Affordability, the Family Glitch, and the Cost-Sharing Cliff
The Whitfields - Marcus (46), Elena (44), and two children (11 and 8) - live in Fort Collins. Marcus's employer offers employee-only coverage at $7,900 a year; the plan's actuarial value is 58% and no dependent coverage is offered at all. The family's projected 2025 household MAGI is $78,000, and the 2025 federal poverty line for a family of four is $32,150. Their benchmark silver plan costs $1,240 a month before credits. Marcus wants a bronze HSA-qualified plan so he can open a family HSA, and he has already picked one out.
1. Does the employer's offer block premium tax credits for Marcus? For Elena and the children? Show the math.
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Test 1 - affordability for Marcus. Required contribution percentage for 2025 is 9.02%: 0.0902 × $78,000 = $7,035.60. The employee-only premium is $7,900, which exceeds that, so the offer is not affordable.
Test 2 - minimum value. The plan's AV is 58%, below the 60% minimum value threshold. Even if the offer had been affordable, a plan that fails minimum value does not disqualify him from credits.
Test 3 - the family. Under the family glitch fix, affordability for family members is tested against the cost of family coverage relative to household income. The employer offers no dependent coverage, so there is no offer to test. Elena and both children are eligible for credits.
Conclusion. All four are credit-eligible. Their required contribution is roughly 4% of income at this income level - about $3,000 a year, roughly $250 a month toward the benchmark - so the advance credit is approximately $1,240 − $250 = $990 a month. Note the trap: the employer's plan is a dead end for Marcus on two independent grounds, so the answer does not hinge on which test you apply.
2. Marcus insists on the bronze HSA plan. What is he giving up at $78,000 of income, and how do you frame the choice?
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He is forfeiting cost-sharing reductions. At $78,000 the household is at 78,000 ÷ 32,150 = 243% of FPL, inside the 200–250% band. CSR attaches only to silver plans, and at that band it moves the plan from 70% to 73% actuarial value with a sharply lower deductible. Bronze receives none of it.
What the bronze plan buys instead. A family HSA limit of $8,550 in 2025, plus a deduction of the same amount. At a combined marginal rate near 16% (12% federal plus Colorado), that is roughly $1,370 of tax savings, which is real but modest against four figures of extra deductible.
The trade-off to state out loud. Bronze is better only if claims are near zero. With two school-age children, the probability of at least one urgent care or ER visit is high. Quantify it: on the bronze plan the family absorbs the full deductible before meaningful cost sharing begins; on the CSR silver plan the deductible drops materially. Also note the second-order point - HSA contributions reduce MAGI, which would slightly increase the credit, but he cannot contribute to an HSA while enrolled in the CSR silver plan because it is not HSA-qualified.
3. In June the employer cancels the group plan entirely. What enrollment pathway is available, and when does coverage start?
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Loss of minimum essential coverage is a qualifying life event. It gives a special enrollment period of 60 days before and 60 days after the loss of coverage. Missing it means waiting for open enrollment (November 1 – January 15 for a February 1 effective date).
Effective date. Enrollment completed by the 15th of a month produces coverage on the first of the following month.
Practical points.
- The loss must be involuntary and documented; the exchange will ask for a termination letter or COBRA notice.
- COBRA eligibility does not block the exchange SEP, but the exchange will ask whether affordable employer coverage is available. COBRA is generally not treated as affordable employer coverage, so credits are not automatically lost.
- Do not let the 60-day window run silently. The family is uninsured from July 1, and a hospitalization in that gap is uncovered.
- If Marcus's income for the year comes in above projection, the advance credit is reconciled on the return; an SEP does not insulate him from that.