Under the Affordable Care Act (ACA), a Federally Facilitated Marketplace (FFM) was created where all participating carriers’ health insurance plans are approved and listed. The plans have to meet the Minimum Essential Coverage (MEC), and are called QHP (Qualified Health Plans). The plans are divided into 4 metal levels – bronze, silver, gold, and platinum, each covers approximately 60, 70, 80, and 90% of medical costs. The higher the coverage is, the more the premium costs.
The marketplace plans are eligible for government subsidy by APTC (Advance Premium Tax Credit) if participant’s income falls into certain range. If the projected annual income is between 100-400% of the FPL, the participants may qualify for PTC when filing federal income tax return. The federal government lets the participants advance the PTC when paying monthly premium. The amount of APTC depends on the income. The lower the income is, the higher the APTC is, and the lower the premium becomes.
ACA and Medicaid
A provision of ACA called for a Medicaid expansion (to cover people with income up to 138% FPL). By law, the federal government cannot force the states to expand their Medicaid program, but the federal government sponsors 90% of the expansion cost. From 2014 to 2021, the number of states that have implemented Medicaid expansion has increased from 26 to 39. Three states (Wisconsin, Utah, and Georgia) have implemented a partial expansion (up to 100% FPL). Georgia’s expansion just went into effect in July, 2021. Federal government will only fund 67% of the cost for partial expansion. Medicaid offers better coverage than marketplace plans. It generally has no premium and lower cost shares.
If a job-based (lowest-cost) health plan covering only the employee that costs 9.83% or less of the employee’s household income, the plan is said to be ‘affordable.’ If a job-based plan is affordable, and meets the minimum value standard, you’re not eligible for a premium tax credit if you buy a Marketplace insurance plan instead. Minimum value (MV) is defined as coverage of 60% of medical costs, and sufficient size of providers’ network.
On the flip side, if just one of the employees is able to join a marketplace plan and qualify for APTC, the employer will be subject to a fine, called the ’employer’s shared responsibility.’ Employers with 50 or more FTE (Full-Time Equivalent) employees are required to provide an MEC that meets MV, to avoid the penalty.
Originally, consumers who did not meet the MEC requirement, will have to pay an ‘individual shared responsibility’ penalty when filing tax return. Starting the 2019 tax year, the penalty no longer exists.
American Rescue Plan Act
The American Rescue Plan Act (ARPA) of 2021 expanded the eligibility for government subsidies for plan year 2021 and 2022. The act is in place to combat the economic distress caused by the Covid-19 pandemic.
For Plan Years 2021 and 2022, PTC is available to taxpayers with household income above 400% FPL. ARPA caps the ratio of premiums over household income at 8.5%. This essentially redefined affordability.(For Plan Year 2021 only, consumers who have received or have been approved to receive unemployment compensation during any week in 2021 may be eligible to receive enhanced subsidies to help pay for 2021 Marketplace coverage. Taxpayers receiving unemployment compensation in 2021 who have a household income under 100% FPL and who are not otherwise eligible for Medicaid may be eligible for APTC. Consumers receiving unemployment compensation in 2021 will be considered to have household income between 100% and 133% FPL, when applying for financial assistance.)
The marketplace is often referred to as the exchange. People with income not low enough to qualify for government subsidies, don’t have to enroll in a marketplace plan. The same insurance carriers offer plans off the exchange. In fact, some insurance carriers don’t participate in the marketplace exchange. Some carriers offer more plans off exchange. So you actually get more options, and in some cases, cheaper plans off exchange. Also off-exchange plans might have larger provider network because some providers do not accept marketplace policies.