ICHRA vs. APTC: Can You Claim Government Health Subsidies and Employer Funds?

When you have the option of receiving an Individual Coverage Health Reimbursement Arrangement (ICHRA) from your employer, and you also qualify for government financial help, it creates a common and confusing question: Can I use both?

The short answer: no.

IRS regulations do not allow consumers to receive both an Advanced Premium Tax Credit (APTC) and money from their employer through an ICHRA.

You must make a choice between the two benefits. Understanding this choice starts with a two factors:

1) The Size of Your Employer
2) ACA Affordability

Factor 1: The Size of Your Employer

Your employer's size often impacts whether you qualify for Advance Premium Tax Credits (APTCs) in the first place, because it determines whether the ICHRA offer is mandatory or optional.

• If you work for an employer with 50+ Employees (Applicable Large Employer):
  • The employer must offer affordable coverage to nearly all full-time staff (95%) or face significant IRS penalties.
  • ICHRA offers must meet the affordability test to help the employer avoid these fines.
    
  • If an employee claims APTCs, the employer gets fined.
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• If you work for an employer with Fewer than 50 Employees (Small Employer):
  • The employer is not subject to the ACA mandate.
  • They won't face penalties for "unaffordable" offers, but the affordability of the ICHRA still determines whether you are eligible for APTCs.
  • Because the employer is not penalized, employees of small businesses often have a clearer financial choice. It sometimes makes more financial sense for you to decline the ICHRA and claim the larger APTC subsidy depending on your income.

In short: Your employer's size determines their legal exposure (fines), but the next rule, ACA affordability, is the final trigger that determines whether the government lets you access the APTC subsidy at all.

Factor 2: ACA Affordability

The decision of whether you are even eligible for an APTC is tied directly to the ICHRA your employer offers. The government has a formula to decide if your employer’s offer is "affordable."

The ICHRA is considered affordable if the amount you would have to pay out-of-pocket for the lowest-cost Silver plan on the marketplace (after your employer's ICHRA contribution) is less than a certain percentage of your household income. This percentage is set by the IRS each year. Employers have to meet this affordability threshold in order to satisfy their legal requirements under the Affrodable Care Act.

The affordability calculation creates two distinct paths:

Path 1: If the ICHRA is Affordable (Most Common)

If your employer's ICHRA offer is deemed Affordable by the government's standard:

• You are ineligible for APTCs. The government considers your employer to have offered you a good, affordable health benefit. You must waive the APTC and accept the ICHRA benefit to use the funding.

Path 2: If the ICHRA is Unaffordable (Your Choice)

If your employer's ICHRA offer is deemed Unaffordable by the government's standard:

• You have a choice. You can either accept the ICHRA funds, or you can opt out of the ICHRA entirely and claim the full APTCs and other subsidies on the Marketplace.

ICHRA vs. APTC: The Crucial Choice You Must Make

If the ICHRA is determined to be unaffordable, you must analyze your family’s specific financial situation to decide which benefit is worth more:

Option A: Accept the ICHRA

You'll receive tax-free funds from your employer to reimburse premiums and eligible medical costs.

Option B: Decline the ICHRA

You become eligible for APTCs and other subsidies (like Cost-Sharing Reductions) based on your household income and family size.

You receive $0 from your employer for your health insurance for the entire year.

If your employer's ICHRA is ACA-Compliant (Affordable): The Choice is Mandatory. 

You cannot claim APTCs because the government considers you to have been offered adequate, affordable coverage.

If your employer's ICHRA is NOT ACA-Compliant (Unaffordable):The Choice is Financial. 

You are eligible to claim APTCs. This is where your income becomes the critical factor: The lower your household income, the greater the APTC subsidy you will likely receive. You must carefully compare the total value of the ICHRA offer against the potential value of the APTCs to make the best financial decision.

The Bottom Line

You cannot use your employer’s ICHRA money and get a government subsidy for the same health plan. It is one benefit or the other.

The choice between accepting the ICHRA and claiming the APTC comes down to a signle question: Does the total government subsidy (APTC) or the tax-free employer contribution (ICHRA) give your family more money?

To quickly run that math, talk to Venteur today. We take the hard math out of the decision.