Healthcare Marketplace and the Premium Tax Credit

With the deadline to enroll in a health insurance plan through the Marketplace tomorrow (December 15), this is your last chance to see if you should be covered through the Marketplace. “The Marketplace” refers to each state’s price comparison website for subsidized health insurance, and was established by the Affordable Care Act.

Individuals with health insurance through an employer can probably stop reading here. For those without access to an employer-sponsored plan, however, purchasing a plan through the Marketplace is usually the next best option. In fact, with the ACA assessing a Shared Responsibility penalty against those without minimum essential coverage, purchasing insurance through the marketplace can prove cheaper than going uninsured.

Insurance purchased through the Marketplace may potentially be subsidized. Applicants whose household incomes fall between 100% and 400% of the federal poverty line, as depicted here, may qualify for the Premium Tax Credit or Advanced Premium Tax Credit. The PTC is a refundable credit designed to offset the cost of obtaining minimum essential coverage for lower-income applicants. It can be claimed when filing a federal tax return for any applicant who meets the income requirement, as well as several others. The Advanced Premium Tax Credit applies this tax credit on a monthly basis, directly offsetting the price of premiums. Anyone who reasonably estimates that they will meet the requirements of the Premium Tax Credit may apply for the Advanced credit when they apply for coverage.

Other eligibility requirements of the Premium Tax Credit include:

  • You or a family member must be enrolled in health insurance coverage through the Marketplace for one or more months during the year.
  • During this time, the individual cannot be eligible for coverage outside the Marketplace, including Medicare or Medicaid.
  • You are between 100% and 400% of the Federal Poverty Line for your household size.
  • You are not filing Married Filing Separately (excluding certain victims of domestic abuse or spousal abandonment.)
  • You cannot be claimed as a dependent by another person. Even if another other person could claim you, but chooses not to, you are ineligible for the PTC.

If you are unsure if you will be within the necessary income range, but think you could be, sign up through Healtcare.gov. Talk with your financial advisor about ways to increase or decrease your income to be eligible for the credit.

For more details on PTC eligibility, visit the IRS website here