Federal premium tax credits - Employer coverage FAQs

Federal premium tax credits are available to qualifying Americans who purchase an individual health insurance plan through the public health insurance exchanges.

Eligibility for the premium tax credits is straightforward if employees are uninsured or purchase health insurance on their own - it's based on income and household size. However, many employees who have access to employer coverage - either through their job or a family member's - have questions about if they are eligible for the tax credits. These FAQs help answer some of those questions.

What are the federal premium tax credits?

The federal premium tax credits are available to eligible individuals and families who buy individual coverage in a state or federal health insurance exchange (marketplace). The tax credits may reduce the amount they pay monthly for coverage.

The premium tax credit is available to those whose household income is between 100% and 400% of the federal poverty level (FPL). This is between $15,060 and $60,240 if you're single. But, thanks to the Inflation Reduction Act, anyone can get tax credits if they're expected to pay more than 8.5% of their income toward health insurance through 2025.

To be eligible, individuals can't have access to traditional employer-sponsored health coverage or government health coverage. The government bases the tax credit on the premium for the second lowest–cost Silver plan in the Marketplace, although a person can select any metallic level plan. 

How much are the federal premium tax credits?

The amount of the premium tax credit varies on a sliding scale, depending on income. The premium tax credit acts as a cap on the amount employees will pay out-of-pocket for the insurance premium. 

What if I have access to employer-sponsored coverage?

Employees who have access to employer-sponsored coverage that meets federal minimum value and affordability standards aren't eligible to receive a premium tax credit. This includes access to employer coverage through their job, or through a spouse's job.

This is where it gets a little more complicated. Here's what you need to know:

• If an employer offers coverage to its employees, dependents, and spouses, then no one in the family is eligible for the premium tax credit, assuming coverage is minimum value and "affordable" (affordability is based on just the single-only coverage premium - not how much is required to pay for spouse/dependent coverage).

• If an employer offers coverage to its employees only (coverage that is minimum value and affordable) then the spouse and dependents may be eligible for a premium tax credit through coverage on the Marketplace.

• If an employer offers coverage to its employees and dependent children only (that is minimum value and affordable), then the spouse may be eligible for a premium tax credit through coverage on the Marketplace.

What is minimum value?

An employer plan meets minimum value if the plan pays at least 60% of covered healthcare expenses for a typical population. 

What is affordable coverage?

An employer plan is defined as affordable if an employee doesn't pay more than 9.02% of their household income for the lowest-cost, self-only coverage premium in 2025. 

What If I am eligible for a government program?

If employees qualify for a program like Medicare, Medicaid, TRICARE, Children’s Health Insurance Program (CHIP), or other programs, they aren't eligible for a premium tax credit on the Marketplaces. The health insurance Marketplaces will help individuals determine eligibility for these government programs and will direct eligible applicants to these sites.