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Affordability

How does the system define and measure the affordability of health insurance and ensure that available insurance meets these definitions?

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Premium Tax Credit

Policy Definition: The premium tax credit reduces eligible Marketplace enrollees’ monthly payments for insurance plans purchased through the Marketplace. Eligibility for tax credits calculated on a sliding scale based on the consumers income, family size, and other requirements. source

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Cost Sharing Reduction (CSR) Subsidy

Policy Definition: Cost-sharing subsidies work by reducing a person or family’s out-of-pocket cost when they use health care services, such as deductibles, copayments, and coinsurance.” source

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Affordability Threshold

Policy Definition: In Employer Sponsored Health plans affordability is defined by the employee-only contribution amount. In 2019, the contribution is considered affordable if it does not exceed 9.86% of an employer’s premium. This percentage changes annually and is based on employee’s W2 wages, their monthly wages, and the federal poverty level for a single individual. source

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Excise Tax

Policy Definition: Beginning with the 2022 tax year, the ACA requires plan sponsors and insurers to pay a 40% excise tax (or Cadillac) on the excess cost of employer-sponsored health coverage provided to employees to ensure consumer affordability. source

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