Large groups: Is your health plan meeting the affordability index?

Late last week, the 2025 affordability percentage for large employers was released.

This number determines whether the employer’s coverage is “affordable” for an employee.

There are three safe-harbor ways an employer can determine whether coverage is affordable for a certain employee:

🔹Rate of Pay

🔹W-2

🔹Federal Poverty Level

Here’s an example:

ABC Company is offering a health plan that meets minimum value, and for 2025, they will be using the Rate of Pay safe harbor to set premium amounts for full-time staff.

Let’s say their lowest paid employees make $10 per hour. The employer would use 130 hours per month times $10 per hour, or $1,300 per month.

The employer would then set the employee’s monthly premium cost so it doesn’t exceed 9.02% of $1,300, or $117.26 per month.

In 2024, the percentage threshold was 8.39%, which meant the most an employee making $10/hr could be charged for the lowest-cost plan was $109.07.

To remain compliant, the employer in this scenario will need to adjust the company contribution to ensure that the coverage stays affordable.

#compliance #affordabilityindex #largegroup #healthinsurance #employeebenefits #groupbenefits #healthplans