In 2026, employer-sponsored health plans are affordable when employee premiums stay at or below 9.96% of household income.

For the 2026 plan year, a plan is considered affordable for a customer with employer-sponsored coverage if the plan's premiums for the employee do not exceed ________ of the employee's household income.

• A. 8.65%
• B. 9.96%
• C. 11.12%
• D. 9.65%

Answer: (B)

For the 2026 plan year, a health insurance plan is deemed affordable for individuals with employer-sponsored coverage if the employee's premium costs do not exceed 9.96% of their household income. This percentage is determined by federal guidelines that define affordability in the context of health insurance. To elaborate, the calculation considers the employee's contribution to the health plan's premium, ensuring it is a reasonable part of their overall financial burden. If the premium costs exceed this threshold, the coverage would not be classified as affordable, which could have implications for eligibility for premium tax credits or other assistance for marketplace coverage. This standard of 9.96% aligns with regulations aiming to ensure access to affordable healthcare and is updated periodically based on economic conditions. The other percentages listed do not align with the criteria set for the 2026 plan year, making 9.96% the accurate figure representing affordability for employer-sponsored health plans in this context.

Affordability in 2026: What 9.96% really means for employer-sponsored coverage

When you hear “affordable health insurance,” you might picture a monthly bill that doesn’t make you wince. The truth is a little more precise. For the 2026 plan year, a health plan through an employer is considered affordable if the employee’s share of the premium doesn’t exceed 9.96% of the employee’s household income. That’s the number the federal guidelines use to decide whether a plan is affordable for that year—and it affects things like eligibility for premium tax credits on the marketplace.

Let me break down what that means in practical terms, and why it matters even if you’re not staring at a calculator every day.

The bottom line, in plain language

• Threshold: 9.96% of household income.

• What counts: the employee’s contribution to the health plan’s premium.

• Why it exists: to gauge whether the costs of coverage are reasonable relative to how much a household earns.

• What happens if you exceed it: affordability isn’t met for the purposes of tax-credit eligibility on the marketplace, which could influence your options if you ever consider switching coverage or applying subsidies.

If you’re thinking in numbers, here’s a simple way to visualize it

You don’t need to be a math whiz to see how this plays out. Try a couple of quick scenarios:

• Scenario A (affordable): Your household income is $60,000 per year. Your employer plan requires you to contribute $5,000 annually to the premium. Percentage = 5,000 / 60,000 = 8.33%. That’s below 9.96%, so the plan would be considered affordable for the purpose of the affordability rule.

• Scenario B (not affordable): Your household income is the same $60,000 per year, but your share of the premium is $8,000 annually. Percentage = 8,000 / 60,000 = 13.33%. That’s well above the threshold, so affordability would not be met in this context.

• Scenario C (edge of affordability): Income $70,000; annual premium contribution $6,930. Percentage = 6,930 / 70,000 ≈ 9.9%. This stays just under the limit, so it would still be considered affordable.

These examples aren’t about picking numbers to fit a story; they illustrate how the percentage works in real life. The key is the comparison: your premium contribution versus your household income.

Why this threshold matters for coverage and choices

• Premium tax credits aren’t automatically available to everyone who can’t afford employer coverage. If your employer-sponsored plan is deemed affordable, you typically don’t qualify for premium tax credits to help pay for a marketplace plan. On the flip side, if affordability tests show your employer plan isn’t affordable, you might become eligible for those credits if you choose a marketplace plan.

• This rule is part of a broader effort to ensure access to healthcare without pricing families out. It’s tied to how subsidies are calculated and who is eligible for them.

How the calculation works in practice

• What counts as “income”? For affordability questions tied to health coverage, the relevant figure is the employee’s household income. That’s the total income of everyone in the household who is required to file taxes, not just the employee’s paycheck.

• What counts as “employee contribution”? This is the amount you pay toward the premium for your share of the employer plan, before taxes. It includes any payroll deductions that go straight to your plan.

• The month-to-year conversion helps prevent sticker shock. Since premiums are paid monthly, you might be tempted to calculate only a monthly share. The official rule uses annual numbers, so multiply your monthly contribution by 12 to compare with your annual household income.

A quick note on why the number can feel a bit abstract

The 9.96% figure isn’t a personal scorecard about your health or your job. It’s a standard used to compare plans across many households with different incomes. That means two families with the same premium may find their affordability status looks different if their incomes are different. It’s a reminder that affordability is as much about what you earn as it is about what you pay.

How this ties into your overall coverage decisions

• If your employer plan is affordable, you generally won’t see tax credits on a marketplace plan. That’s by design: the goal is to push people toward coverage they can pay for with their income.

• If your employer plan isn’t affordable, you have another path. You could explore a marketplace plan and apply for premium tax credits, which can make coverage more budget-friendly. This doesn’t mean you should jump at subsidies blindly; you’ll want to compare total costs, including out-of-pocket costs, networks, and benefits.

• Always check the latest numbers. The affordability threshold can shift as economic conditions change, and the federal guidelines update accordingly. It’s not a fixed destination; it’s a policy anchor that moves with the calendar.

Where to find the numbers and how to interpret them for you

• Your employer: Start with your benefits portal or HR representative. They can tell you your exact employee premium contribution for the year.

• The household income figure: Your tax situation determines this. If you’re unsure, a quick chat with a tax advisor can help you estimate what the IRS considers household income for your filing status.

• Official guidelines: The 9.96% threshold for 2026 comes from federal affordability rules. It’s worth checking the latest guidance each year because the percentage can change with new rules or inflation adjustments.

A few practical takeaways you can hold onto

• Don’t assume affordability just because the monthly premium feels manageable. The real test is annual cost relative to household income.

• If you’re curious about options beyond your employer plan, shop thoughtfully. Look at premium costs, but also at deductibles, copays, networks, and out-of-pocket maximums.

• If you ever notice your plan is marked as affordable, don’t panic if you have friends with the exact same plan but different incomes. Affordability is calculated per household, not per person. That’s why one family might see a plan as affordable while another sees the same plan as less favorable.

A gentle note on context and access

Health coverage is a cornerstone of financial and physical well-being, and getting it right can feel layered. State resources—like Get Covered Illinois—exist to help people understand options, compare plans, and see how rules like the 9.96% affordability threshold apply to real life. The goal isn’t to pile on jargon but to give you a clear sense of how a number on a page translates into decisions about coverage, costs, and care.

If you’re navigating coverage choices in 2026, here’s a simple step-by-step to keep in mind

• Gather your income range for the year (or use your last filed return as a reference).

• Identify your annual employee premium contribution for your employer plan.

• Compute the percentage: premium contribution divided by household income.

• Compare to 9.96%. If you’re below it, the employer plan is considered affordable for the purposes of the rule. If you’re above, explore marketplace options and potential premium tax credits after weighing all costs.

• Consider the whole picture: networks, doctors, prescriptions, and out-of-pocket costs matter as much as the sticker price.

A closing thought

Affordability isn’t a single number that sits in isolation. It’s a compass that helps you understand where your money goes and how much protection you have when life throws a curveball—injury, illness, or a sudden job change. The 9.96% threshold for 2026 is part of a broader effort to keep healthcare within reach. It’s not about catching anyone out; it’s about clarity so you can decide what coverage fits your real life.

If you’d like, I can help translate these rules into a personal illustration. Share a rough range for your household income and your current premium contribution, and I’ll sketch a couple of straightforward scenarios that show where you stand with the 9.96% standard. After all, the more you understand the math behind the rules, the easier it is to make informed, confident choices about your coverage.