Quick answer: For 2027, employer coverage counts as “affordable” if your share of the premium is 10.22% of household income or less. The test is run twice: once on the cost of employee-only coverage (for you) and once on the cost of family coverage (for your spouse and kids). If family coverage costs more than 10.22% of household income and your income is at or below 400% of the federal poverty level, your spouse and kids may qualify for Marketplace tax credits, even if you stay on your work plan.
Who this is for
- Employees paying a lot to cover a spouse or kids through work
- Families whose household income is at or below roughly $132,000 for four (400% FPL for 2027 coverage)
- Anyone who’s been told “you have insurance at work, so you can’t get a subsidy”
What “affordable” means, and why it matters
The Marketplace’s premium tax credits are meant for people without access to affordable job-based coverage. So before you can get a tax credit, the rules ask: is the coverage your employer offers “affordable”?
For 2027 plan years, the IRS set the affordability threshold at 10.22% of household income (IRS Rev. Proc. 2026-26). If your share of the premium is at or below that, the coverage is considered affordable, and you generally can’t get Marketplace tax credits.
The fix that changed everything for families
Until 2023, affordability was judged only on the cost of employee-only coverage, even for spouses and kids. That meant a family could be “offered affordable coverage” when the employee’s single plan cost $100 a month but adding the family cost $1,200. That gap was nicknamed the “family glitch.”
A rule that took effect in 2023 fixed it. Now there are two separate tests:
| Who | Test | If it fails |
|---|---|---|
| The employee | Employee-only premium share vs. 10.22% of household income | Employee may qualify for tax credits |
| The spouse and kids | Family-coverage premium share vs. 10.22% of household income | Spouse and kids may qualify for tax credits |
In practice, the employee usually passes (single coverage is cheap enough), while the family often fails.
How to run the 10.22% test, step by step
Step 1: Estimate your 2027 household income. Use modified adjusted gross income (MAGI) for everyone in your tax household. For most families, that’s close to adjusted gross income on your tax return.
Step 2: Multiply by 10.22%. That’s the most your family coverage can cost per year and still count as affordable.
Step 3: Find your annual share of family coverage. Take your per-paycheck deduction for family coverage (the lowest-cost plan that covers the family and meets minimum value) and multiply by the number of paychecks in a year.
Step 4: Compare. If Step 3 is bigger than Step 2, family coverage is unaffordable for your spouse and kids under the 2027 rules.
Step 5: Check the 400% line. For 2027 coverage, tax credits end at 400% of the federal poverty level: $86,560 for a household of two, $132,000 for a family of four (HHS poverty guidelines). If you’re above it, the family can still buy a Marketplace plan, just without a tax credit.
What “minimum value” means
The test only applies to coverage that meets minimum value, meaning the plan is designed to pay at least 60% of covered costs and includes substantial hospital and doctor coverage. Most employer plans meet it. If yours doesn’t, the coverage doesn’t count against your family’s tax credit eligibility at all, regardless of cost. HR can tell you; it’s usually listed in the plan’s Summary of Benefits and Coverage.
Common mistakes when running the test
Using the wrong plan. The test uses the lowest-cost plan your employer offers that covers the family and meets minimum value, not the plan you happen to be on. If your company offers a cheaper option, use that one.
Using gross pay instead of household income. The test compares the premium to your household’s modified adjusted gross income (MAGI), which includes your spouse’s income and other taxable income, and subtracts things like pre-tax retirement contributions.
Forgetting the per-paycheck math. If you’re paid every two weeks, there are 26 paychecks, not 24. Multiply carefully.
Assuming the employee qualifies too. The employee is tested on employee-only coverage. In most cases that passes, so the employee stays ineligible for tax credits even when the family qualifies.
Ignoring the 400% line. Failing the affordability test only matters for tax credits if household income is at or below 400% FPL ($132,000 for four in 2027). Above that, there’s no Marketplace tax credit either way.
Using last year’s income. Tax credits are based on your expected 2027 income. If a raise or a new job is coming, include it. Since 2026, there’s no cap on paying back extra tax credits at tax time (HealthInsurance.org), so a low guess can be expensive.
How the timing works
Employer open enrollment and Marketplace Open Enrollment don’t always line up, so plan the switch carefully:
- During your employer’s enrollment, remove your spouse and kids from the work plan for 2027 (keep yourself enrolled).
- During Marketplace Open Enrollment (Nov 1, 2026 to Jan 15, 2027), enroll them in a Marketplace plan. Pick a plan by Dec 15 so coverage starts Jan 1, the same day the work-plan change takes effect.
- Report the employer offer accurately on the Marketplace application, including the family premium amount.
- Pay the first premium so coverage actually starts.
If your employer’s plan year doesn’t start January 1, ask a broker to line up the dates so nobody has a gap.
A worked example
This is an illustrative example.
| Amount | |
|---|---|
| Household income (family of four) | $100,000 |
| 10.22% of income | $10,220 per year ($852 per month) |
| Employee-only share at work | $1,560 per year ($130 per month): affordable |
| Family-coverage share at work | $13,200 per year ($1,100 per month): not affordable |
| Income vs. 400% FPL for four ($132,000) | Under the line |
| Result | Employee stays on the work plan; spouse and kids may qualify for Marketplace tax credits |
What the test doesn’t tell you
Passing or failing the test answers “can my family get a tax credit?” It doesn’t answer “what’s cheapest?” To know that, compare:
- The family’s total Marketplace premium after tax credits
- Two deductibles (yours on the work plan, theirs on the Marketplace plan) versus one family deductible
- Networks for the kids’ pediatrician and any specialists
- Prescription coverage
Sometimes the split saves a lot. Sometimes the family deductible on the work plan makes staying together cheaper. That’s why the math matters.
Real-world scenarios
Under the line, family fails the test (Marketplace). A Chandler family of four at $88,000 pays $1,000 a month for family coverage at work, well over 10.22% of income ($750 a month). The spouse and kids qualify for tax credits, and their Marketplace Silver plan costs far less than the family tier at work.
Over the line (private plan comparison). A Gilbert couple at $140,000 with no kids is over 400% FPL for a household of two ($86,560), so there’s no tax credit either way. The spouse is healthy and compares a private medically underwritten plan against being added to the work plan. Private plans aren’t HSA-eligible and may exclude pre-existing conditions, so they read the plan details before deciding.
Family passes the test (stay). A Tempe employer pays most of the family premium, and the employee’s share is $350 a month on a $90,000 income. Family coverage is affordable, so the spouse and kids don’t qualify for tax credits, and staying on the work plan is likely the best value.
Action checklist
- Estimate 2027 household MAGI
- Multiply by 10.22%
- Get your annual employee-only and family premium share from HR
- Compare both against the 10.22% figure
- Check income against the 400% FPL line for your household size
- Compare total costs (premiums + deductibles) before switching anyone
Frequently asked questions
What is the ACA affordability percentage for 2027?
10.22% of household income, per IRS Rev. Proc. 2026-26.
Does the affordability test use employee-only or family coverage?
Both. Employee-only coverage is tested for the employee, and family coverage is tested for the spouse and dependents.
What is the family glitch?
It was the old rule (before 2023) that judged family members’ eligibility on the cost of employee-only coverage. It was fixed in 2023.
If my family qualifies, do I have to leave my work plan too?
No. The employee can stay on the work plan while the spouse and kids enroll in a Marketplace plan.
What if our income is over 400% of the poverty level?
There’s no Marketplace tax credit above that line for 2027 coverage. The family can still buy a full-price Marketplace plan, stay on the work plan, or compare private plans if they’re healthy.
Which plan does the test use if my employer offers several?
The lowest-cost plan that covers the family and meets minimum value standards.
Does my spouse’s income count in the test?
Yes. The test uses household income for everyone in your tax household, including your spouse.
What if I’m paid biweekly?
Use 26 paychecks a year when you annualize your premium share, not 24.
Do I report my employer’s offer on the Marketplace application?
Yes. The application asks about job-based coverage offers, including the cost of family coverage. Accurate answers keep your family’s tax credit correct.
Can I switch my family mid-year?
Usually only during your employer’s open enrollment, the Marketplace’s Open Enrollment (Nov 1 to Jan 15), or after a qualifying life event.
Bottom line
The 10.22% test takes about ten minutes with a calculator and your benefits sheet. If family coverage at work costs more than 10.22% of household income and you’re under 400% of the poverty level, your spouse and kids may qualify for Marketplace tax credits while you stay on the work plan. Passing or failing the test is only step one; the real decision comes from comparing total costs, networks and deductibles for each setup.
Run the numbers with a licensed broker
Want me to run the 10.22% test with your real numbers? I’ll tell you whether your family qualifies and what each setup actually costs. Free.
Derek Greenlee, Greenlee Health Insurance
Phone: 480-375-1652
Email: derek@greenleehealthinsurance.com
Website: www.greenleehealthinsurance.com
Book a free consultation
Related reading
- Employer Health Insurance in 2027: What to Check at Open Enrollment
- Should Your Spouse and Kids Leave Your Work Plan? 2027 Options Compared
- Why the ACA Subsidy Cliff Hits High-Income Households Hardest in 2026