Debate: When Is Workplace Health Insurance ‘Unaffordable’?

Under the Affordable Care Act, taxpayers become eligible to claim the premium tax credit to help cover the cost of a marketplace health insurance plan if their required contribution to employer-sponsored health insurance exceeds an annual threshold amount. That annual threshold amount is adjusted each year. Since the ACA was enacted, the threshold percentage has increased in most, but not all, years.

In response to increased inflation, the IRS recently announced that the affordability threshold will decrease significantly, to 9.12% of household income for 2023 (the threshold was 9.61% in 2022 and 9.83% in 2021).

We asked two professors and authors of ALM’s Tax Facts with opposing political viewpoints to share their opinions about the decrease to the ACA affordability threshold.

Below is a summary of the debate that ensued between the two professors.

Their Votes:

Block

Byrnes

Their Reasons:

Blocks: Inflation is the highest we’ve seen in decades. Ordinary Americans are less able to afford health insurance than at any point since the ACA was put into effect. Decreasing the affordability threshold percentage will serve to ensure that millions of hardworking Americans don’t lose health coverage because they’re unable to afford their required contributions.

Byrnes: This decrease means that many employers will be required to pay more for employee coverage in 2023 because employer-sponsored coverage will be deemed “affordable” only if the employee’s required contribution for self-only coverage does not exceed 9.12% of the employee’s household income.

This reduction puts a significant new burden on employers that will now face increased costs because of the lowered affordability threshold. Small-business clients are struggling in this high-inflation environment just like individual taxpayers. Punishing those business owners who are investing in our economy makes little sense.