Essential Coverage than they must file 1094 in order for you to get a 1095 so that you can verify coverage on your year end taxes. Because they are a small employer they aren’t required to offer Minimal Essential Coverage, so what they are offering may not qualify as Minimal Essential Coverage. That is where you should start. Ask your employer if they are filing a 1094 to assert that the coverage qualifies as Minimal Essential Coverage. If not, than you are not being offered employer sponsored coverage that would satisfy the IRS at tax time for you and your family and you can use the Marketplace.

Sick and disgusted on

Totally in agreement, A TOTAL NIGHTMARE! My husband was on disability, I am disabled but do not qualify for disability payments or SSI (reason being, when I stopped working my ‘disability insurance points’ were lost, apparently most people do not even know that this can happen. But it does. So when I applied for my disability, approx 3 years after I lost them, I did not qualify for Disability payments from Social Security. If I live 10 more years I will qualify for Social security/medicare. Of course there is SSI, if your spouse receives under $1400 ? per month in disability. Naturally , our state is one of the states that did not expand medicaid coverage when all of this AC came into play, I was receiving help from a ‘charity’ program thru my doctors office, so that I could see my doctors and get treatment, but when the affordable care act kicked in, they increased their rules to make it harder to qualify for help. I had been selling a few items around the house online to help make ends meet, and had to give an estimate on income for 2016, and apparently, if I make more than my estimate, I may have to pay back $300+ for subsidies that I received thru the marketplace…at the end of the year. The worst part is that I have struggled financially, physically and mentally all year long, had only 1 dr visit because I did not have the money for my copay, had to scrape together $34 per month to pay my part of the premium, my ‘affordable’ insurance premium subsidy was over $500 PER MONTH, (the subsidy that I guess taxpayers paid for) I can’t afford medicines unless they are on the $4 list at the local walmart, so my $500 yearly deductible has not been met and it is already December, my FREE checkup isn’t until the 22nd of December. That is a lot of money wasted..for nothing! I worked from the time I was 15 years old until I was 50+, paid my share of taxes, but have ALWAYS seemed to be borderline on getting help on anything. I think that I have done more crying the past 6 months than I ever have in my entire life. Struggling with paperwork, trying to qualify for SOMETHING. I stay confused, stressed and depressed. There is no help for me, I HATE the so called affordable care act, I wish the ones that came up with it, had to live by the same guidelines that the rest of us do, and I hope that there comes a day that they will have to, and suffer just like I have.

Laura Bradshaw Tucker on

“arrogate” is not a common word, and the only sense in which I’m familiar with it is to take something by force, or without justification. In what sense is it used here?

I went to this site to see what percentage of my income a plan must cost before it is deemed unaffordable. I do not have an employer who offers a plan (I work part-time for a business with only three employees and do freelance work), so I purchase my insurance myself. This section repeatedly refers to employer plans; it does not clearly state what the rate is for a person who is not offered an employer plan. And, I’m not clear on when the rate is 8.13 percent, and when it is 9.66 percent. While I gather that this is based on household income, it is not clear how the rate applies if one member of the household receives Medicare (and pays about $120 per month) while the other purchases their own insurance. Does the ACA look at the total costs to the household for insurance plans (including Medicare)?
And, hasn’t t his changed since last year — wasn’t the percentage based n the lowest-priced silver plan, not the lowest-priced bronze plan last year?r

ObamaCareFacts.com on

Good catch. It was a misspell of aggregate. The average price of one or more dependents, not the combined price, and not the price with employee included).

Laura Higginbotham on

My brother is 61 with a heart condition, and a social phobia, both which prevent him from working. He has always been supported by our parents. He helped our mother with our grandparents and our father who was severely debilitated from a stroke. After they passed, and mother began to have difficulties with walking and her vision, he basically became her caregiver. She was eligible for Aid and Attendance from the VA and through the help of the home health social worker, he was qualified by the VA to become her paid caregiver. This was discussed with the IRS to be sure to file his taxes in a way he would not be considered self-employed. Enter the ACA. I set him up with an affordable plan through BCBS. Several months into the plan, they had a home invasion and my brother was struck in the head with a gun. When I took him to the ER, his heart condition was discovered. Yay for the ACA, which covered all but $500 of his hospitalization. The next year, his premium doubled, but still affordable. Last year the form for the tax subsidy was so confusing that I, with my masters degree, was unable to decipher it. Took it to H&R Block and the self-employment nightmare reared its ugly head. Still dealing with that. This year, his premium after the tax credit would be over $500. Well, our mother passed away in November, leaving my brother with zero income. Insurance would be over $1000 as he is no longer eligible for the subsidy. In fact, as a 61 year old male with health issues and zero income, he is not eligible for any sort of coverage through the ACA, In other words, he is too poor for assistance.