The IRS has announced a significant change to the Patient Protection and Affordable Care Act (ACA) affordability percentage for 2026. This year's percentage is 9.96%, a substantial increase from 9.02% for 2025. This marks a notable shift from the decreasing trend we've seen in recent years, representing the highest percentage in several years. Let's take a deep dive into what this increase means for your business, and how an Individual Coverage Health Reimbursement Arrangement (ICHRA) can be the affordable healthcare solution to help you navigate these changes while remaining ACA compliant.
"This increase underscores the importance for businesses to reassess their contribution strategies to ensure continued compliance and avoid potential penalties,” says John Jenkins, Head of Compliance at SureCo. “If you're concerned about rising premiums, an Individual Coverage HRA (ICHRA) could be the cost-effective alternative your organization needs."
What Is the ACA Affordability Percentage?
Applicable large employers (ALEs) are required under the ACA Employer Mandate to offer affordable health coverage to full-time or full-time equivalent employees. The IRS sets a minimum baseline for coverage and affordability. But how is “minimum” coverage determined? According to the IRS, an employer-sponsored plan meets the mark if it covers at least 60% of the total allowed cost of benefits that are expected to be incurred under the plan.
Coverage is considered affordable if an employee's contribution for self-only (individual) coverage on the lowest cost plan available doesn't exceed a certain percentage of their household income — otherwise known as the affordability percentage. This rate is adjusted annually for inflation and economic conditions. In 2025, an employee's contribution for self-only coverage couldn't exceed 9.02% of their income; for plan years beginning January 1, 2026 or later, their contribution can't exceed 9.96% of their income.
How an Affordability Percentage Increase Impacts Your Business
This increase represents a significant shift from recent trends and comes alongside the continued rise we're seeing in healthcare costs. What it means for your business is that employees can now be expected to pay slightly more for self-only coverage in 2026, which may provide some relief for employers dealing with rising healthcare premiums. However, this also means that employers need to carefully balance their contribution strategies to remain competitive in attracting and retaining talent.
Depending on what industry your business is in, you could be at high risk for incurring ACA penalties. Particularly high-risk industries include:
- Leisure and Hospitality
- Home Healthcare
- Staffing
- Construction
What makes them so risky compared to other industries? There are a few significant factors, such as a tendency to lack centralized HR teams, workforces of more hourly vs. salaried employees, high employee turnover, and challenges in staying within the affordability percentage limits.
Staying ACA Compliant With an ICHRA
It might seem like things are only getting more difficult to manage for your team, but there is a light at the end of the tunnel. ICHRAs are a great alternative to traditional group plans to cut the rising costs of healthcare and remain ACA compliant.
In fact, ICHRAs are inherently ACA compliant — any plan offered through an ICHRA will meet the minimum essential coverage requirement. How? Because health coverage offered through an ICHRA must meet the same standards for affordability and coverage as plans available through the individual market. Even better: ICHRAs meet all ACA regulations regarding pre-existing conditions, annual and lifetime benefits, and essential health benefits.
SureCo’s Enrollment Platform makes it easy for your team to administer an ICHRA while staying ACA-compliant. Our team will calculate affordability during the onboarding process to make sure all individuals in your workforce meet the requirements for affordability.
