Employer-sponsored health insurance, explained
Coverage through a job is how most Americans under 65 are insured. Here is how it works, and when the Marketplace can be the better deal.
Last checked October 24, 2026 · Written by licensed advisors · Sources are numbered and listed under Notes and sources
What it is
Employer-sponsored health insurance is a plan your employer offers and usually helps pay for. You pay your share out of your paycheck, often before taxes, which lowers what it really costs you. Your spouse and children can usually be added for a higher premium.1
- Your employer picks the plan
- It usually helps pay
- Your share comes out of your paycheck, often before taxes
- Spouse and children can usually be added
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Is your job’s plan affordable? The 2027 test
For plan years starting in 2027, job-based coverage counts as affordable if your share of the cheapest employee-only plan your employer offers is no more than 10.22% of your household income. For you, the test uses the employee-only price, even if you need family coverage.
Example: with a household income of $50,000, the line is $5,110 a year, about $426 a month. If the cheapest employee-only plan costs you $300 a month, it counts as affordable, and you can’t get a Marketplace tax credit. Your family members are judged on the cost of family coverage instead.23
Can you use the Marketplace instead?
You can always buy a Marketplace plan. The question is whether you can get a tax credit for it. If your job offers coverage that counts as affordable and meets a minimum standard, you can’t get the credit, so you would pay the full Marketplace price.
Coverage counts as affordable when your share of the cheapest employee-only plan stays under a set percentage of your household income, which the IRS updates each year. Since 2023, your family members are judged on the cost of family coverage, so they may qualify for a credit even when you don’t.324
The downsides
You don’t choose the insurer or the network; your employer does. If you leave the job, the coverage ends, and keeping it through COBRA means paying the full price yourself. And a plan that is affordable for you can still be expensive for your family.5
- Your employer picks the insurer and network
- Coverage ends when the job ends
- COBRA means paying the full price
- Affordable for you can still be costly for your family
Leaving a job: COBRA or the Marketplace
When job coverage ends, you can keep it through COBRA or switch to a Marketplace plan. COBRA keeps your plan and doctors, but you may pay the whole premium plus up to 2%. Losing job-based coverage gives you 60 days to enroll in a Marketplace plan, where a tax credit may lower the price.
Choose carefully: within 60 days of losing job coverage you can still switch from COBRA to a Marketplace plan. After that, cancelling COBRA yourself outside open enrollment does not open a new window. During open enrollment on HealthCare.gov, November 1 to January 15, you can switch for any reason. Choose by December 15 for a plan that starts January 1.65
- Same plan, same doctors
- You may pay the whole premium plus up to 2%
- Cancel it yourself outside open enrollment and you usually wait
- Losing job coverage opens a 60-day window
- A tax credit may lower the price, based on income
- A new plan and network
Heads up: Choose a plan December 16 to January 15 and it starts February 1, not January 1.
If you run a business
You can offer a small group plan, or reimburse employees for their own individual plans through an ICHRA or, for small employers, a QSEHRA. Each works differently for taxes and for your employees’ tax credits.78
- You offer one plan to your employees
- You reimburse employees for their own individual plans
- Reimbursement for small employers
What to do: Thinking about covering your team? We compare a group plan with the reimbursement options for your headcount.
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Obamacare Hotline and/or Medicare Po Polsku are private companies not affiliated with any local, state, or federal government agency. This guide is general information, not tax or legal advice.