Your employer offered an individual coverage HRA (ICHRA), and Marketplace open enrollment for 2027 coverage started November 1, 2026. The question is whether to take the monthly allowance or turn it down and apply for the premium tax credit. The IRS does not let you pick whichever is cheaper: an ICHRA offer that passes the 2027 affordability test makes you ineligible for the credit whether you use the allowance or not.
Adults under 65 weighing this choice need one calculation: the lowest-cost Silver self-only premium in your area, minus the allowance, compared with 10.22% of your household income for plan years starting in 2027 (Rev. Proc. 2026-26, section 3.02). The sections below work that test with real numbers, show what declining does to your coverage, and list what to do if the offer is affordable. For the basics of how an ICHRA works, see the ICHRA explainer linked at the bottom.
Coverage Breakdown
Direct answer: can you decline an ICHRA for the credit?
It depends on affordability. For plan years starting in 2027, an ICHRA is affordable when the lowest-cost Silver self-only premium in your area, minus your monthly allowance, does not exceed 10.22% of one twelfth of your household income. If it is affordable, you cannot get the premium tax credit, even by declining. If it is not affordable, you can decline it and take the credit, but not both.
The 2027 ICHRA affordability test, step by step
The 2027 ICHRA affordability test compares two numbers. Treasury's rule defines your required ICHRA contribution as the monthly premium of the lowest-cost Silver self-only plan in your rating area, minus the monthly amount your employer makes available (26 CFR 1.36B-2(c)(5)). The offer is affordable when that contribution does not exceed one twelfth of your household income times the required contribution percentage, which is 10.22% for plan years beginning in 2027 (Rev. Proc. 2026-26, section 3.02). For plan years beginning in 2026 it is 9.96% (IRS Questions and Answers on the Premium Tax Credit, Q11).
Household income, not your salary alone, drives the 2027 ceiling. The table below shows the most you can be asked to pay per month, after the allowance, before an ICHRA counts as affordable. Net cost at or under the ceiling means affordable, which blocks the credit. Net cost over the ceiling means unaffordable, which lets you decline and apply for the credit.
Worked example: a $60,000 household in 2027
A single adult with a $60,000 household income in 2027 has an affordability ceiling of $511.00 a month (10.22% of $60,000 is $6,132 a year). Suppose the lowest-cost Silver self-only plan in that adult's area costs $640 a month in 2027. These figures are hypothetical; your own lowest-cost Silver premium comes from HealthCare.gov's plan listings for your ZIP code and age.
- Allowance of $100 a month in 2027: net cost $540, which is over $511.00. The ICHRA is unaffordable, so this adult can decline it and apply for the premium tax credit.
- Allowance of $150 a month in 2027: net cost $490, which is at or under $511.00. The ICHRA is affordable, so the credit is blocked even if the adult declines.
- Break-even allowance in 2027: $640 minus $511.00 is $129 a month. At $129 or more the offer is affordable; below $129 it is not.
What declining an ICHRA does to your coverage and credit (2027)
Declining an ICHRA means opting out of and waiving future reimbursements, and Treasury's rule treats you as not covered by the HRA for those months (26 CFR 1.36B-2(c)(5)(vii)). HealthCare.gov says employers must give you the chance to decline annually before the plan year begins, or when you are first offered it. If the offer is unaffordable, you must decline to get the credit; if it is affordable, you and household members are not eligible for the credit even if you never use the allowance.
Marketplace help changes with the decision. Cost-sharing reductions on Silver plans also depend on being eligible for the credit, so an affordable ICHRA offer ends that help as well. In 2027, excess advance credit is repaid in full at any income (no repayment cap for tax years after 2025, per the IRS), so report the ICHRA offer on your Marketplace application. If the Marketplace finds the offer unaffordable at enrollment, that finding counts for that enrollment period (26 CFR 1.36B-2(c)(5)(iv)), but it relies on accurate information from you.
Household members, income range and other limits in 2027
Family members offered an ICHRA follow the same result as the employee. HealthCare.gov states that when an offer is affordable, the employee and household members are not eligible for the premium tax credit on Marketplace coverage. The test uses a self-only plan, so adding a spouse or children does not make an affordable offer unaffordable.
Passing the affordability test only opens the door to the credit. For 2027 coverage, the credit covers household income from 100% to 400% of the 2026 poverty guidelines: $15,960 to $63,840 for one person and $33,000 to $132,000 for a family of four. Immigration-status limits also begin with 2027 coverage, and DACA recipients cannot use the Marketplace. The ICHRA must also pay toward an ACA-compliant individual plan, which covers essential health benefits and cannot turn you away for a preexisting condition.
Dates for the ICHRA decision and 2027 Marketplace enrollment
HealthCare.gov lists 2027 coverage open enrollment as November 1, 2026 to January 15, 2027, and says to enroll or change plans by December 15, 2026 for coverage starting January 1, 2027. Check the dates page again before you rely on December 15, because that deadline is in litigation. Ask your employer for the written ICHRA notice and the monthly allowance, then run the 2027 test before you decline.
Alternatives if the ICHRA is affordable and you want other coverage
An affordable ICHRA closes the credit door for 2027, but four paths remain, each with an official source.
- Accept the ICHRA and buy an individual plan with it. The allowance reimburses premiums for an ACA-compliant plan; the HealthCare.gov CHOICE Arrangements page explains how.
- Ask for a different offer. If your employer also offers a group plan, ask HR whether you can choose it instead; the employer rules differ by class of employee (HealthCare.gov).
- Check Medicaid or CHIP. Medicaid and CHIP have no open enrollment window, and eligibility is based on income and household size, not on the ICHRA offer (Medicaid.gov).
- Look for a Special Enrollment Period. Losing the ICHRA, a new class offer or a job change can open one (HealthCare.gov CHOICE Arrangements page).
Frequently Asked Questions
I am 41, offered a $200 monthly ICHRA for 2027. Can I decline it and get the premium tax credit?
Only if the offer is unaffordable. Subtract $200 from the lowest-cost Silver self-only premium in your area, then compare the result with 10.22% of your household income divided by 12 for plan years starting in 2027. If your net cost is over that ceiling, you can decline and apply for the credit. If it is at or under, the credit is blocked.
If I decline an affordable ICHRA in 2027, will the Marketplace still give me a subsidy?
No. HealthCare.gov states that when the offer is affordable, the employee and household members are not eligible for the premium tax credit on Marketplace coverage, even if they do not use the arrangement. Declining then leaves you paying the full 2027 premium with no allowance and no credit.
My household income is $45,000 in 2027 and my ICHRA is $180 a month. What is my ceiling?
The 2027 ceiling is 10.22% of $45,000, which is $4,599 a year or $383.25 a month. If the lowest-cost Silver self-only plan in your area is $560 a month, your net cost is $380, under $383.25, so the offer is affordable. At $570 the net cost is $390 and the offer is not. These prices are hypothetical.
Which Silver plan counts, the one I would actually buy or the cheapest one?
The cheapest. Treasury's rule uses the monthly premium of the lowest-cost Silver self-only plan in your rating area (26 CFR 1.36B-2(c)(5)(ii)), regardless of which plan you choose. You can pick a Bronze or Gold plan, but the affordability test still uses the lowest-cost Silver premium for 2027.
My spouse and two kids are on my ICHRA offer and I am 38. Does the family size change the test in 2027?
Family size changes your household income range for the credit, but the ICHRA test itself uses a self-only plan. If the offer is affordable for you in 2027, HealthCare.gov says household members are also not eligible for the credit. If it is unaffordable and you decline, household members can apply for the credit.
I took the ICHRA in January 2027 but my income dropped. Can I switch to the credit mid-year?
Not automatically. The offer is tested against your household income, and the opt-out normally happens before the plan year. HealthCare.gov says mid-year changes can open a Special Enrollment Period, such as your employer ending the arrangement. Ask HR about mid-year opt-out rules and check HealthCare.gov before dropping the allowance.
What happens if I get advance credits in 2027 and my ICHRA turns out to be affordable?
You repay the full excess advance credit on Form 8962 for tax year 2027, at any income. The IRS says there is no repayment cap for tax years after 2025. Report the ICHRA offer on your Marketplace application, and keep the employer notice that shows the allowance.
I turn 65 in 2027 and have an ICHRA. Does the same test apply?
The affordability test is the same, but at 65 the ICHRA rules change. HealthCare.gov says an ICHRA participant must have individual health insurance or Medicare Parts A and B or Part C for each month covered by the HRA. Marketplace credits are generally unavailable to people enrolled in Medicare Part A. Ask a SHIP counselor at shiphelp.org about your dates.
