Many people who shop for individual insurance policies on the state or federal exchange qualify for government aid. These premium tax credits are calculated based on your income and insurance affordability to help you get coverage.
If you're offered an affordable benefit through your company, you don't qualify for a premium tax credit.
How do I know if my benefit is affordable?
The IRS determines insurance affordability by comparing your household income to the lowest-cost silver plan available in your area. If you've been offered an HRA benefit from your company, that benefit is also considered in affordability.
With that being said, if your cost (after the benefit allowance is applied) for the lowest-cost silver plan exceeds 9.78% of your household income, the benefit is considered unaffordable and you can choose to opt-out and use a premium tax credit instead.
Jane is a 30-year-old female in SLC, Utah. Her household income is $30,000 and her company is offering her an HRA allowance of $200/month.
When Jane went shopping for insurance, she saw that the lowest-cost silver plan in her area is $450/month. After the $200/month allowance, that leaves $250/month that she'd have to pay for insurance that wouldn't be reimbursed back to her.
To find out if that's affordable, Jane calculated 9.78% of her income ($2,937) then divided by 12 to get the monthly amount: $244.50.
Since Jane would have to pay $250/month for the lowest-cost silver plan and that is higher than 9.78% of her household income, the benefit is considered unaffordable.
Jane may want to opt-out of that benefit and apply for premium tax credits instead.