Turning 2027 Affordability Flexibility Into a Strategic Advantage

As employers prepare for 2027 renewals, the Affordable Care Act (ACA) affordability threshold will rise to 10.22%, giving applicable large employers more flexibility in setting employee premium contributions. But flexibility does not mean shifting costs is right for every organization. Striking the right balance between cost management and employee-centered benefits will be essential as organizations navigate this change.

Flexibility Within the Affordability Limits

The 10.22% ACA affordability threshold is a compliance boundary, not a target. It sets the maximum employees may be required to contribute toward the lowest-cost self-only coverage option while keeping coverage ACA-compliant. Although the increase gives employers more flexibility to manage rising costs, contribution strategies should also consider employee affordability, satisfaction, and workforce needs.

Evaluating Contribution Strategies

Employers can choose from several cost-sharing strategies, each balancing cost management, employee affordability and administrative simplicity.

• Percentage-based contributions: Percentage-based contributions create a defined split between employer and employee costs. They are also relatively simple to administer and communicate from year to year.
• Flat-dollar contributions: With a flat-dollar approach, employers contribute a set amount toward each employee’s coverage, making costs predictable and easier to budget. Amounts can be adjusted over time as needs change.
• Tiered contributions: Tiered contribution strategies adjust employer contributions by salary, role or other workforce factors, helping balance affordability and plan costs. They can benefit complex workforces but require more administration and communication.
• Plan design changes: Strategic plan design changes, such as adding a health savings account (HSA) qualified plan, implementing a health reimbursement arrangement (HRA) or offering a narrower network, can help manage costs without simply increasing employee contributions. These options may require more communication and enrollment planning but can support affordability goals.

Making Contribution Decisions for 2027

The higher ACA affordability threshold gives employers an opportunity to reassess cost sharing and choose a contribution strategy that aligns with their financial goals, workforce needs and benefits objectives. Download the bulletin for more details.