The IRS announced the 2026 ACA affordability percentage will increase to 9.96%, up from 9.02% in 2025, the largest single-year jump in recent years. This significant change, along with updated employer penalty amounts and out-of-pocket maximums, directly impacts how Applicable Large Employers (ALEs) structure their health benefits for 2026.
Every year, the Department of Health and Human Services (HHS) and the Centers for Medicare and Medicaid Services (CMS) update the ACA benefit and payment parameters through the Notice of Benefit and Payment Parameters (NBPP). The 2026 parameters, released in July and October 2025, include several critical changes that applicable large employers (ALEs) with 50 or more FTEs must understand to maintain ACA compliance and avoid costly penalties.
.png?width=1082&height=541&name=2026%20ACA%20Affordability%20Key%20Numbers%20at%20a%20Glance%20(1).png)
If your company needs to comply with the ACA, you need to know what to expect in 2026. Learn more here about the 2026 Notice of Benefit and Payment Parameters and how it may affect you.
How 2026 Compares to Previous Years
The 2026 affordability threshold of 9.96% represents a significant shift from recent trends:
- 2024: 8.39% (lowest in recent history)
- 2025: 9.02% (beginning to rise again)
- 2026: 9.96% (returning closer to pre-2024 levels)
This increase reflects updated calculations using the National Health Expenditure Accounts projections and provides employers with slightly more flexibility in setting employee contribution amounts while maintaining ACA compliance.
Higher Premium Adjustment Percentage
One component of the 2026 Notice of Benefit and Payment Parameters that directly affects employers is the premium adjustment percentage.
The premium adjustment percentage determines the out-of-pocket maximums for health plans. It also affects:
- Required contribution percentage to determine eligibility for some exemptions
- Amount of employer shared responsibility penalties
The Premium Adjustment Percentage for 2026 will be 1.60, representing a 60% increase in employer-sponsored insurance premiums since 2013. This 10.3% increase from 2025's rate of 1.45 is one of the steepest adjustments in recent years, reflecting rising healthcare costs across the industry.
Increased Out-of-Pocket Maximums
The out-of-pocket maximum is the highest amount an employer with a sponsored group health plan can impose on enrollees. The new maximums for 2026 will be:
- $10,600 for individual coverage
- $21,200 for family coverage
This is an increase of 15.2% from 2025 limits ($9,200 individual / $18,400 family). The significant jump reflects the rising cost of healthcare services and prescription drugs, particularly high-cost specialty medications and GLP-1 drugs.
Employer Mandate Penalties Increase Significantly
The employer mandate penalty amounts have been confirmed for 2026 with substantial increases. The
penalties are:
- $3,340 annually ($278.33/month) for the "A Penalty"
- $5,010 annually ($417.50/month) for the "B Penalty"
These represent a 15.2% increase from 2025 penalty amounts.
The lower A Penalty applies to applicable employers who don't offer minimum essential coverage to at least 95% of full-time employees and their dependent children (up to age 26).
The higher B Penalty applies to employers who:
- Offer minimum essential coverage that isn't affordable under the 9.96% threshold, or
- Offer minimum essential coverage that doesn't provide minimum value (at least 60% actuarial value)
The penalty only applies if at least one full-time employee receives the premium tax credit for buying coverage through the Health Insurance Marketplace. Given the significant penalty increases for 2026, ensuring your health plans meet ACA affordability and reporting requirements is more critical than ever.
Higher Health Plan Affordability Threshold
Related to the out-of-pocket maximum and employer penalty amounts is the health plan affordability threshold. The affordability threshold determines whether the health plan with the lowest premium you offer meets the criteria of affordability.
The IRS announced that the affordability threshold for 2026 will be 9.96% of an employee's household income. This is an increase from the 2025 limit of 9.02%.
While this represents a higher percentage than 2025, it actually provides employers with slightly more flexibility in setting employee contribution amounts. The increase reflects the methodology change in how the IRS calculates affordability based on premium growth rates relative to income growth rates.
Safe Harbor Calculations for 2026
Because employers typically don't have access to employees' household income details, the IRS provides three safe harbor methods:
Federal Poverty Line (FPL) Safe Harbor:
For 2026, using the 2025 FPL of $15,650 for mainland states, the maximum monthly employee contribution is $129.90 (9.96% × $15,650 ÷ 12 months). Note: This $129.90 amount applies to plan years that start in the first half of 2026. HHS has not yet issued the new federal poverty line figures, which will be used to calculate affordability for plan years starting in the second half of 2026.
Rate of Pay Safe Harbor:
Calculate 9.96% of the employee's monthly wages (hourly rate × 130 hours).
W-2 Safe Harbor:
Calculate 9.96% of the employee's W-2, box 1 wages for the calendar year.
What's Different About 2026: Enhanced Premium Tax Credit Uncertainty
A critical factor affecting the 2026 parameters is the scheduled expiration of enhanced premium tax credits on December 31, 2025. These enhanced credits, extended through the Inflation Reduction Act, have kept ACA Marketplace coverage affordable for millions.
Their potential expiration could significantly impact:
- Employee decisions about whether to enroll in employer coverage or seek Marketplace plans
- Marketplace premiums, which are projected to rise 18-26% in 2026
- Employer penalty exposure, as more employees may seek subsidized Marketplace coverage if employer plans are deemed unaffordable
If the enhanced credits are not renewed, experts estimate that approximately 4 million people could lose their Marketplace coverage and become uninsured. For employees currently receiving these credits, monthly premium payments could more than double in 2026.
Employers should monitor Congressional action on extending these credits throughout early 2026, as changes could affect ACA compliance strategies and employee benefit decisions.
Standardized Plan Options Continue
Issuers in the federally facilitated marketplace (FFM) and state-based marketplaces on the federal platform must continue offering standardized plan options in 2026. The standardized plans must be available at every product network type, every metal level, and throughout every service area.
The standardized options receive differential display on the Health Insurance Marketplace website. HHS believes that differential display will:
- Streamline plan selection for consumers
- Help consumers distinguish standardized plans from non-standardized plans
- Improve consumer understanding of the benefits of standardized plans
Issuers active in states that already require standardized plan options can continue under the state rules.
Nondiscrimination Policy for Health Plan Design
CMS has maintained its clarified nondiscrimination policy for 2026. The policy specifies that benefit limits and plan coverage requirements must be based on clinical evidence. This is meant to combat plan designs that are presumptively discriminatory.
Discrimination on the basis of sexual orientation or gender identity remains a particular concern for HHS. The agency continues to address discrimination in health coverage based on sex under section 1557 of the ACA, ensuring these policies remain consistent with evolving civil rights protections.
Using the 2026 Notice of Benefit and Payment Parameters
The 2026 Notice of Benefit and Payment Parameters from HHS and CMS contains several significant changes that will affect applicable employers.
These changes will impact:
- Plan affordability calculations with the 9.96% threshold
- Employee contribution limits based on updated out-of-pocket maximums
- Penalty exposure with substantially increased penalty amounts ($3,340 and $5,010)
- Compliance strategies in light of potential premium tax credit changes
For employers, the key takeaway is clear: the 2026 parameters require immediate attention to avoid significantly higher penalties. With penalty amounts increasing by more than 15% and affordability thresholds rising, now is the time to review your health plan offerings and ensure compliance.
ACA Compliance Doesn't Have to Be Complicated
Navigating the 2026 ACA affordability percentage and updated compliance requirements doesn't have to be overwhelming. ACA Reporter from Points North is an intuitive, all-in-one ACA reporting solution with all the updated regulations for IRS and state filing and tracking rules built in.
With ACA Reporter, you can:
- Automatically calculate affordability using the current 9.96% threshold and all three safe harbor methods
- Monitor compliance in real-time with alerts when employees approach affordability limits
- Generate accurate 1095-C forms with updated 2026 penalty amounts and thresholds
- Track employee eligibility across complex scenarios like variable hours and multiple locations
- File electronically with the IRS with built-in validation to prevent costly errors
- Access comprehensive reporting to make informed decisions on coverage offerings
Our software automatically incorporates the latest ACA regulations, so you don't have to worry about manually updating calculations every year. Explore our ACA reporting guides to learn more about staying compliant, or see how we can help you track ACA employee status effectively.
Contact Points North today to schedule a free demo. Let us show you how the right ACA solution can help you stay up-to-date and compliant with 2026 requirements more easily.
