The default assumption is that employer coverage automatically beats a marketplace plan, because the employer is paying part of it. Sometimes that’s true. Often it isn’t, once you actually run both numbers side by side instead of comparing a payroll deduction to a sticker price.
Here is how to compare them properly, including a rule most employees never hear about: an employer offer does not always cut you off from a subsidy.
The affordability test
The IRS sets an “affordability” threshold each year for employer-sponsored coverage. For 2026, an employer plan is considered affordable if the employee’s share of the employee-only premium is no more than 9.96% of household income.
If your employer’s cheapest self-only plan costs more than that as a share of your income, the coverage is treated as unaffordable — and you may be eligible to decline it and shop the marketplace with a premium tax credit instead, even though an offer exists. Most employees never check this, because the payroll deduction feels small next to the sticker price of an individual plan.
Where it gets less generous for families
The affordability test above is based on employee-only cost, not family cost. A 2023 rule change (often called the “family glitch” fix) means your spouse and dependents are now tested separately, against the cost of covering the whole family — which is frequently far less affordable than the employee-only figure suggests.
Practically: it’s entirely possible for your own coverage to be affordable through your employer while your spouse and kids are not, making them separately eligible for marketplace subsidies even though you keep the employer plan yourself.
Build the real comparison
Sticker prices don’t tell you what a plan actually costs you. Use the same formula for both options:
(Premium you pay x 12) + realistic deductible and copay usage, capped by the out-of-pocket maximum.
Run it twice for each plan: once assuming a normal year, once assuming a bad one. Employer plans often win on deductible and out-of-pocket maximum because group risk pools tend to be priced more favourably. Marketplace plans, especially with a full subsidy applied, can still win on total annual cost even with a thinner network. Neither assumption holds universally — that’s the entire reason to run the numbers rather than default to whichever one sounds simpler.
Our guide to choosing a marketplace plan walks through the same total-cost approach in more depth, including cost-sharing reductions, which only apply on the marketplace side.
Don’t forget your actual subsidy number
None of this comparison means much without knowing what you’d actually pay on the marketplace. That depends on where your household lands against the 2027 income rules, which reverted to a stricter structure after the enhanced subsidies expired at the end of 2025. We break that down fully in ACA subsidy eligibility for 2027.
If you’re the employer: where ICHRA fits in
Small business owners have a third option worth knowing about before assuming group health is the only way to offer benefits. An Individual Coverage Health Reimbursement Arrangement (ICHRA) lets you give employees a defined, tax-free allowance to buy their own marketplace or individual plan, rather than buying one group policy for everyone.
It shifts the affordability question onto each employee’s own household circumstances instead of a single group rate, which can change who is eligible for a subsidy on top of the allowance. We compare the two directly in ICHRA vs. group health insurance, and you can read more about how ICHRA works.
If this is happening mid-year
This comparison usually comes up because something changed — a new job, a job loss, or an employer plan you’re newly eligible for. Starting or losing employer coverage is typically a qualifying life event, which opens a 60-day window to enroll in a marketplace plan without waiting for Open Enrollment. See our Special Enrollment Period guide for the full list of qualifying events and what documentation you’ll need.
Common questions
Can I decline my employer’s plan and still get a subsidy?
Only if the employer coverage fails the affordability test (or the minimum value test) for you specifically, or for the family members you’d be covering. If it passes, declining it does not open up subsidy eligibility on the marketplace.
Does my employer have to tell me if their plan is affordable?
Employers typically report the required information on your Form W-2 and through required notices, but the number that matters is a percentage of your household income, which your employer doesn’t know. You need to run that calculation yourself, or with an advisor.
What if I’m self-employed with no employer offer at all?
Then this comparison doesn’t apply to you directly — you’d be evaluated purely on the standard marketplace subsidy rules, with the added detail that the self-employed health insurance deduction interacts with your income figure for eligibility purposes.
Get both numbers run properly
This comparison has more moving parts than it looks like from the outside — affordability tests, the family glitch fix, subsidy cliffs, and (for business owners) ICHRA versus group. Get in touch and we’ll run your specific numbers on both sides before you have to decide anything during Open Enrollment.
This article is general information, not personalised advice. Affordability thresholds, subsidy eligibility and plan availability depend on your income, household, employer plan design and current law.
