Nearly half of everyone under 65 who buys their own health coverage on the ACA marketplace is either self-employed, a small-business owner, or works for a company with fewer than 25 people. So when the IRS quietly updates the math behind premium tax credits, it isn't a footnote for benefits administrators — it's a number that shows up directly in a freelancer's or founder's monthly cash flow.
On July 21, 2026, the IRS released Revenue Procedure 2026-26, which sets the indexed percentages that will determine ACA premium tax credits and employer coverage "affordability" for the 2027 tax and plan year. If you buy your own health insurance through healthcare.gov or a state exchange, or if you run a small business trying to decide whether the coverage you offer employees is legally "affordable," these numbers are worth understanding now — not in December when open enrollment forces the issue.
What Revenue Procedure 2026-26 Actually Changes
Every year, the IRS has to index two related numbers under the tax code:
- The Applicable Percentage Table (Internal Revenue Code §36B(b)(3)(A)(i)) — this determines what share of your household income you're expected to contribute toward a benchmark health plan before premium tax credits kick in.
- The Required Contribution Percentage (§36B(c)(2)(C)(i)(II)) — this is the affordability threshold employers use to check whether the health coverage they offer employees counts as "affordable" under the ACA's employer mandate (§4980H).
For plan years beginning in 2027, the IRS set these figures:
| Household Income (% of Federal Poverty Line) | Required Contribution |
|---|---|
| Under 133% FPL | 2.15% |
| 133%–150% FPL | 4.30% |
| 150%–200% FPL | 6.78% |
| 200%–250% FPL | 8.66% |
| 250%–400% FPL | 10.22% |
The 2027 affordability percentage for employer-sponsored coverage — the number that matters most to small-business owners deciding what to charge employees for a health plan — is 10.22%. If an employee's share of the premium for the lowest-cost, self-only plan you offer exceeds 10.22% of their household income (or a IRS-approved safe harbor substitute, like W-2 wages), that coverage is not considered "affordable," and the employer could face a penalty under §4980H if that employee instead gets subsidized coverage on the exchange.
A Quiet Methodology Change Worth Knowing About
Buried in the revenue procedure is a change to how the IRS calculates "premium growth" — the input that drives these percentages up or down each year. Starting with the 2026 benefit year, the growth measure no longer looks only at employer-sponsored insurance premiums. It now blends in individual-market premium growth too, following a Department of Health and Human Services rule aimed at "marketplace integrity and affordability."
In practice, this means the annual percentage adjustments will track the individual market more closely going forward — which matters because individual-market premiums have been rising faster than employer-group premiums in many regions. If that trend continues, expect the required contribution percentage to climb again for 2028 and beyond.
Why This Lands Differently in 2027
Context matters here. The temporary "enhanced" premium tax credits from the American Rescue Plan and Inflation Reduction Act — which removed the 400% FPL income cap and lowered required contributions across the board — expired at the end of 2025. That means 2026 already brought back the pre-enhancement rules, including the return of the so-called "subsidy cliff": households earning more than 400% of the federal poverty line get zero premium tax credit, no matter how expensive their benchmark plan is.
Revenue Procedure 2026-26 doesn't reverse any of that — it's simply the routine annual indexing of the base statutory formula for 2027. But it lands on top of an already leaner subsidy environment, which means small increases in these percentages compound with the loss of the enhanced credits. For someone near a income threshold, the difference between last year's percentage and this year's can be the difference between an affordable premium and a four-figure monthly bill.
What This Means If You're Self-Employed
If you buy your own coverage on the marketplace:
- Re-run your premium tax credit estimate for 2027, especially if your income is projected to land near a FPL breakpoint (133%, 150%, 200%, 250%, or 400%). A small change in projected income can shift you into a different percentage bracket entirely.
- Track your income carefully through the year. Because credits reconcile against actual household income when you file your taxes, underestimating income means repaying credits; overestimating means leaving money on the table during the year. This is exactly the kind of number a clean set of books makes easy to project — if your income and expenses are recorded as you go rather than reconstructed at tax time, you can re-forecast your ACA credit exposure in minutes instead of guessing.
- Consider timing deductible business expenses (retirement contributions, equipment purchases, HSA contributions) to manage your modified adjusted gross income if you're close to a bracket line — a conversation worth having with a tax advisor before year-end, not after.
What This Means If You Run a Small Business
If you offer group health coverage to employees:
- Check your lowest-cost plan against the new 10.22% threshold using whichever affordability safe harbor you rely on (Form W-2 wages, rate of pay, or federal poverty line). A plan that was affordable at 2026's lower percentage may become non-affordable — or vice versa — once 2027's number applies, so this is worth revisiting even if you haven't changed your plan.
- Remember this only applies at 50+ full-time-equivalent employees for the employer mandate penalty itself, but affordability still matters below that threshold if you're trying to attract and retain talent with a competitive benefits package.
- Budget for potential premium increases driven by the same individual-market pressures now baked into the federal indexing formula — group premiums have historically followed individual-market trends with a lag.
Keep Your Finances Organized from Day One
Between shifting ACA thresholds, expiring subsidies, and the ordinary cost of running a business, it pays to know exactly where your income and expenses stand at any moment — not just at tax time. Beancount.io provides plain-text accounting that gives you complete transparency and control over your financial data, so you can model scenarios like a premium tax credit cliff without waiting on a spreadsheet to catch up. Get started for free and see why developers and finance professionals are switching to plain-text accounting.