Affordability Exemptions and the Family Affordability Glitch for 2018 Plans

Below we present the affordability exemptions for 2018 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.

A List of Affordability Exemptions For 2018

You can claim a coverage exemption for yourself or another member of your tax household for any month in which:[1]

  • The cheapest marketplace coverage (AKA the lowest cost Bronze plan) in your region for individual or family coverage after cost assistance would cost more than 8.05% of household income. In this case, the individual or family is exempt from the fee to get coverage and may be able to purchase catastrophic coverage via the marketplace.
  • The cheapest employer-based coverage for self-only coverage would cost more than 8.05% of household income after the employer’s contribution. In this case, that person is exempt from the requirement to get health insurance (but can’t necessarily use the exchange).
  • The cheapest employer-based coverage for one or more family members on aggregate would cost more than 8.05% of household income after the employer’s contribution. In this case, those family members are exempt from the requirement to get health insurance (but can’t necessarily use the exchange).
  • The cheapest employer-based coverage for self-only coverage would cost more than 9.56% of household income after the employer’s contribution. In this case, the person can both get an exemption and use the marketplace.
  • The cheapest employer-based coverage for one or more family members on aggregate is over 9.56% of household income after the employer’s contribution. In this case, those members can both get an exemption and use the marketplace.

In other words, in the marketplace, 8.05% is the key number for individuals and families. If the cheapest plan costs more than this for the individual for self-only coverage or the family for a family plan, the individual or family is exempt.

However, with employer coverage, it is a little more complicated as one has to consider self-only coverage and coverage for one or more members of aggregate (even in cases where the whole family is offered coverage) and both the 8.05% and 9.56% figures (as the 8.05% relates to being exempt and the 9.56% number relates to being able to use the marketplace).

Exemptions can be claimed on the 8965 form at tax time. However, you additional steps may need to be taken to qualify (such as filling out the forms below).

The Exemption Forms:

That is the simple version of how affordability exemptions work. Below are some key details. When in doubt read the 8965 exemption instructions or contact HealthCare.Gov for assistance.

Learn more about affordability exemptions.

The Family Glitch: The is when one or more members technically has “affordable employer coverage,” but the family as a whole doesn’t. For example, due to employers not contributing as much to spousal and dependent coverage as they do to employee-only coverage, you may have a family affordability glitch. This glitch can result in families being exempt from the fee, but not having access to cost assistance, as well as to other complex situations.

Medicaid and CHIP: Medicaid/CHIP may be an option for some families with access to employer-based coverage. Some families may find they can get assistance that way, even when marketplace assistance isn’t an option.

Citations

  1. Don’t Overlook 2018 Change in ‘Affordability’ Safe Harbor Percentage IRS annually limits how much employees can be asked to pay for health insurance