Health Insurance Marketplaces (also called exchanges) provide a way for people to buy affordable health coverage on their own. The following Q&A explains the cost-sharing reductions that are available to low-income individuals and families via marketplace plans, to help them afford out-of-pocket costs when they get health care.

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What are cost-sharing reductions?

Some people receiving premium tax credits to help pay their premiums for marketplace plans also are eligible to receive cost-sharing reductions (CSR) to help them pay their cost-sharing charges. (For more information about the premium tax credit, see Key Facts: Premium Tax Credits.) CSR reduce the deductibles, co-payments, and other out-of-pocket charges that people eligible for them pay when they use benefits covered by their health plan.

Who is eligible for cost-sharing reductions?

Individuals and families with incomes up to 250 percent of the poverty line are eligible for cost-sharing reductions if they are eligible for a premium tax credit and purchase a silver plan through the Health Insurance Marketplace in their state. People with lower incomes receive the most assistance.

How are the cost-sharing reductions provided?

People eligible for cost-sharing reductions who enroll in a silver plan will automatically receive a version of the plan with reduced cost-sharing charges, such as lower deductibles, out-of-pocket maximums and co-payments. Unlike the premium subsidies, cost-sharing reductions are not provided as a tax credit and they do not have to be “reconciled” when people file their taxes for the year they received cost-sharing reductions.

What is a silver plan?

A silver plan is one type of plan available through both the state’s marketplace and individual market outside the marketplace. Plans offered in the individual market inside and outside the marketplace generally must fit within one of four metal tiers: bronze, silver, gold, and platinum. These tiers are defined by what’s known as actuarial value.

What is actuarial value?

In general, actuarial value percentages represent how much of a typical population’s medical spending a health insurance plan would cover. The actuarial value is 60 percent for bronze plans, 70 percent for silver plans, 80 percent for gold plans, and 90 percent for platinum plans. The higher the actuarial value, the more the plan covers of a typical population’s costs (and thus the typical population would pay less out-of-pocket). A lower actuarial value means the plan covers less of the costs (and the population pays more). The actuarial value calculation focuses mainly on cost-sharing charges. This means that a bronze plan generally would have higher overall enrollee cost sharing than a gold plan would. (For more information about actuarial value and the metal tiers, see Key Facts: Cost-Sharing Charges.)

Will the cost-sharing reductions lower the out-of-pocket charges under a plan by a specific amount?

No, the cost-sharing reductions increase the actuarial value of a standard silver plan, which results in lower out-of-pocket charges. Specific cost-sharing charges will vary from silver plan to silver plan with the same actuarial value; in most states, insurers have significant flexibility to set these charges.

Table 1 shows an example of how various cost-sharing charges in a sample silver plan could be reduced to meet each of the cost-sharing reduction levels. For example, a person with annual income of 182 percent of the federal poverty line enrolled in a silver plan would be subject to a $800 deductible under the sample silver plan. (The deductible is the amount that the person must pay each year before the plan starts to pay for most covered services. (For more information on different types of cost-sharing charges, please see Key Facts: Cost-Sharing Charges.)

Does a person eligible for a cost-sharing reduction have to keep track of spending on health care services to get reimbursed by the health plan or the federal government?

No. The cost-sharing charges for the silver plan are automatically reduced for someone who is eligible for a cost-sharing reduction. For example, consider the situation of Jane, a single woman buying her own health insurance. If Jane is not eligible for CSR and enrolls in the standard silver plan shown in Table 1, she would have a $7,150 annual deductible, with a 30% coinsurance for many services after meeting that deductible, and a $70 co-payment for each physician visit (that would apply before the deductible is met). She could be charged no more than $7,350 in out-of-pocket charges (deductibles, co-payments, and coinsurance) for in-network covered benefits for the year. However, if Jane has income equal to 200 percent of the federal poverty line, she would face lower cost-sharing charges, as shown in the column of Table 1 for the plan with an 87 percent actuarial value. For example, she would have a $800 deductible instead of the $7,150 deductible under the standard silver plan. She would pay $10 for each doctor visit instead of $70.

Will people who have the same income spend the same amount of money out-of-pocket if they qualify for a cost-sharing reduction?

No. How much anyone spends out-of-pocket depends on what health care they use and the details of the specific health insurance plan they select. As Figure 1 shows, two people in the same silver plan with the same cost-sharing reduction will pay different amounts because they use different medical services.

FIGURE 1: Two People, One Silver Plan
Silver Plan: 87 percent AV, $800 deductible, $1,700 out-of-pocket maximum, 10% coinsurance for hospital admission (after deductible), $10 co-payment for physician office visit
Example: John
	Health Care:	3 non-preventive physician visits
	Total Cost:	$300
	John’s share of cost:	= $30 ($10 co-payment for each physician visit)
Example: Jane
	Health Care:	Hospitalized, 3 physician visits, 15 physical therapy visits
	Total Cost:	$7,300
	Jane’s share of cost:	= $1,630 ($250 hospital co-payment + $800 deductible + 10% coinsurance of $4,000 hospital admission + $10 for each of 18 office visits)

Are there any requirements for how insurers must design their cost-sharing reduction plans?

Yes. Insurers offering coverage in the marketplaces must offer variations of each standard silver plan that corresponds to the different cost-sharing reduction levels. A standard silver plan has an actuarial value of 70 percent. Insurers will provide several variants of each silver plan: one with a 73 percent actuarial value for people with incomes between 201 percent and 250 percent of the poverty line, one with an 87 percent actuarial value for those with incomes between 151 percent and 200 percent of the poverty line, and one with a 94 percent actuarial value for those with incomes up to 150 percent of the poverty line. Each silver plan variation will cover the same benefits and include the same health care providers in its network as the standard silver plan on which it is based.

Federal rules also specify how cost-sharing charges under a standard silver plan should be adjusted to increase their actuarial values. First, the out-of-pocket maximum — the maximum amount that an enrollee would pay out of pocket each year for in-network items and services covered by the plan — is reduced.

The 2021 out-of-pocket maximum amounts for the income levels of people receiving cost-sharing reductions appear in Table 2.^[1]

For example, a person with income at 140 percent of the poverty level will receive a silver plan with an out-of-pocket limit no greater than $2,850. The enrollee would not have to spend more than the maximum annual out-of-pocket limit on deductibles, co-payments, and coinsurance for in-network, covered items and services during the course of the year.

After the insurer reduces the maximum out-of-pocket limit for a plan to an amount no greater than the amount in the Table 2 below, further adjustments may be needed so that the plan reaches the actuarial value target for the specific cost-sharing reduction level. In general, insurers can make these reductions in the deductible and/or the co-payments or coinsurance for each silver plan variation. However, some states have set specific standards for the cost-sharing charges insurers may establish under the cost-sharing reduction plans.

How are insurers paid for providing the cost-sharing reductions?

Until late 2017, the federal government reimbursed each health insurer over the course of the year for the estimated costs of reducing the cost-sharing that would otherwise be charged under their standard silver plans for all the plan enrollees eligible for cost-sharing reductions. Later, the federal government compared the upfront payments to the costs the insurer actually incurred to provide cost-sharing reductions to eligible people, and make adjustments needed to account for any under- or over-payments. In October 2017, the Trump Administration decided to stop making CSR payments to insurers, amid a long-running court case over the payments. In response, insurers in most states responded by charging higher silver plan premiums, a practice known as silver loading. People eligible for premium tax credits are largely shielded from these increases, even when they enroll in a silver plan, because the amount of the credit they receive is tied to the (now higher) sticker price of a silver plan. People who are not eligible for subsidies can generally avoid the premium increase related to “silver loading” by enrolling in a silver plan outside of the marketplace, or in a bronze or gold plan.

How will someone eligible for cost-sharing reductions select a plan?

The marketplace website is likely to be the easiest place to compare all marketplace plans. Once a person has applied and received a determination that they are eligible for both premium credits and cost-sharing reductions, the website will display the silver plan variations (with lower deductibles and other cost sharing) that correspond to the individual’s cost-sharing reduction level. In other words, the plans that the individual sees will have the cost-sharing reductions built in. Most people will have multiple silver plan options to choose from in each state, meaning that people eligible for cost-sharing reductions will also have multiple plan options. Each of the standard silver plans may have differences in benefits, visit limits, provider networks, and drug formularies. One insurer may offer different silver plan options, each with its own set of cost-sharing reduction variations that may differ substantially in terms of the specific deductibles and co-payments charged to enrollees.

Does it matter which silver plan someone getting the cost-sharing reductions selects?

Yes. Silver plans are going to be different in various ways, as noted above, in addition to the cost-sharing charges. For example, one silver plan may include the doctor or hospital a person now sees in its network, while another may not, and plans will have different formularies, or lists of covered prescription medications. It will be important for people, including those receiving cost-sharing reductions, to be aware of such differences as they decide which plan to choose.

Would it ever make sense for someone eligible for cost-sharing reductions to buy a bronze plan instead of a silver plan?

If a person with income below 250 percent of the poverty line enrolls in a bronze plan instead of a silver plan, he would not be eligible for cost-sharing reductions. He would have to pay whatever out-of-pocket charges are required under the bronze plan. In most cases, it will make the most sense for people at the lower end of the income scale to pick a silver plan and receive cost-sharing reductions. But the choice will depend on an individual’s situation and preferences. Consider the example in Figure 2:

• John has income equal to 200 percent of the federal poverty line and is eligible for a premium credit of $3,476 per year to help him purchase coverage. He is also eligible for a cost-sharing reduction if he enrolls in a silver plan. With the premium credit, he could get a silver plan by paying $127 per month of his own money, with the credit taking care of the remaining cost of getting the health insurance. With the cost-sharing reduction, he is able to get a plan with a deductible of $800. The plan also caps his out of pocket costs for in-network, covered benefits at $1,700 for the year.
• If John picks a bronze plan, he would pay nothing toward the premium because his premium credit covers the entire cost. But the cost-sharing charges he could face should he need health care services would be significantly greater in the bronze plan than in the silver plan with a cost-sharing reduction. He would face a $6,400 annual deductible in the bronze plan, and up to $7,350 in out-of-pocket costs if he ends up having very high medical expenses.
• If John does not expect to use much health care, he may choose to buy the bronze plan and forgo the cost-sharing reduction. If he does that, he would be taking a risk that he may have to pay high out of pocket charges if he gets sick, but he may decide the risk is worth taking because he would pay nothing in premiums (because of the premium tax credit) in order to purchase the bronze plan.

FIGURE 2: Comparing Different Plan Tiers
John Age: 24 PTC: $3,476 Income: 200% FPL	Example 1: Silver Plan Total Premium: $5,000 John’s Premium Contribution: $127/month Plan AV with CSR: 87%	Example 2: Bronze Plan Total Premium: $3,000 John’s Premium Contribution: $0 / month Plan AV without CSR: 60%
	Sample Silver-CSR Plan (enrollee pays)	Sample Bronze Plan (enrollee pays)
Deductible	$800	$6,400
OOP Maximum	$1,700	$7,350
Inpatient Hospital	10% of the charge (after deductible)	50% of the charge (after deductible)
Physician Visit	$10	50% of the charge (after deductible)

Might someone eligible for a cost-sharing reduction be better off getting a gold or platinum plan instead of a silver plan?

In general, a person with income at or below 200 percent of the poverty line would be better off enrolling in a silver plan and taking advantage of the cost-sharing reduction. For example, if John (who has income equal to 200 percent of the poverty line) used his premium tax credit to purchase a gold plan, he would pay more for his share of the premium — a total of over $200 per month if the gold plan costs $6,000 per year — than he would pay for the silver plan with a cost-sharing reduction. Moreover, under the cost-sharing reduction variation of the standard silver plan John is eligible to receive, the cost-sharing charges would also be lower compared to a gold plan. The gold plan has an actuarial value of 80 percent (with, say, a $900 deductible and $25 physician-visit copayments), while the cost-sharing reduction John can get would make an 87 percent actuarial value plan available to him (with a $800 deductible and $10 physician copayments in our example). So, in this case, John would clearly be better off from a pure cost perspective buying a silver plan and taking advantage of the cost-sharing reduction because it would mean paying less toward the premium and paying less out-of-pocket when he uses health care services.

If John’s income were at 225 percent of the poverty line, the decision may not be as clear. He would be eligible for a 73 percent actuarial value version of the silver plan, but the difference between cost-sharing charges under that plan and the 70 percent standard silver plan are not likely to be dramatic. If John wants more generous coverage and can manage to pay a higher premium, he might decide to choose an 80 percent gold plan.

Does someone have to take the premium tax credit in advance in order to receive the cost-sharing reduction?

No. To get the cost-sharing reductions, a person only needs to be eligible for the premium tax credit. The person can still get the cost-sharing reductions if they choose to wait until they file their taxes to receive the premium tax credits.

What happens if someone receiving a cost-sharing reduction experiences a change (such as a change in income) during the course of the year?

A change in circumstances during the year may result in a change in eligibility for cost-sharing reductions. A person could no longer be eligible and move to a standard silver plan without a cost-sharing reduction, or a person could become eligible for a lesser or more generous cost-sharing reduction level. Unlike with the premium credits, no reconciliation or repayment of cost-sharing reduction amounts occurs in these situations; nor can the person generally receive a refund of any prior cost-sharing charges a person paid that he or she wouldn’t have had to pay if enrolled in a cost-sharing reduction plan with a higher actuarial value. But in some cases, the person can get credit for cost-sharing charges already paid that year.

Consider an example: John anticipates an annual income of 200% of the federal poverty line ($25,520 for 2020), enrolls in a silver plan, and automatically is placed in a cost-sharing reduction plan (a silver plan variation) with an 87 percent actuarial value. During January and February, John spends a total of $300 out of pocket, lower than the amount of the deductible in the 87 percent plan. Then, he loses his job and gets a new one with lower pay. His new total expected income for the year is $19,140 (150% of the poverty line in 2020). He informs the exchange and gets a redetermination of his eligibility, resulting in John being enrolled in a different cost-sharing reduction variation of the silver plan he is in. This new variation has an actuarial value of 94 percent. The deductible under this cost-sharing reduction plan is $250. John is able to get credit for the $300 he already paid out of pocket toward the deductible and out-of-pocket limit in the cost-sharing reduction version he newly enrolls in, but he would not receive a refund of the amounts he paid toward his deductible.

John would receive “credit” for his prior out-of-pocket costs only if he remains enrolled in the same silver plan offered by the same health insurer when his cost-sharing reduction level changes. He can enroll in a different silver plan, but if he does that, any out-of-pocket amounts he already spent during the year would not count toward the deductible or out-of-pocket maximum.

^[1] These amounts are indexed and will change each enrollment year. For yearly guidelines, see Reference Chart: Yearly Guidelines and Thresholds. 

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Millions of uninsured Americans are eligible for a premium tax credit to help them pay for health coverage. The premium tax credit is only available to people without another offer of affordable and adequate coverage; in most cases, this will mean that people with an offer of employer-sponsored coverage will not be eligible for the premium tax credit. The following Q&A explains how employer-sponsored health insurance affects a family’s eligibility for a premium tax credit, and when employees and their family members can forgo an offer of employer coverage and purchase coverage in the health insurance marketplace with the help of a premium tax credit.

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Are employers required to offer health insurance to employees and their family members?

No. Large employers (those with at least 50 full-time employees) have the choice to offer coverage to their full-time employees and their dependents, not including spouses, or to make a shared responsibility payment to the government on behalf of each full-time worker. Small employers (those with fewer than 50 full-time employees) will not make a shared responsibility payment if they fail to offer coverage. Some small employers that do cover their workers will qualify for a tax credit to help pay the employer’s share of premiums.

Can part-time workers get coverage from their employers?

That decision is made by employers. Employers are not required to offer health insurance coverage or pay a shared responsibility payment for employees who work fewer than 30 hours per week. If an employer does not offer coverage to part-time workers, those employees may be eligible for premium tax credits to help pay for coverage purchased in the marketplace. If an employer does choose to offer coverage to part-time workers, those workers will only be eligible for premium tax credits if the employer’s offer of coverage is unaffordable or if it does not meet “minimum value,” which is a measure of the health plan’s share of expected costs.

Can someone who is offered employer-sponsored coverage qualify for a premium tax credit?

In most cases, no. An offer of employer-sponsored coverage generally makes an employee ineligible for a premium tax credit. The exception is if the employer-sponsored coverage is unaffordable or fails to meet the minimum value standard. If the coverage is affordable and adequate, the employee will be ineligible for a premium tax credit regardless of whether the employee chooses to enroll in the employer-sponsored coverage. However, if the employer’s health plan does not offer adequate coverage or is not affordable, the employee can choose to enroll in coverage in the marketplace and can qualify for a premium tax credit.

Employer-sponsored coverage meets the minimum value test and is considered adequate if it covers at least 60 percent of the total cost of benefits expected to be incurred under the plan. Employer-sponsored coverage is considered to be affordable if the contribution required to cover the employee is less than 9.83 percent of the employee’s household income in 2021.^[1] Employer-sponsored coverage must meet both tests; otherwise, the employee may forgo the employer’s offer and potentially qualify for a premium tax credit in the marketplace (an event sometimes referred to as “jumping the firewall.”)

How do you measure the adequacy of employer-sponsored coverage?

Employer-sponsored coverage is adequate if it meets the minimum value test. A plan meets this test if it is designed to pay at least 60 percent of the total cost of benefits expected to be incurred under the plan. This is not something that employees can determine on their own — it is a technical calculation usually determined by an actuary. Employees can learn whether their health plan meets minimum value by requesting a Summary of Benefits and Coverage (SBC) from their employer. The SBC is a required plan document and should clearly state whether the plan meets the minimum value requirement.

What benefits must employer-sponsored insurance cover?

Every health plan, including all employer-sponsored coverage, is required to meet important standards. First, plans cannot place lifetime or annual caps on coverage. In addition, plans must limit enrollees’ out-of-pocket expenses so an individual enrollee will not pay more than a certain amount for in-network care in a calendar year. (In 2021, the maximum out-of-pocket limit is $8,550.)^[1] In addition, all plans (except grandfathered plans in place prior to when these standards became effective) must cover preventive services with no cost sharing.

Most small employers that offer coverage purchase it in the small-group insurance market, which requires that every plan cover ten categories of services known as the essential health benefits.

How is the affordability of employer-sponsored coverage measured?

Employer-sponsored coverage is considered to be affordable to the employee if the employee’s share of the premium is less than 9.83 percent of the employee’s household income in 2021, regardless of the cost to cover family members. If coverage is affordable and meets minimum value, the employee is not eligible for a premium tax credit. For example:

• Jose and Alma Reyes are married and have two children. Jose has an annual salary of $25,000. Alma earns $10,000 from part-time work. Jose’s share of the premium for his employer-sponsored health insurance is $2,500 per year to cover only him (or 7.1 percent of household income). Jose’s health insurance is considered affordable because it costs less than 9.83 percent of Jose and Alma’s household income, even though it is 10 percent of Jose’s income alone. If their household income decreases — for example, if Alma loses her job — then Jose’s insurance would not be considered affordable. In that situation Jose and Alma could “jump the firewall” and become eligible for a premium tax credit. [In either scenario, their children are likely eligible for Medicaid or the Children’s Health Insurance Program (CHIP).]

How do you measure the affordability of family coverage offered by an employer?

Employee-only coverage is considered to be affordable if it costs less than 9.83 percent of household income in 2021. If employee-only coverage is affordable, any offer of coverage for dependents is automatically considered affordable as well. This means that coverage offered by an employer to dependents may cost more than 9.83 percent of income and still be deemed affordable as long as employee-only coverage costs less than 9.83 percent of income. In such cases, the dependents are not eligible for a premium tax credit because they are considered to have affordable employer-sponsored coverage. Using the earlier example of Jose and Alma Reyes:

• Jose and Alma are married and have two children. Jose and Alma have combined annual income of $35,000. Jose’s employer offers employee-only and family coverage. Employee-only insurance costs $2,500 per year (7.1 percent of household income) and coverage for the entire family costs $6,000 per year (17 percent of family income). Family coverage is considered affordable, even though it costs more than 9.83 percent of household income, because Jose’s employee-only insurance is affordable. The offer of affordable family coverage means that Jose, Alma and their children are not eligible for a premium tax credit, even if they turn down the employer offer of family coverage and instead opt for employee-only coverage or no coverage at all.

If a family has multiple sources of insurance for which they pay multiple premiums, do those costs factor into the affordability test?

No. Some families pay multiple premiums for multiple sources of insurance. For instance, each spouse may pay a premium for coverage under their respective employers’ insurance and the children may be enrolled in CHIP for a premium. The affordability test for eligibility for premium tax credits is limited to the cost of employee-only coverage as compared to the household income, regardless of other insurance or medical costs the family may incur.

What if the employer doesn’t offer family coverage?

Some employers offer coverage for employees only, or for employees and their children, and do not offer spousal coverage. Large employers will face a penalty for failing to offer coverage to full-time employees and their dependents if at least one employee receives a premium tax credit for marketplace coverage. There is no penalty for failure to offer coverage to the employee’s spouse. If no plan offered by the employer covers the spouse or children, the spouse or children may purchase insurance in the Marketplace and qualify for a premium tax credit, assuming all other eligibility rules are met.

• It’s a new plan year and Jose’s employer has changed its coverage options. Now, Jose’s employer offers employee-only and employee-plus-children coverage. They’ve dropped the family coverage option so Alma no longer has an offer of coverage. Employee-only insurance costs $2,500 per year (7.1 percent of income) and coverage for the employee plus children costs $4,500 per year (12.8 percent of income). The “employee plus children” option is considered affordable, even though it costs more than 9.83 percent of income, because Jose’s employee-only insurance is affordable. This means that Jose and his children are not eligible for premium tax credits, whether or not they accept this coverage option. Alma doesn’t have an offer of coverage through her own or Jose’s employer so she may be eligible for a premium tax credit to purchase coverage in the marketplace.

Are part-time workers eligible for a premium tax credit?

The affordability and adequacy of an employee’s health plan is measured the same way, regardless of whether the employee is designated as full-time or part-time. If a part-time worker is offered insurance that costs less than 9.83 percent of household income and meets minimum value, the worker will not be eligible for a premium tax credit. However, if a part-time worker is offered insurance that is unaffordable or is below minimum value — or if he is not offered coverage at all — then he may be eligible for a premium tax credit, assuming all other requirements are met.

Does employer-sponsored coverage have to fail both the affordability and minimum value tests to allow an employee and dependents to become eligible for a premium tax credit?

No, the offer of employer-sponsored coverage does not need to fail both tests. An employee can qualify for premium tax credits when no plan offered by the employer is both affordable and meets minimum value. For example, if an employer offers a plan that is very low-cost for the employee but has a minimum value of less than 60 percent, the employee can turn down the plan and qualify for a premium tax credit. However, if the employee enrolls in the plan, the employee will not be eligible for a premium tax credit. During the marketplace open enrollment period, an employee who enrolls in an employer plan that is not affordable or not minimum value can drop that plan and enroll in a marketplace qualified health plan (QHP) with a premium tax credit, assuming the employee meets all other eligibility requirements.

Is all employer-sponsored insurance required to meet the affordability and minimum value tests?

No, not every plan an employer offers is required to meet the affordability and minimum value tests. For example, an employer could offer three plans: Plan 1 that meets both affordability and minimum value, Plan 2 with comprehensive benefits but high premiums that is not considered affordable for all employees, and Plan 3 that has very low premiums but limited coverage that fails to meet minimum value. The employer can offer, and the employee can select, any of these plans. Regardless of which plan employees choose, they will not qualify for premium tax credits in the Marketplace because the employer offers at least one plan (Plan 1) that meets both affordability and minimum value. For the employee, any employer plan he accepts qualifies as minimum essential coverage to meet his obligation to obtain coverage, even if the plan’s benefits don’t meet the minimum value test.

How will the marketplace confirm whether an applicant for the premium tax credit has employer-sponsored insurance?

When a person fills out the marketplace application, they are asked questions about any offers of employer-sponsored coverage. The application asks if insurance is offered, whether it meets minimum value, its cost, and whether any waiting period applies to determine whether the employee is eligible for a premium tax credit despite having an offer of coverage. The marketplace will use information to determine whether the offer bars eligibility for PTC. Employers share data with the marketplace and the IRS to identify the people who have been offered employer-sponsored insurance (and insurers prepare a similar report that identifies who was enrolled in coverage).

If the person doesn’t have that information readily available, they can request download a form called the Employer Coverage Tool to be completed by the applicant’s employer or with the employer’s help. If the employer doesn’t assist in completing the document, the applicant can try to find this information in other ways. For example, the employee can find premium costs in information provided during their most recent open enrollment period. In addition, the minimum value of every plan should be on its Summary of Benefits and Coverage (SBC), a document that all plans — including employer-sponsored plans — are required to produce.

Does an offer of retiree coverage prevent someone from receiving a premium tax credit?

A person who is eligible for retiree coverage does not have to demonstrate that the retiree coverage offer was unaffordable or failed to meet minimum value to qualify for a premium tax credit. The retiree will be eligible for a credit if he meets all other criteria for eligibility. This is in contrast to other offers of employer-sponsored coverage which disqualify an employee from receiving a premium tax credit whether or not the coverage is accepted (assuming the coverage meets the affordability and minimum value tests). However, if the retiree actually enrolls in the retiree plan, it is considered minimum essential coverage and becomes a barrier to receiving premium tax credits. People who are enrolled in retiree coverage generally must wait until the marketplace open enrollment period to drop that coverage and enroll in a QHP with a premium tax credit.

If an employer offers retiree coverage, but does not extend it to the retiree’s spouse, will the spouse be eligible for a premium tax credit?

Yes, assuming that other requirements are met, the spouse will be eligible for a premium tax credit in the marketplace. The retiree’s eligibility for retiree coverage will not affect the spouse’s eligibility for a premium credit.

Does an offer of COBRA coverage prevent someone from receiving a premium tax credit?

COBRA is continuation coverage that is available to workers and their families after certain circumstances make them no longer eligible for the worker’s employer plan. The same rules that apply to people who are eligible for retiree coverage apply to people who are eligible for COBRA. Like retiree coverage, an offer of COBRA does not bar someone from being eligible for a premium tax credit. It is only a barrier to receiving the credit if the person actually enrolls. During the marketplace open enrollment period, an individual enrolled in COBRA could drop that coverage and enroll in a marketplace plan with a premium tax credit, if otherwise eligible.

Does an offer of domestic partner coverage for unmarried, cohabitating couples create a firewall from premium tax credit eligibility?

Some employers offer health coverage for domestic partners (whether of the same or opposite sex). In most cases, the offer of coverage would not prevent the domestic partner from being eligible for premium tax credits. A person who is offered coverage because of his or her relationship to an employee, but who does not file a joint tax return as a spouse or is not claimed as a dependent on the employee’s tax return, may turn down the offer of coverage and be eligible for a premium tax credit, if all other tests are met. However, an employee’s spouse or dependent who is offered coverage through the employer cannot qualify for a premium tax credit unless the coverage is unaffordable or fails to meet the minimum value test.

If an employer gives employees a stipend for coverage instead of providing health insurance, are those employees still eligible for a premium tax credit?

Yes. Some employers offer a cash “stipend” instead of offering health insurance. This cash stipend is taxable income, similar to a bonus or a pay raise, and cannot be conditioned on the purchase of health insurance or made through payroll deductions. This type of employer assistance does not disqualify a person from receiving a premium tax credit. Employers cannot reimburse employees for the cost of their marketplace premiums using pre-tax dollars.

Can someone who is self-employed qualify for a premium tax credit?

Yes. A person who is self-employed can enroll in coverage through the marketplace and potentially qualify for a premium tax credit. A self-employed person who has employees (other than independent contractors) can purchase coverage for employees in the Small Business Health Options Program (SHOP) Marketplace.

Can a person enroll and qualify for a premium tax credit if he or she was offered employer-sponsored coverage but missed the employer’s open enrollment period?

In general, no. Some people may have missed their opportunity to enroll in their employer-sponsored plan. However, if the insurance offered by the employer was affordable and met minimum value, that employer offer still counts as an offer of minimum essential coverage that prevents a person from being eligible for a premium tax credit. A person in this position may enroll in marketplace coverage during an open or special enrollment period but will be ineligible for financial help.

^[1] This percentage is indexed and will change each enrollment year. For yearly guidelines, see Reference Chart: Yearly Guidelines and Thresholds.

View all key facts

Health Insurance Marketplaces (also called exchanges) provide a way for people to buy affordable health coverage on their own. Health insurance plans available through the marketplace have to meet standards for the charges that people enrolled in the plan pay when they use medical care, which are known as cost-sharing charges. The following Q&A describes the different kinds of cost-sharing charges that plans may impose and provides details on the standards that plans available to individuals and families through the marketplace must meet.

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What is a cost-sharing charge?

A cost-sharing charge is the amount an individual has to pay for a medical item or service (e.g., hospital stay, physician visit, or prescription) covered by his health insurance plan. Plans typically have three different types of cost-sharing charges: a deductible, copayments and coinsurance, although not all plans feature each of these three types of cost sharing.

What is a deductible?

A deductible is the amount that a health insurance plan enrollee must pay before the plan starts to pay for most covered items and services. The deductible is set on a yearly basis. For example, if a plan has a $1,000 deductible, an enrollee will generally have to pay the full charge (or total cost) for most medical services until she has spent $1,000. Once the deductible has been met, if the enrollee receives additional medical care during the same year, she would not have to pay the full charge for those additional items and services. The health insurance plan would pay a portion, and the enrollee would pay a portion based on the copayments and coinsurance that apply to the service.

Are all covered benefits subject to a deductible?

No. Under the health reform law, health insurance plans sold in the marketplaces have to pay the full charge for certain preventive care services delivered through the physicians’ offices, hospitals, pharmacies and other health care providers that are part of the plan’s network (in-network and out-of-network benefits are discussed below). Even if a plan has a deductible, the enrollee would be able to get these preventive services without having to pay a share of the cost.

In addition, some health insurance plans may decide to exempt other items or services, such as prescription drugs or a certain number of physician visits, from the deductible. In the case of prescription drugs, for example, the plan may pick up a portion of the cost of the drugs (rather than requiring an enrollee to pay the full charge) even if the enrollee has not yet met their deductible for that year.

What is a copayment?

A copayment is a fixed dollar amount that enrollees must pay toward the cost of a medical item or service that they use and that the health insurance plan covers. Copayments are common for prescription drugs and seeing a physician. An example of a copayment is when the enrollee pays $10 for a prescription drug and the plan pays the rest of the cost.

What is coinsurance?

Coinsurance is a fixed percentage of the allowed amount for a covered item or service that an enrollee must contribute (see below for a definition of what is an allowed amount). For example, a plan may require a plan enrollee to pay 30 percent of the allowed amount for lab tests. The plan would pay the remaining 70 percent of the charge.

For an explanation of common health insurance terms and an example of how cost-sharing charges work, see the Department of Health and Human Services’ (HHS) glossary.

What is the difference between in-network and out-of-network benefits?

Health insurance plans usually have a network of health care providers, with whom they negotiate prices for certain services. These doctors, hospitals, and other providers may be called “in network,” “preferred,” or “participating.” If a plan enrollee uses a provider that is in the plan network, the plan will pay some or all of the costs of the care delivered by the provider depending on whether the enrollee has met his deductible and the type of service.

Health insurance plans may also provide some coverage for services received “out of network” but may require enrollees to pay a higher share of the costs for these services. For example, a higher deductible, copayments and/or coinsurance may apply to out-of-network care than for care provided by the plan’s network of providers. In addition, the full charge (or total cost) of the service may be higher, because the out-of-network provider can charge more than the amount the plan has negotiated with providers in the network. For example, if an enrollee sees a physician who is outside of her insurance plan’s network, and the physician charges $150 for the visit, but the plan’s allowed amount (discussed below) is $125, then the insurer will pay only $125 minus any cost-sharing charges that apply. In addition to the cost-sharing charges, the enrollee would be responsible for the $25 difference between the allowed amount and the full amount charged for the service.

What is the “allowed amount” for a medical service?

As noted above, insurers usually negotiate how much they will pay for the costs of covered health care services with physicians, hospitals, and other health care providers in the health insurance plan’s network of health care providers. These negotiated amounts are known as the “allowed amount,” and sometimes the “eligible expense,” or “negotiated rate.” Health care providers participating in a plan’s network agree to accept these payment amounts when a person covered by the plan uses their services. The cost-sharing charges the enrollee owes (for example, a 20% coinsurance rate) are based on this allowed amount. If an enrollee uses a provider that is not in the plan’s network, the overall charge could be higher than the allowed amount. And the enrollee may be required to pay the excess, a practice known as “balance billing.” A provider participating in the enrollee’s plan network cannot balance bill the enrollee.

Is there any limit on the total amount of cost-sharing charges that an enrollee in a marketplace health insurance plan has to pay?

Yes, there is a “maximum annual limitation on cost sharing,” or a maximum out-of-pocket limit, that applies to all marketplace health insurance plans. This is the maximum amount that an enrollee is required to pay for all cost-sharing charges (including the deductible, copayments and/or coinsurance) during the course of a year. The health law requires each plan to have a maximum out-of-pocket amount that applies to covered essential health benefits delivered by in-network providers. Insurers may set out-of-pocket limits that are lower than these maximum amounts, and out-of-pocket limits for a family plan are limited to twice as high as the maximum amount for an individual plan. For 2021, the maximum out-of-pocket limits are $8,550 for individual coverage and $17,100 for family coverage. In a family plan, each individual enrollee must be protected by the maximum individual annual out-of-pocket cap, even if the overall limit for the family is higher. For example:

• William, Paula and their son, Sammy, are enrolled in a family plan with an out-of-pocket limit of $12,000. William incurs $10,000 in cost-sharing charges due to a hospitalization in May. However, because William is protected by the individual maximum out-of-pocket limit, he will only pay the maximum allowed out-of-pocket amount for an individual ($8,550 is the limit in 2021), and for the remainder of the year, he will pay no cost sharing. If Paula and Sammy have additional medical expenses and spend $4,100 on cost-sharing charges during the year, the family will reach their health plan’s $12,000 out-of-pocket limit and will pay no cost sharing for the rest of the year.

Will the maximum out-of-pocket limit change from year to year?

The amount of the maximum out-of-pocket limit for a health insurance plan covering an individual will be adjusted to account for changes in the cost of private health insurance. HHS announces the maximum amount for each new enrollment year in an annual notice. For 2021, HHS has announced that the maximum out-of-pocket limits are $8,550 for individual coverage and $17,100 for family coverage. The amount of the maximum out-of-pocket limit for a family plan will always be double the amount set for an individual plan, though the individual limit of $8,550 also applies to each person enrolled in the family plan.

What happens if an enrollee gets care from providers that are not in the health insurance plan’s network?

If an enrollee receives a significant amount of health care from providers outside of a health insurance plan’s network, she could pay more in total deductibles, coinsurance and copayments than the out-of-pocket limit, because the limit does not apply to cost-sharing charges related to out-of-network health care services.

What if someone gets a health care service that the marketplace health insurance plan doesn’t cover?

If an enrollee uses medical services that the health insurance plan does not cover at all, she would have to pay all of the costs out of pocket, and those costs would not be subject to the health law’s out-of-pocket maximum. This would be the case even if she got the care from an in-network provider.

Are people enrolled in a marketplace plan required to spend the full amount of the out-of-pocket limit each year?

No. Only a very small portion of people will have such large medical expenses that their cost-sharing charges will reach the out-of-pocket limit. But, the out-of-pocket limit provides critical financial protection for people with serious illness or injury and particularly for unexpected or catastrophic health care needs.

For example, if a marketplace health insurance plan enrollee gets sick just once in a year and goes to the doctor once and fills one prescription, she might spend $50 out of pocket in that year, depending on the charges for her care and the details of her coverage. But in the case of a very expensive illness requiring hospitalization, total deductibles, copayments and coinsurance could reach into the tens or hundreds of thousands of dollars if there was not a limit.

Who pays for health care services after a person’s total out-of-pocket costs reach the out-of-pocket limit?

After an enrollee spends the amount of the plan’s out-of-pocket limit in deductibles, copayments and coinsurance for in-network, covered benefits, the plan pays the full costs of any covered health care services that the individual receives from in-network providers.

Besides the out-of-pocket maximum, are there other standards related to cost-sharing charges that marketplace health insurance plans have to meet?

Yes. Most marketplace health insurance plans must be organized into coverage levels or tiers named for precious metals: bronze, silver, gold, and platinum. Plans are sorted into levels based on their actuarial value, which is a way to estimate and compare the overall generosity of different plans. (Actuarial value is explained below.) The more precious the metal, the higher the actuarial value of the plan, and the lower the cost-sharing charges, such as deductibles and copayments, that enrollees have to pay. For example, a gold plan generally has substantially lower cost-sharing charges than a bronze plan, which means that the insurance plan pays a larger share of costs when someone uses medical services (see Figure 1).

FIGURE 1: QHPs Must Provide Plan Designs Consistent with Actuarial Value

Are health insurance plans other than those offered through the marketplace — such as a plan offered by a large employer — subject to any cost-sharing requirements under the Affordable Care Act?

Yes. The out-of-pocket maximum applies generally to employer plans as well as plans in the individual market both inside and outside of the insurance marketplace. (Grandfathered plans — those that existed prior to passage of health care law and have not changed significantly since — are exempt.)

As for the requirements for exchange plans to be in metal tiers, they only apply in the individual and small-group markets and do not apply to plans offered by large employers.

Do all health insurance plans in the marketplace have to be in one of the metal tiers?

Marketplace health insurance plans either have to fit within one of the “metal” tiers or be a “catastrophic” plan. Catastrophic plans were created as an option for younger people. The plans have a very high deductible (equal to the out-of-pocket maximum, so $8,550 for an individual in 2021). This means that, with the exception of preventive services that have to be provided without any cost-sharing charges and at least three primary care physician visits per year (with enrollee cost-sharing allowed for all care that’s non-preventive), enrollees would generally pay the full cost of any medical care they might need until they spend $8,550. The catastrophic plans also are not eligible for purchase with premium tax credits.

Catastrophic health insurance plans may be attractive to people who want to pay as low a premium as possible, do not expect to need much health care, and are not eligible for premium tax credits. People younger than 30 are eligible to enroll in a catastrophic plan. People 30 and older are eligible to enroll in a catastrophic plans if they qualify for a marketplace coverage exemption because they lack access to affordable coverage or have experienced a hardship.

What is the purpose of the metal levels?

Organizing health insurance plans into levels based on the level of coverage they provide can help enrollees compare different plan options and decide which one is best for them. The metal levels also ensure that a basic level of coverage will be available. Federal standards require insurers participating in the marketplace or exchange to offer plans in at least the silver and gold levels.

What is actuarial value?

In general, the actuarial value percentages that apply to the metal levels represent how much of a typical population’s medical spending the health insurance plans in that metal level would cover.

Percentages (60 percent for bronze, 70 percent for silver, 80 for gold, and 90 for platinum) represent the actuarial value of plans at each level. A higher percentage means the plan covers more of a typical population’s costs (and the population pays less out-of-pocket). A lower percentage means the plan covers less (and the population pays more). The actuarial value calculation focuses mainly on cost-sharing charges, so that a bronze plan generally would have higher enrollee cost-sharing amounts compared to a gold plan. There also may be differences in how benefits are covered, such as differences in the prescription drugs that are covered or how many physical therapy visits the plan covers. The law requires all the metal level plans to cover a set of essential health benefits.

How is actuarial value calculated?

Actuarial value calculations are based on spending on health care services associated with a “typical population.” A “typical population” is a large group of people with a mix of health care needs. To determine the actuarial value of a health insurance plan, it is assumed that the entire typical population is enrolled in that plan. Data on the health care services used by the typical population are then used to figure out how much of the typical population’s costs the plan covers. This process takes into account the plan’s specific cost-sharing charges, including the deductible, copayments, and coinsurance. The actuarial value is an estimate of what the plan would spend on the benefits covered by the plan that are used by the typical population. So, a silver plan covers about 70 percent of the costs of a typical population’s costs for covered benefits.

Does that mean that people enrolled in a health insurance plan with a 70 percent actuarial value level have 70 percent of the cost of their medical care covered? So an enrollee in that plan would pay 30 percent of the cost?

No. The actuarial value of a health insurance plan is determined using a large population, which includes people who use little or no health care services and others that have significant health spending. The value of a plan’s coverage to a particular enrollee depends primarily on the health care the enrollee uses.

As an example, consider two people, John and Jane, who are enrolled in the same silver plan, as shown in Figure 2. They have very different heath care needs during the year and therefore have different out-of-pocket costs under the plan.

FIGURE 2: Two People, One Silver Plan
Silver Plan: 70% AV, $2,000 deductible, $5,000 OOP limit, $1,500 copay for hospital admission after deductible, $30 copay for physician visit after deductible
Example: John
	3 physician vists	$300
	Insurer’s share of cost	– $0
	John’s share of cost	= $300
Example: Jane
	Hospitalized, 3 physician visits, and 20 physical therapy visits	$7,300
	Insurer’s share of cost	– $3,110
	Jane’s share of cost	= $4,190
	Deductible Hospital copay Office visits	$2,000 $1,500 $690

What will the cost-sharing charges be in the various health insurance plan levels?

In most states, insurers can decide what cost- sharing amounts they will charge enrollees, as long as the health insurance plan applies the required maximum out-of-pocket limit and designs the cost-sharing charges so that the plan meets one of the actuarial values associated with a metal level. In some states, such as California and New York, however, the marketplace requires insurers to offer certain standard plan designs. Table 1 shows some examples of cost-sharing charges that would allow four sample plans to meet the various actuarial value metal levels.

Are the cost-sharing charges in marketplace health insurance plans always going to simply involve a yearly deductible, a uniform copayment or coinsurance for services, and a maximum out-of-pocket limit?

No. While some health insurance plans may follow that simple structure, there is a significant amount of flexibility within the federal requirements for insurers to do things differently and in a more complex manner. For example, a plan might have two separate annual deductibles, one for prescription drugs and one for medical care. A plan may have cost-sharing charges that are quite low for some services (for example $10 co-payments for physician visits) but a different cost-sharing structure (such as 50 percent cost sharing) for other services. The same covered item or service may itself have different cost-sharing charges; for example, generic drugs may require a $10 copayment, preferred brand-name drugs a $25 copayment, and other high-cost drugs 50 percent coinsurance.

Can the provider network for health insurance plans offered by the same insurer vary from one metal tier to another?

Yes, except in states that are creating standard plan designs such as New York. As long as a health insurance plan meets the actuarial value target (60 percent, 70 percent, etc.) and limits in-network enrollee cost-sharing charges to no more than the federally established out-of-pocket maximum, insurers in most states can determine the specific cost-sharing charges for each item or service, as well as the specific amounts of the deductible and out-of-pocket limit. So two plans in the same metal level could have two different sets of cost-sharing charges for enrollees, even though the two plans have the same actuarial value. As an example, Table 2 shows how two sample plans that are both within the silver level can have different cost-sharing charges.

How can someone find out what the cost-sharing charges in the marketplace health insurance plans are?

Healthcare.gov and the web sites for the marketplace in each state displays final information about what the health insurance plans look like. This allows people to browse plans offered in their area and compare specific details such as cost-sharing charges under various plans. In addition, marketplace web sites must make available a form called the Summary of Benefits and Coverage (SBC) for each plan.

The form provides information about plan benefits and cost-sharing charges in a standard way to allow for comparison of the plans offered in the marketplace. The SBC also must be provided by insurers or employers for other health insurance plans.

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Household size is a key factor in determining eligibility for the premium tax credit. The following Q&A explains the rules on household size and how it affects eligibility for and the amount of the premium tax credit.

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Why does household size matter when calculating eligibility for the premium tax credit?

Eligibility for the premium tax credit is based on a family’s income as a percentage of the federal poverty line (FPL). The poverty line increases with household size. Table 1 shows the federal poverty guidelines for different household sizes in the 48 contiguous states and the District of Columbia. (Alaska and Hawaii each have their own federal poverty guidelines.) A family’s poverty line percentage is their annual income divided by the poverty line for their household size. For example, a married couple with two children earning $45,000 a year would divide their household income by the poverty line for a family of four — $26,200 in 2020 — to calculate their income at 172 percent of the federal poverty line. This puts them in the eligible income range for a premium tax credit and cost-sharing reduction. (For more information on cost-sharing reductions, see Key Facts: Cost-Sharing Reductions.)

Income as a percentage of the federal poverty line also sets the amount of premium tax credit a household is eligible to receive. Families at different income levels are expected to contribute different percentages of their income towards premiums (see Table 2), with higher income families paying a greater percentage of their income towards premiums than lower income families. The premium tax credit is determined by subtracting the premium contribution from the cost of a benchmark plan so as premium contributions rise, the premium tax credit is reduced. (For more information on how the premium tax credit is calculated, see Key Facts: The Premium Tax Credit.)

How does the marketplace establish household size to determine eligibility for the premium tax credit?

A person’s household for premium tax credit eligibility includes all the individuals on their tax return — the tax filer, the tax filer’s spouse (if married filing jointly), and any dependents. Everyone is included in the household, even family members who are not applying for coverage and those who are not eligible for a premium tax credit. For example:

• Maria and Simon are married and have one child, Elaine, whom they claim as a tax dependent. They have a tax household of three people and earn $35,000 a year (which is 161 percent of the poverty line in 2020). Elaine is eligible for the Children’s Health Insurance Program (CHIP), making her ineligible for a premium tax credit, but she’s still included in Maria and Simon’s household for determining premium tax credit eligibility.
• Suppose that Maria and Simon also have an older daughter, Cora, who is 22 and living at home with her parents. Cora just graduated from college and is working full-time. She cannot be claimed as a tax dependent by her parents and files her own taxes. Even though Cora lives with her family, she is a household of one for premium tax credit purposes because she cannot be claimed by her parents.

Who can be in a household together?

The composition of the household for premium tax credit purposes follows Internal Revenue Service (IRS) rules for filing status and dependents. For more information on tax rules, see The Health Assister’s Guide to Tax Rules.

How do you determine the household of married couples who file separate tax returns?

To be eligible for a premium tax credit, married couples must file a joint tax return. Married couples who file separate returns are not eligible for a premium tax credit, with the following exceptions:

• A married person qualifies to file as head of household. A person who is married but does not plan to file jointly with a spouse can sometimes qualify as Head of Household, a filing status that allows a person to be eligible for a premium tax credit, rather than Married Filing Separately, which does not. In general, a person can be Head of Household if he or she is unmarried or considered unmarried. A married person is considered unmarried if he or she will live apart from his or her spouse in the last six months of the tax year and pays more than half of the cost of keeping up the home for their dependent child.
• A married person is a survivor of domestic violence or abuse. A taxpayer who lives apart from his or her spouse and is unable or unwilling to file a joint tax return due to domestic violence will be deemed to satisfy the joint filing requirement by making an attestation on his or her tax return. Under this IRS rule, taxpayers may qualify for the premium tax credit despite having the tax filing status of married filing separately; or
• A married person has been abandoned by his or her spouse. . A taxpayer is still eligible for a premium tax credit despite filing separately if he or she has been abandoned by a spouse and certifies on the tax return that the spouse cannot be located after using “reasonable diligence.”

The household of a person who qualifies for one of these exceptions includes the person and anyone he or she claims as a dependent on the tax return.

Note also that married people who file as Head of Household are always eligible for a premium tax credits, but married people who are survivors of domestic abuse or have been abandoned by their spouse can only qualify for those exceptions for no more than three consecutive years. (For more information on these exceptions, see the IRS rules.)

Do family members have to enroll in the same plan to be included in the same premium tax credit? 

The tax household for premium credit eligibility is based on tax rules and doesn’t always align with insurers’ rules about who can enroll in the same plan. In the marketplace, people have the option to purchase individual or family policies. Typically, health insurers limit family plans to only immediate family members (e.g., parents and their children). That means that a member of a tax household may need to enroll in a separate plan if they aren’t the child of the taxpayer, even if they’re properly claimed as a dependent and part of the household for premium tax credit purposes. For example:

• Serena lives with her son, Jacob, and her aunt, Martha, who Serena supports. Serena is a tax filer and claims both Jacob and Martha as tax dependents. Because most insurers wouldn’t include Martha in a family plan covering Serena and Jacob, Martha will be in a separate health plan. However, even though they are covered through separate health plans, the family is still one tax unit, so their premium tax credit is determined as a household of three, and the advance payment of the premium tax credit (APTC) is applied proportionally to the two plans (see Figure 1).
• Even though part of the advance payment goes to Martha’s health insurer during the year, Serena will claim the tax credit and be responsible for reconciling the entire household’s APTC, including Martha’s portion. Because Martha is a tax dependent, not a tax filer, she cannot directly claim a premium tax credit.

FIGURE 1: Example Allocation of APTC If Multiple Plans Cover One Household
Household of 3 (SERENA, JACOB, MARTHA)
Plan A Enrollees: SERENA and JACOB	Plan B Enrollees: MARTHA

On the other hand, insurers are required to allow taxpayers’ children under age 26 to enroll in their parents’ plan, even if they are not dependents and have a separate tax household. In these cases, the IRS has established rules for how to allocate advance payments of the premium tax credit. For example:

• Brian and Anika are married and file taxes jointly. Their 23-year-old daughter, Olivia, is not a dependent and files her own tax return. Even though Olivia is in a different tax household from her parents, she can enroll in a plan with them because she is under 26 years old. However, even if they enroll in a family plan together, the premium tax credit amount will be determined separately for each tax household (see Figure 2). Brian and Anika’s premium tax credit will be based on their income as a household of two. Olivia’s premium tax credit will be based on her income as a single household member.
• At tax time, Brian and Anika would file a tax return and reconcile their APTC amount and Olivia would file her own tax return and reconcile her APTC amount.

For a non-dependent child like Olivia, her share of the premium and her premium tax credit amount do not vary based on whether she enrolls in a plan together with or separately from her parents. In either case, the premium Olivia owes will be based on her age, location, and smoking status, and her tax credit will be determined by her income. Having a non-dependent enroll together with other family members also makes reconciliation of the credit more complicated. Given that, even though it’s permitted, there aren’t many benefits to enrolling people from separate tax households into the same marketplace policy.

FIGURE 2: Example Plans and APTC If Multiple Households in One Family

Household of 2 (BRIAN, ANIKA); Household of 1 (OLIVIA)

Plan A Enrollees: BRIAN, ANIKA, and OLIVIA

How do mid-year changes in a person’s household affect premium tax credit eligibility?

A change in household size affects the household income level as a percentage of the poverty line, changing the premium tax credit the taxpayer is eligible to receive. Since the premium tax credit is based on annual income, the change in household size affects the premium tax credit amount for the entire year, not just for the months after the change occurs. For example:

• A married couple with a projected income of $34,500 has income at 200 percent of the poverty line. If they have a baby sometime during the year they become a household of three and their income would be 159 percent of the poverty line. This change in poverty level income will lower the household’s expected contribution from 6.52 percent to 4.57 percent of income, which will make them eligible for a larger credit.

To ensure that individuals receive the correct premium tax credit for the year, household size and other changes should be immediately reported to the marketplace.

Are premium tax credit and Medicaid households the same?

No. For the premium tax credit, members of a tax household are always in the same household when determining their eligibility. For Medicaid, household size and composition are determined separately for each member of the household. The rules look at more than just tax filing status; familial relationships and who physically lives in a household are also part of the determination. In some cases, Medicaid follows the premium tax household rules, but in some cases it will not.

In addition, household rules for the premium tax credit are uniform across all states, but Medicaid provides some state options — such as some flexibility in the age limits for the definition of a child — that result in variability in household size depending on the state. For more information on the Medicaid household rules, see Key Facts: Determining Household Size for Medicaid.

How will the marketplace determine whether to use Medicaid or premium tax credit household rules to determine eligibility? 

An applicant can’t be eligible for a premium tax credit if he is eligible for Medicaid, so the marketplace applies the state Medicaid rules first. It determines the family size of each individual in the tax household using Medicaid rules. (If the individual is assessed or determined eligible for Medicaid, he will be transferred to his state’s Medicaid agency.) If the individual is ineligible for Medicaid, then the marketplace will look at his household and eligibility for a premium tax credit using premium tax credit rules.

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For updated yearly percentages, please see Reference Guide: Yearly Guidelines and Thresholds. 

As a result of the Affordable Care Act (ACA), millions of Americans are eligible for a premium tax credit that helps them pay for health coverage. This Q&A explains who is eligible for the tax credit, how the amount of an individual or family’s credit is calculated, how mid-year changes in income and household size affect tax credit eligibility, and how the reconciliation between the tax credit amount a person receives and the amount for which he or she was eligible will be handled.

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What is the premium tax credit?

The ACA created a federal tax credit that helps people purchase health insurance in health insurance marketplaces (also known as exchanges). The “premium tax credit” is available immediately upon enrollment in an insurance plan so that families can receive help when they need it rather than having to wait until they file taxes. People can choose to have payments of the premium tax credit go directly to insurers to pay a share of their monthly health insurance premiums charged or wait until they file taxes to claim them.

Who is eligible for a premium tax credit?

The premium tax credit is available to individuals and families with incomes between the federal poverty line and 400 percent of the federal poverty line^[1] who purchase coverage in the health insurance marketplace in their state. A premium tax credit is also available to lawfully residing immigrants with incomes below the poverty line who are not eligible for Medicaid because of their immigration status.

To receive a premium tax credit, individuals must be U.S. citizens or lawfully present in the United States. They can’t receive a premium tax credit if they are eligible for other “minimum essential coverage,” which includes most other types of health insurance such as Medicare or Medicaid, or employer-sponsored coverage that is considered adequate and affordable.

In 2014, a Supreme Court decision gave states the choice whether to expand Medicaid to cover adults with incomes below 138 percent of the poverty line. As a result, individuals earning between 100 and 138 percent of poverty can qualify for a premium tax credit in states that do not expand Medicaid, if states don’t already cover those individuals.

What kind of marketplace health plan can someone buy with the credit?

People can use their premium tax credit to buy four different types of plans offered through the marketplace in their state: bronze, silver, gold, and platinum. All plans sold in the marketplace must meet standards to ensure they provide adequate coverage. However, the plans vary, with bronze plans providing the least comprehensive coverage and platinum plans the most comprehensive.

In general, bronze plans require the most overall “cost sharing,” which means costs like deductibles and co-pays. Platinum plans would have the least overall cost sharing. For example, a bronze plan will likely have a higher deductible than a silver plan, while a platinum plan will likely have a lower deductible than a silver plan. People can purchase any of the four types of plans. But, cost-sharing reductions (which are available to people with incomes up to 250 percent of the poverty line) that lower deductibles and the total out-of-pocket costs under the plan, are only available to people who purchase a silver plan. (For more information on cost-sharing reductions, see Key Facts: Cost-Sharing Reductions)

Marketplaces also display catastrophic plans that are less comprehensive than bronze plans, but they are only available to people under the age of 30 and those who receive a marketplace exemption due to hardship or lack of an affordable insurance option. A premium tax credit cannot be used to buy these plans.

How much help do people get?

To calculate the premium tax credit, the marketplace will start by identifying the second-lowest cost silver plan that that is available to each member of the household, called the “benchmark plan.” The amount of the credit is equal to the total cost of the benchmark plan (or plans) that would cover the family minus the individual or family’s expected contribution for coverage (see Figure 1).

FIGURE 1: Calculation of the Premium Tax Credit

The individual or family is expected to contribute a share of their income toward the cost of coverage. That share is based on a sliding scale. Those who earn less have a smaller expected contribution than those who earn more, as shown in Table 1. For example:

• John is 24 years old and has an annual income of $25,520, which equals 200 percent of the poverty line. His expected contribution is 6.52 percent of his income, or $1,663 a year. The benchmark plan available to John is priced at $5,000; John would be eligible for a credit amount of $3,337 ($5,000 minus $1,663).
• Peter, Mary and their two children have an annual income of $65,500, which translates to 250 percent of the federal poverty line. At this income level, the family’s expected contribution is 8.33 percent of their income, or $5,456 a year. In the area where Peter and Mary live, the total premiums for the benchmark plan that would cover all members of the family is $15,000. The credit amount that the family would be eligible for is $9,544, which is $795 a month. ($15,000 minus their expected premium contribution of $5,456). An advance payment of $795 a month will be paid directly to the insurer offering the health plan that the family selects; the family would be responsible for paying the remaining premium to the insurer.

How does the marketplace determine the applicable benchmark plan?

The benchmark plan is the second lowest-cost silver plan that is available to each member of the household. In many cases, such as for single individuals or for parents and their dependent children, coverage can be obtained through a single policy. In cases where there may not be a silver plan offered through the marketplace that covers every single member of the household who is eligible for a premium credit (for example, because of the relationships of the individuals in the household), the benchmark may be based on the second lowest-cost silver option for the combined value of more than one policy.

The following example illustrates how the marketplace would determine the applicable benchmark plan in some different situations:

• Example 1: Single individual obtaining self-only coverage.  John is eligible for a premium tax credit, with an expected contribution of 6.52 percent of his income, or $1,656 a year. The three lowest cost silver plans providing self-only coverage in John’s area are Plans A, B, and C, priced at $4,800, $5,000, and $5,200, respectively. Plan B, which is the second lowest cost silver plan, will be used as the benchmark.
• Example 2: Parents and two children obtaining family coverage.  Peter, Mary, and their two children have income at 250 percent of the federal poverty line, qualifying them for a premium tax credit with an expected contribution of 8.33 percent of income, or $5,460. The benchmark plan in this case is the second lowest cost silver plan that covers the entire family. In the area where the family lives, the three lowest cost silver plans that cover the entire family are Plans A, B, and C, which cost $14,800, $15,000, and $15,200, respectively. Plan B, which is the second lowest cost silver plan, will be used as the benchmark.
• Example 3: Parents and two children obtaining coverage only for the parents.  The circumstances are the same as in Example 2, except that the family now lives in a state that has a higher income eligibility level for CHIP coverage so that the two children are ineligible for a premium credit because they qualify for CHIP. Peter and Mary’s household income would be the same at 250 percent of the poverty line, and their expected annual contribution would stay at $5,460. The applicable benchmark in this case is the second lowest silver plan that covers just Peter and Mary. The three lowest cost silver plans that cover Peter and Mary are Plans A, B, and C, which cost $9,800, $10,000, and $10,200, respectively. Plan B, which is the second-lowest cost silver plan, will be used as the benchmark in calculating the premium tax credit amount.
• Example 4: Members of a tax household residing in different locations.  The circumstances are the same as in Example 2, except that one child is attending college in a different part of the state where services are considered out of network and would not be covered by Peter and Mary’s plan. As a result, the family decides to purchase a separate plan where the child attends college and resides for most of the year. The three lowest cost silver plans that would cover Peter, Mary, and the younger child are Plans A, B, and C, which cost $12,300, $12,500, and $12,700, respectively. The three lowest cost silver plans that would cover the child in college are Plans D, E, and F, which cost $2,400, $2,500, and $2,600, respectively. In this case, the marketplace will add the premiums for Plans B and E to get the benchmark premium that will be used to calculate the premium credit amount for the family.

Does the premium tax credit account for differences in the price of plans based on age, location, and other factors?

The amount of the premium tax credit that an individual or family receives will take into account family size, geographic area, and age. For example, older people will get a larger premium credit than younger people, and an individual who lives in a high-cost state would receive a larger premium credit than an individual with the same characteristics who lives in a low-cost state. However, the premium tax credit will not cover the portion of the premium that is due to a tobacco surcharge. The following examples illustrate how age and tobacco use will affect the amount of the premium tax credit:

• John is 64 years old and has an annual income of $25,520, or 200 percent of the poverty line, which qualifies him for a premium tax credit. His expected contribution is 6.52 percent of his income, or $1,656 a year. Because he is 64 years old, John’s premium could be as much as three times the cost of the premium for someone who is 24 years old. Assuming John’s premium is $15,000, his expected contribution would still be $1,656 a year, the same as the expected contribution for a 24-year old, and his premium credit would be much larger, $13,344 in this example ($15,000 minus $1,656).
• As in our original example, John is 24 years old. As a non-smoker, the benchmark plan available to John is priced at $5,000 so John would be eligible for a credit amount of $3,344 ($5,000 minus $1,656). If John was a smoker, however, in most states insurers could charge him as much as one and a half times the usual premium. This would raise the cost of the second lowest cost silver plan to $7,500. However, John’s premium credit amount would not be adjusted to account for the additional $2,500 in premiums he would be charged because he is a tobacco user. As a result, even with a premium tax credit, it would cost him an additional $2,500 to purchase the benchmark plan.

Do people who receive a premium tax credit ever have to pay more than their expected contribution?

How much people will have to pay for coverage depends on the plan they choose. People can use the premium tax credit to buy a bronze, silver, gold, or platinum plan. The amount of the credit generally stays the same, regardless of which plan a person selects.

Gold and platinum plans will have higher premiums than the silver benchmark plan used to calculate the premium tax credit amount, so people will have to pay more than their expected contribution towards the premiums for these plans.

Bronze plans usually cost less than the benchmark plan. So, if an individual or family chooses a bronze plan, their share of the premium will be lower and possibly even zero. (The premium tax credit cannot exceed the plan premium,)

People must purchase a silver plan in order to get help with their cost-sharing expenses. So, purchasing a bronze plan may not be the lowest-cost option for an individual or family when all their out-of-pocket health care costs are considered.

Here’s how it would work, using the earlier example of John, a single individual:

• John is 24 years old and his annual income is equal to 200 percent of the poverty line. In 2021, based on the cost of the benchmark plan and his expected contribution, he is eligible for a credit amount of $3,344 for the year. The benchmark plan for John costs $5,000 per year. There is also a bronze plan available that would cost $3,300 per year and the lowest-cost silver plan that would cost $4,500.
• If John purchases the benchmark plan, he will have to contribute $1,656 for the year (the $5,000 premium minus the $3,344 premium credit), but he will also be eligible for the cost-sharing reductions that will lower how much he will pay in deductibles and other out-of-pocket costs. If John purchases the cheapest silver plan which costs $4,500 a year, his contribution would go down to $1,156 for the year.
• If John purchases the bronze plan that costs $3,300 a year, he would not have to pay any premiums because the premium tax credit would cover the cost of the entire premium. (Even though John is eligible for a credit of $3,344, he could only claim a credit of $3,300, the bronze plan premium.)  He would not be able to receive cost-sharing reductions. This means that while John’s share of the premium will be zero under the bronze plan, he will have larger deductibles and co-payments when he needs health care services. His overall out-of-pocket health care costs (premiums and cost-sharing charges) could end up being higher under the bronze plan than under the silver plan, depending on how much health care he uses.

How do people qualify for the premium tax credit?

People can apply through the Health Insurance Marketplace online, by mail, or in person. (The open enrollment period for coverage in 2021 is November 1, 2020 through December 15, 2020, and some states with State-Based Marketplaces have longer open enrollment periods.) Applicants need to provide information on their income, the people in their household, how they file their taxes, and whether they have an offer of health coverage through their job. Based on the information provided in the application, the marketplace determines whether members of the household are eligible for a premium tax credit or other health care programs like Medicaid and the Children’s Health Insurance Program (CHIP).

Do people need to wait until they file taxes to receive the premium tax credit?

No. People can choose to receive the credit in advance. Many people wouldn’t be able to afford the entire premium upfront and wait until they file taxes to get reimbursed. Getting the premium tax credit in advance allows them to pay their monthly insurance premiums and enroll in coverage purchased through the marketplace. This is how it works:

• John is eligible for a premium tax credit of $3,344 a year. During the open enrollment period, he chose to purchase the second-lowest cost silver plan (the benchmark plan), which has an annual cost of $5,000. He decided to take the premium tax credit in advance, which means that the IRS sends a monthly payment of $279 ($3,344 divided by 12) directly to his health insurer. This brings down John’s portion of the health insurance premium from $417 to $138 per month, which he pays the insurer.

People who receive advance payments of the premium tax credit will need to file taxes for the year in which they receive them. For example, someone who received advance payments of the credit for the 2020 calendar year will need to file a tax return and reconcile their APTC for 2020 before the April 2021 deadline.

Also, married couples who receive advance payments will need to file a joint return to qualify for the premium tax credit. There is an exception to this rule for survivors of domestic violence and individuals who have been abandoned by their spouses. In addition, an individual who is married but who qualifies to file taxes as Head of Household can also qualify for a premium tax credit.

What if someone has not filed a tax return in the past?

People who did not file a tax return in prior years can still qualify for a premium tax credit if they are otherwise eligible, but they will have to file a return for years they receive advance payments of the premium tax credit to qualify in future years.

Do people have to take the premium tax credit in advance?

No. Most people want to get the credit in advance because they can’t pay their entire monthly health insurance premiums without help, but if they choose, people can wait and receive the credit when they file their taxes.

People can also take a lower advance payment than the amount that is calculated based on their estimated income for the year and receive any remaining credit they are due at tax time.

What happens when people who get a credit in advance file their taxes?

The amount of the advance premium tax credit that people receive is based on a projection of the income the household expects for the year. The final amount of the credit is based on their actual income as reported on the tax return for the year the advance payment was received.

People who receive advance payments of the credit will have to reconcile the amount they received based on their estimated income with the amount that is determined based on their actual income as reported on their tax return. This means that people whose income for the year is higher than they previously estimated could have to pay back some or even all of the advance payments they received. On the other hand, people whose income ends up lower than estimated could get a refund when they file their taxes. For example:

• Peter, Mary, and their two children estimate that their 2021 income will be $56,475. The marketplace determines that they are eligible for a premium tax credit of $10,793 for the year. Peter and Mary decide to take the credit in advance, and the money is sent directly to the insurer. When Peter and Mary file their 2020 taxes in February 2021, it turns out that their income was a little bit higher than they estimated because Peter received a $2,000 bonus at the end of the year. The family’s final credit amount is $296 less than the advance payments they received — $10,497 instead of $10,793. This means that at tax time, if the family was due to receive a refund, the refund would be reduced by $296. If they were not getting a refund, they would have to pay $296 to the IRS.
• On the other hand, if Peter and Mary’s actual income for 2020 was $2,000 lower than they estimated, their final credit amount would be $11,100. This means the family received $307 less in advance payments than they were eligible for. At tax time, the family would either receive an additional $307 refund, or if they owed taxes, the amount they owe would be reduced by $307.

One special rule is that if the advance payments received by people are greater than the final credit amount for which they are eligible, their repayment will be capped if their income is less than 400 percent of the poverty level. Table 2 shows the repayment limits. Note that if income for the year exceeds 400 percent of the poverty line, the individual or family would have to repay the entire amount of the advance payments they received.

What happens if people’s income or circumstances change during the year? How does that affect their eligibility for a premium tax credit?

People who experience changes in income and household size over the course of the year should report these changes to the marketplace when they happen because those changes can affect the amount of their premium tax credit. People whose incomes go down may be able to get a higher advance payment of the premium tax credit for the rest of the year, which would lower their monthly premium payments. (They also may receive more help with their cost sharing.) People whose incomes increase should report the change to have their credit for the rest of the year lowered and avoid having to pay back excess advance payments when they file their taxes. Household changes, which affect family income as a percent of the federal poverty level, such as having a baby or having a child leave the home, will also affect the amount of the credit and should be reported.

Another way people with fluctuating or unpredictable income can avoid having to pay back advance payments at tax time is to take less than the amount calculated based on their estimated income.

People who receive advance payments of the premium tax credit and who, partway through the year, receive an offer of employer coverage that is considered affordable and adequate should also report this change to the health insurance marketplace, as should those who become eligible for other coverage, such as Medicare or Medicaid. Having other “minimum essential coverage” would make people ineligible for a premium credit for the rest of the year.

Can people who don’t have to pay federal income taxes take advantage of the premium tax credit?

Yes. The premium tax credit is refundable, so people whose income taxes are lower than their premium tax credit can still take advantage of the credit. People eligible for the credit will be entitled to the full credit amount whether they take it in advance or wait until they file their taxes. For example:

• With an annual income of $24,280 for 2020, John is eligible for a premium tax credit of $3,412 for the year. John enrolls in a silver plan. In February 2021, when John files his 2020 tax return, John’s federal tax is $1,500. He will receive the full premium tax credit amount of $3,412 even though the amount of the credit is larger than his federal income tax liability.

^[1] The marketplace uses the federal poverty guidelines available during open enrollment to determine premium tax credit amounts for the following year (e.g. 2020 guidelines for 2021 coverage).
^[2] These percentages are indexed and will change each enrollment year. For yearly guidelines, see Reference Chart: Yearly Guidelines and Thresholds.

View all key facts

Each open enrollment period, people receiving advance premium tax credits (APTC) to help them pay for health coverage have to renew their eligibility. The following questions and answers provide information about how the Federally-Facilitated Marketplace (FFM) will renew eligibility for APTC and will briefly explain how Healthcare.gov will assign people to health plans if they don’t come back to the marketplace to select a plan.

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Do enrollees have to return to the marketplace during open enrollment?

For most enrollees in states using HealthCare.gov, there is a process to auto-renew their eligibility for advance premium tax credits (APTC) and auto-enroll them in a health plan if they don’t return to the marketplace to update their financial information and pick a health plan.

Even though this process is available, it is highly recommended that all enrollees return to the marketplace to update their eligibility and plan selection, particularly in this upcoming open enrollment period when there will be significant changes to health plans in many states.

What happens if enrollees do not return to the marketplace to update their eligibility information and select a health plan?

Two actions will take place for enrollees who don’t return to the marketplace.

• Auto-Renewal of Eligibility for APTC. However, the marketplace will not be able to automatically redetermine eligibility for APTC for all enrollees.
• Auto-Enrollment. People will be automatically enrolled in their current plan if it is still available in the marketplace. If the plan isn’t available, HealthCare.gov will enroll people in a new plan that is as similar as possible to their current plan.

How will HealthCare.gov auto-renew eligibility for APTC?

For enrollees who do not return to the marketplace to update their information, the FFM will recalculate their APTC based on the most recent income information that the FFM has for them using updated benchmark plan premiums and poverty level thresholds.

There are some people, however, who will not have their APTC automatically renewed. They must return to Healthcare.gov and provide updated information to renew their APTC. The FFM will send notices to enrollees telling them whether they must return to Healthcare.gov to continue receiving the APTC.

How will HealthCare.gov determine whose APTC can be auto-renewed and whose can’t?

Before open enrollment, the FFM will check Internal Revenue Service (IRS) data and use information from enrollees’ tax returns to determine whether or not their APTC can be auto-renewed if they don’t come back to HealthCare.gov and update their information. The notices enrollees receive from the FFM will tell them whether they can be auto-renewed or whether they must return to HealthCare.gov.

Most people will be able to auto-renew their APTC. However, HealthCare.gov will notify a small number of enrollees that unless they return to the marketplace to update their information, HealthCare.gov will automatically enroll them into the same or similar plan, but will discontinue their APTC. These include people who fall into any of the following groups:

• Opt-Out Group. Enrollees are in the opt-out group if they did not authorize the FFM to access tax return information in order to redetermine their APTC eligibility. When consumers apply for APTC, HealthCare.gov asks them to give the FFM consent to obtain their tax data for five years. A small number of enrollees who did not provide this consent must return to HealthCare.gov and provide consent in order to continue receiving APTC.
• Failure to File or Reconcile Group. People in this group received APTC in 2019 but did not file a 2019 tax return or reconcile their 2019 APTC on the tax return. The ACA requires that people file a tax return for any year in which they receive APTC. When people file their return, they must reconcile the APTC amount they received against the final credit amount for which they are eligible. In general, the FFM will discontinue APTC for enrollees who did not file a tax return or who filed but did not reconcile the credit in the previous tax filing year. This means that for 2021, if a person received ATPC in 2019 and did not file a tax return to reconcile her APTC for that year, then the FFM will discontinue APTC for 2021.
• Above Income Group. People in this group have 2019 tax income that is above 500 percent of the poverty line. These are people whom the FFM has identified as being at highest risk of having 2021 income that would make them ineligible for APTC.
• Repeat Passive Group. This is a group of people who were automatically re-enrolled in marketplace coverage with APTC in both 2019 and 2020, did not return to the marketplace to update their eligibility in those years, and there is no IRS information on their income for those years.

Individuals who fall into any of these groups will receive a notice saying that unless they take action, they will not receive APTC in 2021 for one of the reasons outlined above. When the enrollee returns to HealthCare.gov, he or she will need to go through the entire application to provide information the FFM needs to redetermine their APTC eligibility for 2021.

When will people receive notices and what information will the notices contain?

Enrollees will receive two types of notices before open enrollment begins. The first will be a notice from their insurer, which will include:

• Information about whether enrollees can be auto-enrolled into the same or a similar plan for 2021, and if so, any key changes to benefits and cost-sharing between the 2020 and 2021 plans;
• Information about the 2021 plan’s premium, including, for people receiving APTC, an estimated APTC amount based on the prior year’s amount;
• Information about other health coverage options, including how to pick a different plan in the marketplace;
• Where the consumer can call with questions;
• An explanation of the requirement to report changes to the marketplace;
• For people receiving APTCs, an explanation of the APTC reconciliation process; and
• For people receiving cost-sharing reductions (CSRs) who are being auto-enrolled into a non-silver plan, an explanation that CSRs are only available if enrolled in a silver plan.

HealthCare.gov will send a separate notice containing the following standard information:

• Description of the annual redetermination and re-enrollment process;
• Reminder to report changes that might affect eligibility;
• Key dates, including the last day of open enrollment; and
• A description of how eligibility for the APTC and CSRs will be redetermined if enrollees don’t return to Healthcare.gov to update their information.

All enrollees will receive a notice with this information from the marketplace, but enrollees who fall into the opt out, failure to file or reconcile, above income, or repeat passive groups described above will receive additional information telling them they need to return to Healthcare.gov and update their eligibility in order to continue receiving the APTC in 2021.

What will people in the “failure to file or reconcile” group need to do to continue receiving APTC in 2021? 

People who did not file a 2019 tax return to reconcile the APTC they received in 2019 must do so and return to HealthCare.gov to update their eligibility during open enrollment. Since it will take time for the IRS to process new tax filings, the FFM will not be able to immediately verify whether enrollees have filed and will accept enrollees’ attestation that they filed a tax return and reconciled their 2019 APTC. The FFM will later verify this information with the IRS, and if the IRS cannot verify that a 2019 tax return was filed, APTC may be discontinued.

How will the FFM recalculate APTC amounts for people who don’t update their eligibility? 

For 2021, the FFM will recalculate the APTC by applying the updated federal poverty line (FPL) thresholds and benchmark premiums, and by using the most recent income information that is available to the FFM, adjusted to 2021. The FFM has three sources of income it can use to redetermine enrollees’ APTC eligibility, based on the following hierarchy:

• Projected 2020 income, adjusted to 2021. Enrollees who have projected 2020 income the FFM can use include people who returned to HealthCare.gov during the last open enrollment period to update their eligibility, newly applied for the APTC in 2020, or reported a change in income in 2020. If an enrollees’ projected 2020 income, adjusted to 2021, is below 100 percent FPL (except for certain non-citizens), the FFM will use enrollees’ 2019 tax return information.
• 2019 tax return income, adjusted to 2021. If the FFM doesn’t have projected 2020 income, it will use the enrollee’s income from his 2019 tax return. Enrollees who may be in this situation include those who received and reconciled a 2019 APTC, but who did not update their eligibility during the last open enrollment period. However, two exceptions apply. First, enrollees whose 2019 tax return income, when adjusted to 2021, goes over 400 percent FPL will not be able to auto-renew their APTC for 2021. Second, the FFM will use enrollees’ projected 2019 income for enrollees whose 2019 tax return income, when adjusted to 2021, is below the poverty line.
• Projected 2016 income, adjusted to 2018. If the FFM doesn’t have projected 2020 income or 2019 tax return income, it will use enrollees’ projected 2019 income to redetermine and recalculate the 2021 APTC.

If the FFM does not have projected 2019 or 2020 income, or 2019 tax return income — and the consumer was auto-enrolled in APTC in both 2019 and 2020 — the FFM will discontinue APTC for 2021.

How will HealthCare.gov adjust 2019 or 2020 income to 2021? 

Regardless of the income source the FFM uses, it will adjust for expected income growth from 2019 or 2020 to 2021. This adjustment is based on the percentage change in the federal poverty level for the enrollee’s applicable family size from the year for which annual household income information is used for redetermination to 2021. For example, if the FFM is using 2019 projected income, it will adjust that income to 2021 by applying the rate of growth in the FPL used to determine APTC eligibility in 2019 (which is the 2018 poverty thresholds) to the FPL used to determine eligibility in 2021 (which is the 2020 poverty thresholds). Table 1 lists the expected income growth from 2019 and 2020 to 2021 that the FFM will apply to enrollees’ household income, for families of one to four individuals.

To illustrate, suppose that a single person’s income on his 2019 tax return was $20,000, and this is the income information that the FFM has available to redetermine APTC eligibility in 2021. The percentage change in the poverty guidelines used to determine 2019 and 2021 APTC eligibility is 1.0510 ($12,760 divided by $12,140). The FFM would apply this growth rate to the enrollee’s 2019 income to get a projected 2021 income of $21,021.

Will State-Based Marketplaces use the same renewal process? 

The renewal process may be different in states that established their own marketplaces, unless the state uses the HealthCare.gov platform for enrollment. State-Based Marketplaces (SBMs) have three options for how to conduct renewals:

• Renewal process in original regulation. SBMs could use the process outlined in 45 C.F.R. §155.335(b) through (m) of the regulations, which require the marketplace to obtain updated information through electronic data sources and use that information to redetermine people’s APTC. SBMs would need to obtain updated income and family size information, provide notice to enrollees indicating the information that will be used to redetermine their eligibility, give them 30 days to respond and report any changes to the information contained in the notice. If enrollees don’t respond, the SBM redetermines eligibility using the information contained in the notice.
• Alternative procedure specified by HHS for the applicable benefit year. For each open enrollment period, HHS may specify an alternative process for conducting renewals that the FFM will use, and SBMs have the option of using the same process. HHS will typically announce this alternative process by issuing guidance in the spring preceding the open enrollment period. This Q&A describes the alternative process that the FFM will use to renew enrollees’ APTC for 2018.
• HHS-approved, state-designed alternative. SBMs can also use their own alternative procedures for conducting renewals, with approval from HHS. SBMs must show that the alternative procedure would facilitate continued enrollment in coverage for eligible enrollees, provide enrollees clear information about the process, and ensure that the alternative process would result in accurate eligibility redeterminations.

Assisters working in SBM states should check with their state about the process for renewing coverage and re-determining advance premium tax credit eligibility.

How will the auto-enrollment process work for enrollees who do not select a new plan for 2021? 

If people enrolled in coverage through the FFM don’t select a plan for 2021 by the time open enrollment ends on December 15, 2020, they will be automatically re-enrolled into the same plan they currently have. If the enrollee’s current plan is no longer offered, HealthCare.gov will enroll him in a new plan that is as similar as possible to his 2020 plan, based on a hierarchy established in regulations.

It is possible for people to be auto-enrolled into a plan that has a different type of network (e.g., HMO, PPO, or POS), or a different metal level. It is also possible an individual will be matched with a marketplace plan with a different insurer if the person’s current insurer is no longer offering any plans in the marketplace. In that case, enrollment will not be effective until the enrollee pays the first month’s premium.

Information about the plan people will be auto-enrolled into will come from their insurer. Enrollees who receive a notice saying that their current plan will no longer be offered should return to HealthCare.gov to look at their options and make sure that that they are enrolled in a plan that best meets their needs. HealthCare.gov will send a notice to enrollees in this situation reminding them to return to the marketplace.

Can an enrollee change plans once they are auto-enrolled in a plan? 

This depends. Open enrollment ends December 15, 2020. Enrollees who don’t come back to the marketplace to update their application and select a plan by the December 15 deadline will be auto-enrolled in a plan for 2021.

Those who are auto-enrolled into the same plan they had in 2020 will not be able to switch plans after that deadline. If an enrollee wishes to disenroll from the plan without incurring any premium payments in the 2021 coverage year, she will need to terminate her plan by December 31, 2020. Enrollees can cancel a plan by contacting the marketplace.

Those who are auto-enrolled into a different plan than the one they had in 2020 will be eligible for a special enrollment period (SEP) beginning January 1, 2021 due to the discontinuation of their 2020 plan. They will have 60 days before or after January 1, 2021 to switch to another plan if they choose to use the SEP. (For more information on SEPs, please see the Special Enrollment Period Reference Chart.)

View all key facts

Financial eligibility for most categories of Medicaid and the Children’s Health Insurance Program (CHIP) is determined using a tax-based measure of income called modified adjusted gross income (MAGI). The MAGI methodology includes rules prescribing who must be included in a household when determining eligibility. The following Q&A explains MAGI and the rules for determining Medicaid and CHIP households under MAGI.

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What is MAGI?

MAGI is a methodology used to determine income for the purposes of Medicaid or CHIP eligibility. It is based on tax definitions of income and household. MAGI rules for determining what income to count when determining Medicaid, CHIP, and premium tax credit eligibility are mostly aligned. The rules determining who is in a household and whose income to count, however, can vary significantly. Also, under MAGI rules, an individual or family’s assets do not count in determining eligibility. (For more information on what income counts under MAGI rules, see Key Facts: Income Definitions for Marketplace and Medicaid Coverage.)

To whom do the MAGI rules apply?

All states must use the MAGI rules regardless of the decision to expand Medicaid. However, MAGI rules apply only to certain categories of Medicaid eligibility. These include parents and caregiver relatives, children, pregnant women, and the adult expansion group. States’ previous rules for determining income and households continue to apply to the elderly, disabled, and children in foster care.

How do Medicaid and premium tax credit household rules differ?

Medicaid and CHIP households are determined based on a person’s family and tax relationships as well as their living arrangements. How people file taxes and who is in their tax unit doesn’t always determine who is in their Medicaid household, but it determines which Medicaid household rules apply in defining the household. Premium tax credit household rules, on the other hand, are based purely on tax relationships.

The most important difference between Medicaid and premium tax credit households is that for Medicaid, household size and composition are determined separately for each member of the household, but for the premium tax credit, members of a tax unit are always treated as a household. This means that for Medicaid, household size may differ for family members even when they are in the same tax filing household. Thus, it is possible that for Medicaid, a family of three filing its taxes together may have two members with a household size of three and the third member of the family may be a household of one. For the premium tax credit, each member of a household that files its taxes together will have the same household size. (For more information on determining household size for the premium tax credit, see Key Facts: Determining Household Size for the Premium Tax Credit.)

Another important difference is Medicaid provides states with several options that affect how they define households when determining Medicaid eligibility. However, because the premium tax credit is a federal benefit, the rules are established at the federal level and are consistent across states.

How does Medicaid determine who is in a household?

Medicaid determines an individual’s household based on their plan to file a tax return, regardless of whether or not he or she actual files a return at the end of the year. Medicaid also does not require people to file a federal income tax return in previous years.

For each individual applying for coverage, Medicaid looks at whether he or she plans to be:

• a tax filer
• a tax dependent
• neither a tax filer nor a dependent

People’s intended tax filing status determines which Medicaid household rules apply in making the household determination. Figure 1 summarizes the Medicaid household rules and Figure 2 shows how to apply these rules. (For more information, see Reference Guide: Medicaid Household Rules.)

FIGURE 1: MAGI Rules for Determining Medicaid and CHIP Households

FIGURE 2: How to Determine An Individual’s Medicaid Household

What are the household rules for a tax filer?

For tax filers claiming their own exemption and who can’t be claimed as a tax dependent, the household includes the tax filer, the spouse filing jointly, and everyone whom the tax filer claims as a tax dependent.

What are the household rules for tax dependents?

For tax dependents, the household is the same as the tax filer claiming the individual as a tax dependent. However, there are three exceptions to this rule, when the rule for non-filers is applied:

• Individuals who expect to be claimed as a dependent by someone other than a parent;
• Individuals (under 19) living with both parents, whose parents do not expect to file a joint tax return; and
• Individuals (under 19) who expect to be claimed as a dependent by a non-custodial parent.

What are the household rules for people who neither file a tax return nor are claimed as a tax dependent?

For individuals who neither file a tax return nor are claimed as a tax dependent, the household rules differ based on whether the individual is an adult or a minor:

• For individuals 19 years and older, the household includes the individual plus, if living with the individual, his or her spouse and children who are under 19 years old.
• For individuals under 19 years old, the household includes the individual, plus any siblings under 19 years old, children of the individual and parents who live with the individual.

Are there any adjustments to the three rules based on people’s tax filing?

In addition to the general rules for determining household size, some rules apply in all situations:

• Married couples who live together are always counted in each other’s household regardless of whether they file a joint or separate return.
• Family size adjustments need to be made if the individual is pregnant. In determining the household of a pregnant woman, she is counted as herself plus the number of children she is expected to deliver.

What are different options that states have for implementing MAGI? 

States have flexibility in how they implement the MAGI rules in two areas. First, in some instances the Medicaid household rules applied may depend on whether an individual is under 19 years old or not. Where the rules indicate an age limit, states have the option to extend that age limit to 21 if the individual is a full-time student. Second, for individuals whose household includes a pregnant woman (but are not pregnant themselves), states can count the pregnant woman as one, two, or one plus the number of children she is expecting.

Are married couples who file taxes separately considered to be in separate households? 

Generally, no. Married couples who live together are always considered to be in each other’s household regardless of how they file taxes.

However, married couples who don’t live together and who file taxes separately will be considered as separate households.

How does Medicaid determine the household size of family members when the parents live together but are not married?

As long as both parents file taxes, non-married parents living in the same household would still use the rule for tax filers to determine each parent’s Medicaid household. This means their household includes themselves and anyone claimed as a dependent on their tax return.

However, a child under 19 living with non-married parents and being claimed as a tax dependent by one of the parents, would fall into the non-filer rule. Therefore, the child’s household size for Medicaid would include himself, both parents, and any siblings living with the child. For example:

• Dan and Jen live together with their two children, Drew and Mary. Because they are not married, Dan and Jen must file separate returns. Jen claims Drew and Mary as tax dependents on her tax return. Dan files as a single person and doesn’t claim any tax dependents. Table 1 illustrates the household size determination for each member of the family. To determine the household size for Dan and Jen, Medicaid would apply the tax filer rule and include everyone in each of their specific tax household. To determine the household size for Drew and Mary, Medicaid would apply the non-filer rule because they are children living with both parents who are not expected to file a joint return.

How does Medicaid determine the household of an adult child who is claimed as a tax dependent by his parents? 

The household of an individual who is at least 19 years old and is claimed as a tax dependent by his parents is always the same as the household of the parents claiming him. This is true even if the individual was much older, say 35 years old. For example, under some circumstances parents can claim their child who is 35 years old as a qualifying relative on their tax return. In this scenario, Medicaid would use the tax dependent rule for determining the household of this individual, which means his household would be the same as the household of his parent (the tax filer) claiming him as a dependent. The following examples illustrate how the Medicaid rules would be applied:

• Barry is 29 and is claimed as a tax dependent by his parents. His parents also claim Barry’s younger brother and sister, who are 15 and 17. When determining his household for Medicaid, Barry has the same household as the tax filer claiming him as a dependent, thus Barry would have a household size of five: himself, both of his parents, and his brother and sister.
• Carla is 28 years and lives with both parents who are married. However, her parents file separate tax returns and Carla’s father claims her as a dependent on his tax return. Even though Carla’s parents file separate returns, married people living together are always in the same household as their spouse. As a result, Carla’s father has a household of three: himself, his spouse, and Carla. This means that Carla also has a household of three.

Does the exception to the tax dependent rule for tax dependents who are not a child of the taxpayer only apply to adult tax dependents? 

No. This exception also applies to minors claimed as a tax dependent by someone other than their parent. Anytime an individual — regardless of age — is claimed as a tax dependent by someone other than their parents, the non-filer rules apply in determining that individual’s household. For example:

• Leena lives with and is under the guardianship of her aunt. She is five years old and doesn’t have any siblings or parents living with her. Leena’s aunt claims her as a qualifying relative on her tax return. Leena is a tax dependent but she falls under one of the exceptions to the tax dependent rule because she is not the tax dependent of her parents. This means Medicaid will use the non-filer rules to determine her household, and as a result, Leena’s household consists only of herself.

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Financial eligibility for the premium tax credit, most categories of Medicaid, and the Children’s Health Insurance Program (CHIP) is determined using a tax-based measure of income called modified adjusted gross income (MAGI). The following Q&A explains what income is included in MAGI.

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How do marketplaces, Medicaid, and CHIP measure a person’s income?

For the premium tax credit, most categories of Medicaid eligibility, and CHIP, all marketplaces and state Medicaid and CHIP agencies determine a household’s income using MAGI. States’ previous rules for counting income continue to apply to people who qualify for Medicaid based on age or disability or because they are children in foster care.

MAGI is adjusted gross income (AGI) plus tax-exempt interest, Social Security benefits not included in gross income, and excluded foreign income. Each of these items has a specific tax definition; in most cases they can be located on an individual’s tax return (see Figure 1). (In addition, Medicaid does not count certain Native American and Alaska Native income in MAGI.)

FIGURE 1: Formula for Calculating Modified Adjusted Gross Income

What is adjusted gross income?

Adjusted gross income is the difference between an individual’s gross income (that is, income from any source that is not exempt from tax) and deductions for certain expenses. These deductions are referred to as “adjustments to income” or “above the line” deductions. Common deductions include certain contributions to an individual retirement account (IRA) or health savings account (HSA) and payment of student loan interest. Many income adjustments are capped or phased out based on income. IRS Publication 17 explains adjustments to income in more detail.

What types of income count towards MAGI?

All income is taxable unless it’s specifically exempted by law. Income does not only refer to cash wages. It can come in the form of money, property, or services that a person receives.

Table 1 provides examples of taxable and non-taxable income. IRS Publication 525 has a detailed discussion of many kinds of income and explains whether they are subject to taxation.

Is income subtracted from workers’ paychecks as a pre-tax deduction counted in MAGI?

No. Pre-tax deductions — such as health insurance premiums, retirement plan contributions, or flexible spending accounts — are taken out of wages by the employer. Since this income isn’t taxed, it doesn’t count towards a household’s MAGI. The wages in Box 1 of Form W-2 already exclude any pre-tax benefits so they don’t appear on the tax return as income or deductions.

Does MAGI count any income sources that are not taxed?

Yes. Some forms of income that are non-taxable or only partially taxable are included in MAGI and affect financial eligibility for premium tax credits and Medicaid. Specifically:

• Tax-exempt interest. Interest on certain types of investments is not subject to federal income tax but is included in MAGI. These investments include many state and municipal bonds, as well as exempt-interest dividends from mutual fund distributions.
• Non-taxable Social Security benefits. . For many people, particularly those with no other source of income, Social Security benefits are not taxed at all. However, if there is other income, a portion of the benefit might be taxed. Social Security benefits are reported on Form SSA-1099 (the Social Security Benefit Statement) and, whether or not those benefits are taxable, the full amount is included in MAGI.
• Foreign income. Under section 911 of the Internal Revenue Code, U.S. citizens and resident aliens living outside the U.S. can exclude some earned income for tax purposes if they meet certain residency or physical presence tests. Any foreign income excluded under this section must be added back when calculating MAGI.

Whose income is included in household income?

Household income is the MAGI of the tax filer and spouse, plus the MAGI of any dependent who is required to file a tax return. A dependent’s income is only included if they are required to file taxes; if they file taxes for another reason but had no legal filing requirement, their income is not included.

Is a tax dependent’s income ever included in household income?

If a dependent has a tax filing requirement, his or her MAGI is included in household income. Under rules put in place by the December 2017 tax law, a dependent must file a tax return for 2020 if she received at least $12,400 in earned income; $1,100 in unearned income; or if the earned and unearned income together totals more than the greater of $1,100 or earned income (up to $12,050) plus $350. In general, unearned income is defined as investment income; Supplemental Security Income (SSI) and Social Security benefits are not counted in determining whether a dependent has a tax-filing requirement. However, if the dependent does have a tax filing requirement, the dependent’s Social Security benefits will be counted toward the household’s MAGI.

If a dependent does not have a filing requirement but files anyway — for example, to get a refund of taxes withheld from their paycheck — the dependent’s income would not be included in household income.

What time frame is used to determine household income?

Financial eligibility for the premium tax credit and Medicaid is based on income for a specified “budget period.” For the premium tax credit, the budget period is the calendar year during which the advance premium tax credit is received. When determining eligibility for an advance premium tax credit, the applicant projects their household income for the entire calendar year.

Medicaid eligibility, however, is usually based on current monthly income. But for people with income that varies over the year, states must consider yearly income if the person wouldn’t be eligible based on monthly income. For example, a seasonal worker might be over the income limit based on monthly income if they are employed when they apply but would be under the limit if their yearly income (including the months where they are unemployed) is considered. The Medicaid agency must determine eligibility using the yearly income. This prevents situations where people are considered ineligible for the Marketplace based on their yearly income and ineligible for Medicaid based on their monthly income. In addition, Medicaid also treats some lump-sum income differently than the marketplace, by considering it only in the month received.

How does MAGI differ from Medicaid’s former rules for counting household income?

The MAGI methodology for calculating income differs significantly from previous Medicaid rules. Some income that Medicaid used to consider part of household income is no longer counted, such as child support received, veterans’ benefits, workers’ compensation, gifts and inheritances, and Temporary Assistance for Needy Families (TANF) and SSI payments. Table 2 summarizes the differences between the former Medicaid rules and the new MAGI rules.

In addition, states can no longer impose asset or resource limits, and various income disregards have been replaced by a standard disregard equal to 5 percent of the poverty line. There are also changes to who is included in a household and, therefore, whose income is counted.

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November 9, 2017

Under a recent Department of Health and Human Services (HHS) rule, insurers can opt to collect any past-due premiums from the last 12 months before allowing someone to enroll in a plan with the same carrier. The following questions and answers explain who is affected by this new policy and how much they’ll owe.

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What is a past-due premium?

A past-due premium is an unpaid enrollee premium for a month of marketplace coverage. This can happen, for example, when an enrollee misses a premium and enters a three-month grace period, but fails to catch up on premiums. Coverage is terminated effective the last day of the first month of the grace period. The enrollee still owes that month’s premium, and it is considered past-due.

Who may be charged a past-due premium?

Effective June 19, 2017, an individual or employer who seeks to enroll in marketplace coverage with the same insurer (or a related insurer) after missing a premium payment within the last 12 months may be responsible for paying the past-due premium before the new enrollment will become effective, if the insurer has adopted a policy requiring payment of past-due premiums. For insurers that adopt this policy, payment of the past-due premium is necessary to effectuate coverage. Insurers’ ability to charge past-due premiums may be limited by state law. Check with your state insurance commissioner to find out if your state allows insurers to condition future enrollment on payment of past-due premiums.

What steps must an insurer take before charging someone a past-due premium?

To implement this policy, insurers must follow certain rules. The insurer must provide notice of the adoption of the past-due premium policy and the consequence of non-payment to the enrollee prior to the enrollee’s failure to pay a premium, either through a paper or electronic notification. The insurer must also provide notice of this policy in any communication about the past-due premium. In addition, the insurer can only seek to collect the past-due premium from the person who was contractually obligated to pay the premium (i.e., an insurer cannot demand a past-due premium from family members of the person who was obligated to pay the premium.) Insurers may only seek payment of premiums owed in the last 12 months (and no earlier than June 19, 2017). Insurers must still act consistent with state law.

Will people be aware that they may need to pay a past-due premium to effectuate coverage for 2018?

The full amount owed, including any past-due premium, will appear on the billing statement for January coverage. If consumers question a bill, because it is larger than anticipated, assisters should inquire about the possibility that the insurer is seeking payment of a previous unpaid premium. Consumers should have been given proper notice both before the non-payment and on the notice of non-payment.

Can a person pay January’s premium now and the past-due premium later?

No, an applicant cannot pay the binder payment first. Any payment received by the insurer is first applied to the oldest charge (i.e., the past-due premium), then any remainder is applied to the binder payment. Failure to make the full binder payment by the time specified by the plan will lead to cancellation of the policy.

How is a past-due premium calculated?

The past-due premium is the consumer’s share of the premium after applying any advance payments of the premium tax credit (APTC) paid in that month. In many cases, the amount of the past-due premium will be limited to one month because of the application of the grace period. A person who receives APTC is entitled to a three-month grace period to catch up on missed premiums before coverage is terminated. If premiums aren’t paid in full by the end of the third month, coverage is terminated as of the end of the first month. Therefore, the past-due premium owed is only for one month. However, if an enrollee is still in the grace period when he attempts to enroll in the new plan, the past-due premium will include all unpaid premiums during the grace period months. For example, if no payment is made in November or December and the grace period applies, the enrollee will still be in the grace period when the January payment is due; therefore, the enrollee will owe payments for November, December and January in order to effectuate January’s coverage.

Does the past-due premium policy affect enrollment in coverage under a special enrollment period (SEP)?

Yes. Payment of past-due premiums will be required to enroll in a plan through the same or related insurer through a SEP as well as during open enrollment.

How does the rule work for a person who doesn’t get APTC?

In general, it works the same way. However, if a person doesn’t collect APTC, the insurer treats past-due premiums according to state law; the marketplace’s grace period rules only apply to people with APTC. State laws vary on the timing of termination due to non-payment (i.e., whether coverage ends as of the last day of the last paid month, or whether coverage ends at some future date, such as after a 30-day notice period.) If there is still a balance owed from prior coverage under state rules, the insurer can demand it when the person tries to renew coverage. If state rules allow issuers to terminate coverage retroactive to the end of the last month paid, there may be no past-due premium to pay.

How does this policy apply to someone who is auto-reenrolled?

If someone is auto-reenrolled (or actively reenrolls) in the same plan, she must catch up on overdue premiums for 2018 coverage to take effect. For example, if a person stops paying her premium in November and enters a grace period, then attempts to enroll in the same plan or in a different plan with the same insurer, she must pay November, December and January’s payment by the end of January to remain covered. If not, coverage will be terminated as of November 30 and 2018 coverage will be cancelled.

Example 1:

Sam was enrolled with Insurer A in 2017 with APTC and received a notice in July that past-due premiums would be collected as a condition of re-enrollment. He failed to pay the premium for August coverage and doesn’t make any payments during the grace period so, at the end of October, his coverage is terminated effective August 31. His notice of non-payment stated the insurer’s past-due premium policy. If Sam attempts to enroll with the same insurer for 2018 coverage, he will need to pay his share of the August premium plus his January payment to have his 2018 coverage effectuated.

Example 2:

The situation is the same as in Example 1, except Sam paid all of his premiums until November. He didn’t make a payment for the rest of the year. During open enrollment, he chooses the same plan. He receives his bill for January’s payment in December, and it is due by January 10. As of the billing date, he is still in the grace period and will owe past-due premiums for November, and December, in addition to his January payment. Any payment made prior to the expiration of the grace period on January 31 will be applied to his earliest past-due premium first.

Example 3:

Artemis was enrolled in 2017 coverage with APTC and received a notice that past-due premiums would be collected as a condition of re-enrollment. She had an unresolved income data matching issue and lost her APTC in April. She was billed for the entire premium in April and couldn’t afford to pay. Because she was not receiving APTC in April, she was not given a grace period and her coverage was terminated, effective April 30, according to state law. Her window for filing an appeal on the loss of APTC has closed. If she attempts to enroll in a plan with the same insurer for 2018, she will owe a past-due premium for the full April premium plus January’s payment. However, if state laws on non-payment provide for a termination of coverage at the end of the last month paid, she will have no past-due premium and will only owe January’s payment.

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Families that include immigrants may experience barriers when applying for health coverage.  The following questions and answers explains issues that families may face and provides information about key concerns families with immigrants may have when completing the application process.  (For more information on immigrant eligibility, please see Key Facts You Need to Know About: Immigrant Eligibility for Health Insurance Affordability Programs.)

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PART I: Eligibility policies affecting immigrants in Medicaid, the Children’s Health Insurance Program (CHIP), and the federal and state marketplaces.

Will enrolling in insurance affordability programs have an impact on immigrants when they apply to change their immigration status?

No. When individuals apply for legal permanent resident status, immigration authorities determine whether someone is likely to become dependent on the government for subsistence, commonly referred to as a “public charge.”  This evaluation does not take into account whether someone applied for or received Medicaid, CHIP, or subsidized coverage in the marketplaces.  Thus, applying for or receiving these benefits does not have a negative impact on immigrants when they apply to change their status.  There is an exception:  people receiving long-term institutional care through Medicaid may be considered dependent on the government.

Can people apply for health coverage for other household members even if they are not applying for coverage for themselves (or are ineligible)?

Yes, households of people applying for insurance affordability programs can include both applicants and non-applicants.  During the application process, the person completing the application will state who is in the household and which household members are applying for coverage.  Non-applicants must include information such as their income and plans for tax filing, but they are not required to provide information about their immigration or citizenship status.

Is having a Social Security number (SSN) an eligibility requirement for insurance affordability programs?

For Medicaid and CHIP, individuals seeking coverage for themselves are generally required to provide their SSNs if they are eligible for one (unless they have a religious objection to getting an SSN).  If they are eligible for but do not have an SSN, they must apply for one and the Medicaid or CHIP agency must offer to help them apply.  They cannot be denied coverage while their application for an SSN is being processed.

Individuals seeking to enroll in a marketplace plan for themselves must provide an SSN if they have one.

Is an SSN required if an individual is applying for premium tax credits for a family member and not himself?

Individuals applying for premium tax credits for their dependents or spouse and not for themselves only need to provide their SSN if: (1) they have an SSN, and (2) they filed a tax return for the year for which tax data would be used to verify their household income and family size.  (Eligibility for the 2016 coverage year uses information from the 2014 tax return year to verify that information.)  Providing SSNs of non-applicants who have them is strongly encouraged.  The marketplaces use SSNs to conduct data matches with trusted data sources like the Social Security Administration (SSA) and the Internal Revenue Service (IRS).  When these matches can successfully verify key information like income, consumers may not have to submit proof of their circumstances.

Will a parent applying for Medicaid or CHIP coverage for his child but not for himself be required to provide an SSN?

Parents who apply for Medicaid or CHIP for their children do not have to provide an SSN.  If they have one and choose to provide it, this may help the Medicaid agency electronically verify income for the family, but it is not required.

Can a person who has an Individual Taxpayer Identification Number (ITIN) to file taxes use that number instead of an SSN on the application?

No.  ITINs are not the same as SSNs.  The application will verify SSNs with the Social Security Administration, which cannot verify ITINs.   Someone who uses an ITIN to file taxes is not required to provide an SSN on the application and should skip the question in the application.  (The application will make multiple requests for the SSN; each time the consumer should skip it.)

Can someone include a tax dependent that lives abroad in his application? 

Applicants must include information on all members of the household, including any tax dependents living abroad, for the purpose of determining the applicant’s household size and income.  Dependents living abroad will generally not be eligible to enroll in health insurance coverage.  The Healthcare.gov application asks for the address of all tax dependents but does not accept foreign addresses.  Consumers can put in the address of the tax filer in place of the address for tax dependents who live abroad.

Can information provided in the application be used for immigration civil enforcement purposes? 

No.  Medicaid, CHIP, and the marketplaces use the U.S. Citizenship and Immigration Services’ (USCIS) Systematic Alien Verification for Entitlements (SAVE) program to verify the citizenship or immigration status of people applying for coverage.  However, this data match is only for the purpose of confirming that applicants meet the immigration or citizenship status requirement to enroll in an insurance affordability program.  The USCIS has issued guidance that information about applicants or households obtained for health insurance eligibility will not be used for civil immigration enforcement purposes.

PART II: Applying for premium tax credits in the Federally-Facilitated Marketplace

Who needs to complete remote identity proofing (i.e. ID proofing) to submit an application on Healthcare.gov?

The Federally-Facilitated Marketplace (FFM) uses Healthcare.gov to process applications for and enroll eligible applicants in health coverage.  Healthcare.gov requires the person designated as the household contact in an application (who must be an adult) to successfully complete ID proofing to ensure that he is who he says he is before he can use the online process to apply for coverage, select health insurance plans, report changes, or renew coverage.

Why are some people not able to complete the ID proofing process on Healthcare.gov? 

Experian, the entity that verifies identity for Healthcare.gov, creates personalized questions that the household contact must answer to prove his identity in the application.  Experian often cannot generate a sufficient number of questions for household contacts with limited or no credit history.  Also, consumers have sometimes found questions generated by Experian difficult to answer.

What happens when ID proofing cannot be completed on Healthcare.gov?

When Healthcare.gov cannot complete ID proofing online, it gives household contacts a unique reference code and instructs them to call the Experian Help Desk to complete ID proofing over the phone.

What happens when ID proofing cannot be completed over the phone with Experian?

Household contacts who cannot complete ID proofing over the phone have to submit supporting documents to prove their identity if they wish to submit an application online.  They can upload electronic versions of the documents to their Healthcare.gov accounts, or can mail copies to:

Health Insurance Marketplace
465 Industrial Boulevard
London, KY 40750-0001

Table 1 lists the documents that can be used to verify identity.  When mailing copies, it is important to include the unique reference ID number provided during the online ID proofing process so the documents can be matched to the correct account.

What if consumers do not have any of the documents listed to complete Healthcare.gov’s ID proofing process?

Household contacts who do not have any of the documents needed to complete the ID proofing process will not be able to submit an application online on Healthcare.gov.  Instead, they may complete the application by mailing a completed paper application form or may apply over the phone by contacting the marketplace call center at 1-800-318-2596 (TTY: 1-855-889-4325).  They should ask to receive notices about their application by mail.  If they qualify for marketplace coverage, they will need to go through the marketplace call center to select and enroll in a plan.  To evaluate their health plan options before enrolling, applicants can use the “See plans” tool on Healthcare.gov.  Once enrolled, they will need to report any changes and complete the renewal process through the marketplace call center.

How does Healthcare.gov verify citizenship? 

In the FFM, when applicants attest to being U.S. citizens and provide an SSN, their information is checked against information in SSA’s records to verify citizenship.

SSA does not have citizenship records for some citizens, including many who were born outside the U.S.  If citizenship cannot be verified electronically through SSA, applicants are asked if they are a naturalized or derived citizen.  Some applicants who are naturalized or derived citizens can have their status verified instantly by providing numbers found in their Certificate of Citizenship or Certificate of Naturalization that will be matched with information in the SAVE program.

The SAVE program cannot immediately verify citizenship status of all derived and naturalized citizens.  When this occurs, applicants will have to upload proof of their citizenship to their Healthcare.gov accounts (see list of acceptable proof in Table 2).  Applicants can also mail document copies to:

Health Insurance Marketplace
465 Industrial Boulevard
London, KY 40750-0001

While their citizenship is being verified, applicants who otherwise meet all eligibility requirements can enroll in Medicaid, CHIP, or a marketplace plan during a “reasonable opportunity period” or “inconsistency period.”

How does Healthcare.gov verify immigration status? 

In the FFM, all non-citizens applying for coverage for themselves must attest to having an “eligible immigration status.”  They then must select a document type to use to prove their immigration status.  They will be asked to provide one or two numbers from their document; Healthcare.gov will use this information to attempt to immediately verify their immigration status through the SAVE program.

The SAVE program cannot immediately verify the status of all immigrants.  When this occurs, applicants will have to upload proof of their immigration status to their Healthcare.gov accounts (see list of acceptable proof in Table 3).  Applicants can also mail document copies to:

Health Insurance Marketplace
465 Industrial Boulevard
London, KY 40750-0001

While the applicant gathers and sends in documents and the agency receives and processes them, the applicant can enroll in Medicaid, CHIP, or a marketplace plan if he meets all other eligibility requirements during a “reasonable opportunity period” or “inconsistency period.”

Why are some lawfully present immigrants who are eligible for subsidies not able to immediately enroll in subsidized coverage?

Lawfully present immigrants who have income within the Medicaid eligibility range but are ineligible for Medicaid due to their immigration status can qualify for premium tax credits and cost-sharing reductions even if their income falls below the poverty line.  (Generally, consumers must have income between 100-400 percent of the poverty line to qualify for premium tax credits and cost sharing reductions.)  However, Healthcare.gov has system limitations that can result in an incorrect eligibility determination for some of these individuals.

If Healthcare.gov can instantly verify that a consumer is lawfully present but ineligible for Medicaid because of his immigration status, the applicant should receive the correct determination of eligibility for subsidies.

If Healthcare.gov cannot instantly verify that the consumer’s immigration status makes him ineligible for Medicaid, then the consumer will receive an incorrect eligibility determination for subsidies.  This is because Healthcare.gov will assume the consumer is eligible for Medicaid based on immigration status until the consumer provides proof of his immigration status, which shows he is ineligible for Medicaid. One of two erroneous determinations will occur:

• Healthcare.gov incorrectly assesses or determines he is eligible for Medicaid if the consumer otherwise appears to meet the income and other applicable requirements for Medicaid eligibility.
• Healthcare.gov incorrectly determines he is ineligible for marketplace subsidies and he is treated as if he were in the coverage gap.   This can occur in states that have not expanded Medicaid.  If the consumer does not meet the Medicaid income or other applicable requirement and his income is below the poverty line, Healthcare.gov assumes the consumer is in the coverage gap and does not send his case file to Medicaid.  These individuals are told they are only eligible to purchase a marketplace plan at full cost —without subsidies but that they may qualify for help paying for coverage but must turn in documents to prove their immigration status.

What steps need to be taken to get the correct determination for individuals incorrectly assessed or determined eligible for Medicaid? 

Consumers must be determined ineligible for Medicaid based on their immigration status before they can get the correct eligibility determination for marketplace subsidies.  When Healthcare.gov incorrectly assesses or determines individuals as eligible for Medicaid, it sends the individual’s case file to the state Medicaid agency.  The Medicaid agency will ask the consumer to provide proof of his immigration status.  After the consumer provides proof and is denied Medicaid based on his immigration status, he will be referred back to Healthcare.gov and instructed to update his application to indicate he has been denied eligibility for Medicaid based on immigration status.

After a consumer notes on the application that he has been denied Medicaid due to immigration status, he should receive a correct determination of eligibility for subsidies.

What steps need to be taken to get the correct determination for individuals incorrectly determined ineligible for subsidies and treated as if they were in the coverage gap? 

These consumers must also be determined ineligible for Medicaid based on their immigration status before they can get the correct eligibility determination for marketplace subsidies.  Their eligibility determination notice will say they are not eligible for subsidies and are eligible for an exemption from the requirement to have health insurance, and that they may qualify subsidies but they must submit documents to prove their immigration status to make that determination.  When the marketplace receives and processes the documents, eligible consumers are sent a corrected eligibility determination notice that includes information on eligibility for subsidies, access to a special enrollment period, and instructions to return to Healthcare.gov to select a plan.

Are there any alternative steps individuals can take to get the correct eligibility determination? 

In some cases consumers can get a Medicaid denial due to immigration status more quickly by applying for Medicaid directly through the state Medicaid agency. Once denied Medicaid eligibility based on immigration status by the state agency, consumers can return to Healthcare.gov and indicate they have been denied Medicaid due to immigration status.

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