While summer is usually a time for vacations, relaxation, blistering hot temperatures, and just plain fun, governmental agencies remain busy at work, handing us an assortment of new guidance, regulations, and procedures to prepare employers and brokers for the coming months.
While we’d prefer to dive into a pool, let’s instead dive into some changes employers will be dealing with when it comes to new employer mandate penalties and affordability thresholds, employer reporting forms and reminders and, as previously mentioned, the new Marketplace enrollment landscape.
Minimum essential coverage (MEC) under an employer-sponsored health plan is deemed “affordable” if an employee’s required contribution for the lowest-cost, self-only option that provides minimum value doesn’t exceed an annually indexed percentage of the employee’s household income. The 2026 indexed affordability standard, which applies on a plan year basis, will see an increase to 9.96% of an employee's household income.
This jump from last year’s 9.02% poses some considerations for both employers and employees. This is the highest affordability threshold we’ve seen in a few years, which means that Applicable Large Employers (ALEs) could potentially increase employee premiums in 2026. ALEs may want to begin analyzing their premium contribution strategy to see if there are any adjustments they’d like to make for their plan’s 2026 renewal. Employees, on the other hand, might face eligibility concerns for federally subsidized coverage from the exchanges in light of this increased affordability percentage. These employees and their family members can’t receive premium tax credits or cost-sharing reductions for public exchange coverage if their employer offer satisfies affordability and minimum value standards, and the increased affordability percentage means a contribution that might have translated to an Exchange subsidy in previous years could instead qualify as affordable coverage in 2026.
As a refresher, there are three safe harbors ALEs can choose from to establish the affordability of their offer:
Even though it might seem a little early, we encourage employers, especially those with January 2026 renewals, to begin working with their broker/advisor to decide if they want to make any premium adjustments for the forthcoming plan year (while still satisfying the safe harbor they’ve chosen) in light of the new affordability threshold.
On July 22, 2025, the IRS released the new indexing adjustments for calculating employer shared responsibility payments (ESRPs) under the Affordable Care Act.
As a gentle reminder, ALEs are responsible for ESRPs for any given month if:
Or
In either of these scenarios, penalties are only triggered when a full-time employee enrolls in Marketplace coverage and qualifies for a Premium Tax Credit (PTC).
For 2026, an ALE that does not offer MEC coverage to at least 95% of their full-time employees and applicable dependents may be assessed a $278.33 per full-time employee per month A penalty (minus a 30-employee reduction). Though this increase from last year’s $241.66 penalty might seem insignificant, the ~$37 difference quickly adds up when multiplied across the company’s full-time employee count for each month the penalty is triggered.
An ALE that triggers a B penalty may be assessed $417.50 per month for each full-time employee who receives a PTC. Again, this is a significant increase over last year’s $362.50 per employee per month penalty.
Fortunately, an employer cannot be subject to both penalties. When both could be triggered, the IRS will assess the A penalty.
In the past, we have seen some employers run the numbers and decide to “pay” for intentional noncompliance with the ACA’s employer mandate instead of “play” (i.e., comply with) the requirements. With these significant ESRP increases, ALEs that have decided the risk of the “pay” approach is worthwhile may want to reconfirm that’s still the approach they want to take.
The IRS has released the 2025 draft Forms 1094-B/C and Forms 1095-B/C, which don’t include any significant changes from last year. As a reminder, there’s now furnishing relief available that allows reporting entities to only provide Forms 1095-B and 1095-C to recipients upon request if the employer fulfills a series of requirements first. This relief doesn’t mean that employers only have to make Forms 1095-B/C if they receive requests for them, as (1) they need to be able to provide the forms quickly if they do receive a request and (2) all of the employer’s Forms 1095, plus the Form 1094, still need to be e-Filed with the IRS.
A few other things we’d like to mention:
We previously discussed CMS’ 2025 Marketplace Integrity Final Rule. Without doing a deep dive rehash, we know that many of the changes could affect eligibility for hundreds of thousands, who may not be able to enroll in Medicaid or Marketplace coverage, or who may not be able to qualify for premium tax credits toward Marketplace coverage. As a result, employers could see employees migrating towards their employer-sponsored plans. This potential migration presents employers with some new concerns as to their plan design offerings, premium contributions, and additional reporting and compliance requirements.
So, as we inch closer to the end of summer, the fourth quarter and the old and new ACA elements it brings loom not too far in the distance. We encourage employers and brokers to begin planning now so they’re well-positioned for the changes ahead.
Please reach out to our team at sales@lumelight.com if you’d like information about our ACA reporting services.
