IRS Rule Change Allows Employers to Lower Employee Healthcare Costs

A revision to IRS regulations has fundamentally changed how companies approach healthcare affordability for working families. Under previous guidelines, a plan was deemed 'affordable' if the employee’s individual contribution met certain criteria, regardless of how high the premiums were for spouses and children. This often disqualified families from receiving federal subsidies on public marketplaces.

Since 2023, the affordability test has been split into two distinct tiers: one for the employee’s individual coverage and one for the total family premium. If the cost of adding a family to a group plan exceeds 9.96 percent of household income for 2026, those family members may qualify for marketplace subsidies. This creates a scenario where the employee retains company-sponsored coverage while the rest of the household secures lower-cost, government-subsidized insurance.

Employers who facilitate this shift may see a reduction in their overall group risk profile, as fewer dependents remain on their corporate plans. This strategy effectively provides financial relief to staff without increasing company payroll expenses, potentially serving as a tool for retention and benefit management.