The Affordable Care Act (ACA) created health insurance subsidies, in the form of premium tax credits and cost-sharing reductions, to help eligible individuals and families purchase health insurance through an Exchange. By reducing a taxpayer’s out-of-pocket premium costs, the subsidies are designed to make coverage through an Exchange more affordable.
Subsidies became available beginning in 2014, at the same time the Exchanges became operational. The Exchange open enrollment period for the 2014 plan year ended on March 31, 2014. The 2015 annual open enrollment period will begin on Nov. 15, 2014.
If an enrollee is eligible for a premium tax credit, advance payments of the credit will be made directly to the insurance company on the family’s behalf. At the end of the year, the advance payments must be reconciled against the amount of the family’s actual premium tax credit, as calculated on the family’s federal income tax return.