Higher Affordability Thresholds May Provide More Flexibility for Applicable Large Employers
As employers prepare for the 2027 plan year, the IRS has announced an important update to the Affordable Care Act (ACA). The ACA Affordability Percentage will increase to 10.22% for plan years beginning in 2027, up from 9.96% in 2026.
This marks another increase in the affordability threshold and may offer Applicable Large Employers (ALEs) additional flexibility when determining employee premium contributions while maintaining ACA compliance.
ACA Affordability Percentage Trend
| Affordability Percentage | ||||||||||
| 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 |
| 9.69% | 9.56% | 9.86% | 9.78% | 9.83% | 9.61% | 9.12% | 8.39% | 9.02% | 9.96% | 10.22% |
What Is the ACA Affordability Percentage?
Under the Affordable Care Act, Applicable Large Employers (ALEs)—generally employers with 50 or more full-time or full-time equivalent employees—must offer affordable health coverage that meets minimum value standards to eligible employees or potentially face employer shared responsibility penalties.
The affordability percentage determines the maximum amount an employee can be required to contribute toward the lowest-cost self-only medical plan before coverage is considered unaffordable under ACA rules.
Each year, the IRS adjusts this percentage based on economic factors such as premium costs and income trends.
What Does the 2027 Increase Mean?
The increase from 9.96% to 10.22% gives employers slightly more room when calculating employee contributions for health insurance.
Potential benefits include:
- Greater flexibility when designing employer health plans.
- More options for balancing employer and employee premium contributions.
- Additional opportunities to control benefit costs while remaining ACA compliant.
- Improved ability to evaluate alternative funding arrangements and plan designs.
Although the increase is modest, even small adjustments can have a meaningful impact on benefit strategy and budgeting for large employers.
Is This the Right Time to Review Your Health Plan?
Absolutely.
Annual IRS updates are an ideal opportunity to evaluate whether your current health plan continues to meet your organization’s financial goals and employee needs.
Many employers are also exploring:
- Level-funded health plans
- Self-funded strategies
- Reference-based pricing solutions
- Alternative funding arrangements that help reduce healthcare spending while maintaining quality coverage
A proactive review can uncover significant savings opportunities before the next plan year begins.
Looking for a Lower-Cost Option for Your ALE?
At Cosmo Insurance Agency, we help employers navigate changing ACA regulations while identifying innovative strategies to manage healthcare costs.
Whether you’re reviewing affordability calculations, exploring alternative funding models, or searching for a more cost-effective employee benefits package, our team is here to help.
Looking for a low-cost option for your ALE? Just ask. Let Cosmo Insurance Agency help you build a benefits strategy that supports both your employees and your bottom line.
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