New federal tax credits were authorized in the Patient Protection and Affordable Care Act (ACA; P.L. 111-148 , as amended), to help certain individuals pay for health insurance coverage, beginning in 2014. The tax credits apply toward premiums for private health plans offered through exchanges (also referred to as health insurance marketplaces ). The ACA also authorized subsidies to reduce cost-sharing expenses. Exchanges and Premium Credits

Health insurance exchanges operate in every state and the District of Columbia (DC), per the ACA statute. Exchanges may be established and administered by states, the federal government (administered through the Department of Health and Human Services [HHS]), or a combination of both. Generally, exchange plans provide a comprehensive set of health services and meet all of the ACA's insurance market reforms, as applicable. Certain enrollees in the individual exchanges are eligible for premium assistance in the form of federal tax credits. The premium credit is an advanceable, refundable tax credit, meaning tax filers need not wait until the end of the tax year to benefit from the credit and may claim the full credit amount even if they have little or no federal income tax liability. Enrolled in an Individual Exchange

Premium credits are available only to individuals and families enrolled in a plan offered through an individual exchange; premium credits are not available through the small business (SHOP) exchanges. (The ACA does not change noncitizens' eligibility for Medicaid. ) Required Premium Contributions and Premium Credit Calculations

The amount of the premium tax credit varies from person to person; the credit is based on the household income of the tax filer (and dependents), the premium for the exchange plan in which the tax filer (and dependents) is (are) enrolled, and other factors. Reconciliation of Premium Credits

Under the ACA, the amount received in premium credits is based on the prior year's income tax returns. These amounts are reconciled when individuals file tax returns for the actual year in which they receive premium credits. Cost-Sharing Subsidies

In addition to the premium credits, the ACA established subsidies that are applicable to cost-sharing expenses.
New federal tax credits, authorized under the Patient Protection and Affordable Care Act (ACA; P.L. 111-148, as amended), first became available in 2014 to help certain individuals pay for health insurance. The tax credits apply toward premiums for private health plans offered through exchanges (also referred to as health insurance marketplaces). The ACA also established subsidies to reduce cost-sharing expenses.
Health insurance exchanges operate in every state and the District of Columbia (DC), per the ACA statute. Exchanges may be established and administered by states, the federal government, or a combination of both. Exchanges are not insurers, but they provide eligible individuals and small businesses with access to private health insurance plans. Generally, plans offered through the exchanges provide a comprehensive set of health services and meet all of the ACA's insurance market reforms, as applicable.
The new premium credits established under the ACA are advanceable and refundable, meaning tax filers need not wait until the end of the tax year to benefit from the credit and may claim the full credit amount even if they have little or no federal income tax liability. Premium tax credits generally are available to individuals who enroll in an exchange plan; are part of a tax-filing unit; have household income between specified amounts; are not eligible for other forms of comprehensive health coverage; and are U.S. citizens or lawfully present residents. This report provides examples of hypothetical individuals and families that qualify for the premium credits. The examples use actual 2015 exchange premiums.
The amounts received in premium credits are based on federal income tax returns. These amounts are reconciled after individuals file their returns and can result in overpayment of premium credits if income increases, which must be repaid to the federal government. The ACA limits the amount of required repayments for lower-income enrollees.
In addition to premium credits, the ACA authorized new cost-sharing subsidies. Certain premium credit recipients also are eligible for reductions in their annual cost-sharing limits. Moreover, certain low-income individuals receive additional subsidies in the form of reduced cost-sharing requirements (e.g., lower deductibles).