Health Insurance Premium Credits Under
PPACA (P.L. 111-148)
Chris L. Peterson
Specialist in Health Care Financing
Thomas Gabe
Specialist in Social Policy
April 6, 2010
Congressional Research Service
7-5700
www.crs.gov
R41137
CRS Report for Congress
P
repared for Members and Committees of Congress

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Health Insurance Premium Credits Under PPACA (P.L. 111-148)

Summary
On March 23, 2010, the President signed into law health reform legislation (the Patient Protection
and Affordable Care Act, PPACA, P.L. 111-148, as amended by the reconciliation act, P.L. 111-
152) that will, among other things, provide “premium assistance credits” beginning in 2014 to
help certain individuals pay for health insurance. This report describes the premium credits as
reflected in current law through this legislation (hereafter referred to simply as PPACA).
Under PPACA, state-established “American Health Benefit Exchanges” will have to be
established in every state by January 1, 2014. Exchanges will not be insurers, but will provide
qualified individuals and small businesses with access to insurers’ qualified health plans in a
comparable way.
Only for purchase of coverage within an exchange, advanceable, refundable premium assistance
credits will be available to limit the amount of money some individuals would pay for premiums.
Under PPACA, for example, a family of three just above 133% of the federal poverty line
(FPL)—that is, currently with annual income of $24,352—would be required to pay 3% of its
income toward premiums ($824 annually, if the proposed premium subsidies were currently in
effect). A family of three just under 400% FPL ($73,240), where the premium subsidies end,
would be required to pay no more than 9.5% of its income in premiums ($6,958 annually, if the
proposed premium subsidies were currently in effect).
Although the premium credits will not be available until 2014 under PPACA, the illustrations
provided in this report are based on current FPLs, to reflect how the premiums families would
pay compare to their current income levels.
Relative affordability of health insurance premiums individuals and families might face within
health insurance exchanges will likely vary from exchange to exchange based on a host of factors,
including enrollees’ age, the health of the people actually enrolled in the plan, the varying prices
paid by plans for medical goods and services, the breadth of the provider network, the provisions
regarding how out-of-network care is paid for (or not), and the use of tools by the plan to reduce
health care utilization (e.g., prior authorization for certain tests). Examples shown in this report
depict a range by which premiums might reasonably be expected to vary based on enrollees’ age,
and variation in medical costs across geographic areas, for purposes of illustration only. Actual
premiums will likely vary among health insurance exchanges based on a wide range of factors
other than those depicted in this report.

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Health Insurance Premium Credits Under PPACA (P.L. 111-148)

Contents
Individuals’ Eligibility for Premium Credits ................................................................................ 1
Part of a Tax-Filing Unit ....................................................................................................... 1
Enrolled in an Exchange Plan................................................................................................ 1
Not Eligible for Other Acceptable Coverage.......................................................................... 2
Individual’s Employer Does Not Contribute Toward Exchange Plan...................................... 3
Income Less than 400% of Poverty ....................................................................................... 3
Maximum Out-of-Pocket Premium Amounts............................................................................... 4
Examples of Premium Credit for Single Coverage................................................................. 6
Example of Premium Credit for a Family of Four.................................................................. 7
Health Insurance “Affordability” in the Exchange ....................................................................... 7
Illustrated Potential Effects of Age-Banding and Area Cost Adjustments on
“Affordability”................................................................................................................. 10
Relative “Affordability” of Premiums for Married and Unmarried Couples ......................... 18
Conclusion.......................................................................................................................... 22

Figures
Figure 1. Maximum Out-of-Pocket Premiums for Eligible Individuals, by Federal
Poverty Level (FPL)................................................................................................................. 6
Figure 2. PPACA Compared to Pre-PPACA Premiums: Pre- and Post-tax Out-of-Pocket
Premiums as a Percentage of Adjusted Gross Income ............................................................. 10
Figure 3. PPACA: Pre- and Post-Tax Out-of-Pocket Premiums as a Percentage of
Adjusted Gross Income, by Age—Single Policy in a Lower-Cost Area ................................... 13
Figure 4. PPACA: Pre- and Post-Tax Out-of-Pocket Premiums as a Percentage of
Adjusted Gross Income, by Age—Single Policy in a Medium-Cost Area ................................ 14
Figure 5. PPACA: Pre- and Post-Tax Out-of-Pocket Premiums as a Percentage of
Adjusted Gross Income, by Age—Single Policy in a Higher-Cost Area .................................. 15
Figure 6. PPACA: Pre- and Post-Tax Out-of-Pocket Premiums as a Percentage of
Adjusted Gross Income, by Age— Married Couple with no Children, Single+1 Policy
in a Lower-Cost Area ............................................................................................................. 16
Figure 7. PPACA: Pre- and Post-Tax Out-of-Pocket Premiums as a Percentage of
Adjusted Gross Income, by Age— Married Couple with no Children, Single+1 Policy
in a Medium-Cost Area .......................................................................................................... 17
Figure 8. PPACA: Pre- and Post-Tax Out-of-Pocket Premiums as a Percentage of
Adjusted Gross Income, by Age— Married Couple with no Children, Single+1 Policy
in a Higher-Cost Area............................................................................................................. 18
Figure 9. PPACA: Pre- and Post-Tax Out-of-Pocket Premiums as a Percentage of
Adjusted Gross Income, Comparison of Two Couples Age 30 (Married and Unmarried)
in a Medium-Cost Area .......................................................................................................... 21
Figure 10. PPACA: Pre- and Post-Tax Out-of-Pocket Premiums as a Percentage of
Adjusted Gross Income, Comparison of Two Couples Age 50 (Married and Unmarried)
in a Medium-Cost Area .......................................................................................................... 22
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Health Insurance Premium Credits Under PPACA (P.L. 111-148)


Tables
Table 1. Income Levels for 400% of the Current Federal Poverty Line (FPL) .............................. 3
Table 2. Annual Income, by Current Federal Poverty Level and Family Size................................ 4
Table 3.Maximum Out-of-Pocket Premium Payments Under PPACA, If Currently
Implemented ............................................................................................................................ 7
Table 4. PPACA: Illustrative Health Insurance Premiums, by Enrollee Age, Geographic
Cost, and Plan Type, 2009...................................................................................................... 11
Table 5. PPACA: Illustrative Health Insurance Premiums as a Percentage of Income at an
Income Level of 400% of the Federal Poverty Level, by Enrollee Age, Geographic
Cost, and Plan Type, 2009...................................................................................................... 11

Contacts
Author Contact Information ...................................................................................................... 23

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Health Insurance Premium Credits Under PPACA (P.L. 111-148)

his report describes the “premium assistance credits” to help certain individuals pay for
health insurance, beginning in 2014, in the Patient Protection and Affordable Care Act
T (PPACA, P.L. 111-148, as amended by the reconciliation act, P.L. 111-152).
Under PPACA,1 state-established “American Health Benefit Exchanges” would have to be
established in every state by January 1, 2014. Exchanges will not be insurers, but will provide
qualified individuals and small businesses with access to insurers’ qualified health plans in a
comparable way. Only for purchase of coverage within an exchange, advanceable, refundable
premium assistance credits will be available to limit the amount of money some individuals pay
for premiums.2 This report describes who will be eligible for the premium credits, how the credits
will be calculated, and how individuals’ income will be counted for determining credit eligibility.
The guideline against which income will be compared to determine credit eligibility is referred to
generally as the federal poverty line (FPL). Although the premium credits within exchanges will
not be available until 2014, the illustrations provided in this report are based on current FPLs, to
reflect how the premium credits would compare to families’ current income levels—essentially,
“if the premium credits were available today.”3
Individuals’ Eligibility for Premium Credits
This section lists all of the requirements an individual must meet in order to obtain premium
credits beginning in 2014 under PPACA.
Part of a Tax-Filing Unit
The premium credits will be provided as advanceable, refundable federal tax credits ultimately
calculated through individual tax returns (although the credit payments will go directly to
insurers). The credits can only be obtained by qualifying individuals who file tax returns.4
Enrolled in an Exchange Plan
Premium credits will only be available to individuals enrolled in a plan offered through an
exchange.5 Individuals may enroll in a plan through their state’s exchange if they are (1) residing
in a state that established an exchange; (2) not incarcerated, except individuals in custody pending
the disposition of charges; and (3) lawful residents.

1 Hereafter, “PPACA” will refer to http://www.congress.gov/cgi-
lis/bdquery/R?d111:FLD002:@1(111+148)P.L. 111-148 as amended by
http://www.congress.gov/cgi-lis/bdquery/R?d111:FLD002:@1(111+152)P.L. 111-152.
2 Individuals who qualify for premium credits will also qualify for cost-sharing subsidies to help pay for deductibles,
copayments, etc. The cost-sharing subsidies are outside the scope of this report.
3 Per P.L. 111-144, the 2009 FPLs will be in effect until at least March 31, 2010. Legislation to extend the use of the
2009 FPLs is being considered. The Department of Health and Human Services (HHS) has not released information
regarding 2010 FPLs and their potential application for program eligibility purposes.
4 Couples married at the end of the taxable year will have to file joint returns to be eligible for the credit.
5 Sec. 1401 of PPACA, adding a new Sec. 36B(c)(2)(A)(i) to the Internal Revenue Code.
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Only lawful residents may obtain exchange coverage. Undocumented (“illegal”) aliens will be
prohibited from obtaining coverage through an exchange, even if they could pay the entire
premium without any subsidy.6 Because PPACA prohibits undocumented aliens from obtaining
exchange coverage, they will therefore not be eligible for premium credits.
Not Eligible for Other Acceptable Coverage
To be eligible for credits, an individual cannot be eligible for other acceptable coverage—that is,
“minimum essential coverage,” defined as Medicare, Medicaid, the Children’s Health Insurance
Program (CHIP), coverage related to military service, an employer-sponsored plan, a
grandfathered plan,7 and other coverage recognized by the Secretary. An individual eligible for,
but not enrolled in, an employer-sponsored plan may still be eligible for premium credits if the
employee’s contribution to premiums exceeded 9.5% of household income8 or if the plan’s
payments cover less than 60% of total allowed costs.
Although the Medicaid provisions are generally beyond the scope of this report, eligibility for
Medicaid as expanded under PPACA interacts with the provisions regarding premium credits for
exchange coverage. From 2011 to 2013, states have the option to expand Medicaid to all non-
elderly, non-pregnant individuals (i.e., childless adults and certain parents, except for those
ineligible based on certain noncitizenship status) who are otherwise ineligible for Medicaid up to
133% FPL. Beginning in 2014, states with Medicaid programs will be required to extend
Medicaid to these individuals.9 Thus, in 2014, all non-elderly citizens and certain legal aliens up
to 133% FPL will be eligible for Medicaid. (If a person who applied for premium credits in an
exchange was determined to be eligible for Medicaid, the exchange must have them enrolled in
Medicaid.10) PPACA will not change noncitizens’ eligibility for Medicaid.11 Thus, for example,
certain legal permanent residents (LPRs) who are below 133% FPL will be ineligible for
Medicaid. However, when the credits become available in 2014, lawfully present taxpayers below
133% FPL who are not eligible for Medicaid may be eligible for premium credits. Neither

6 Sec. 1312(f)(3) of PPACA. For more information about the treatment of noncitizens under health care reform
legislation, see CRS Report R40889, Noncitizen Eligibility and Verification Issues in the Health Care Reform
Legislation, by Ruth Ellen Wasem.
7 A group or a nongroup plan in which the person is enrolled and was enrolled in prior to enactment of the legislation,
per Sec. 1251 of PPACA.
8 Sec. 1001(a)(2) of http://www.congress.gov/cgi-
lis/bdquery/R?d111:FLD002:@1(111+152)P.L. 111-152, amending Sec. 1401(c)(2)(C) of PPACA. In
years after 2014, the percentage would be adjusted to reflect any percentage by which premium growth exceeded
income growth. The reconciliation bill added a provision (Sec. 1001(b)) that, after 2018, if the premium and cost-
sharing subsidies exceeded 0.504% of gross domestic product (GDP) for the preceding year, then the required
percentage of income paid toward premiums would also be increased by how much premium growth exceeded overall
inflation for the preceding year.
9 In fact, eligibility would be required up to 138% FPL, because §1004(e) of http://www.congress.gov/cgi-
lis/bdquery/R?d111:FLD002:@1(111+152)P.L. 111-152 also requires income equivalent to 5% FPL to
be disregarded from individuals’ income.
10 Sec. 1311(d)(4) and Sec. 1413(a) of PPACA.
11 As under law prior to PPACA, certain legal aliens are eligible for full Medicaid benefits (e.g., refugees, asylees, and
some legal permanent residents (LPRs) who have been here at least five years) while others are not (e.g., certain LPRs
who have been here less than five years).
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premium credits nor full-benefit Medicaid will be available for individuals who are not lawfully
present.
Individual’s Employer Does Not Contribute Toward Exchange Plan
Certain small employers (and in later years, potentially larger employers) may offer and
contribute toward coverage through an exchange. If an individual is enrolled in an exchange
through an employer who contributed toward that coverage, the individual will be ineligible for
premium credits.12
Income Less than 400% of Poverty
To be eligible for a premium credit, individuals must have “household income”13 of less than
400% FPL. A later section of this report describes how individuals get less or potentially no
premium credit as their income approaches 400% FPL. Using current levels, 400% FPL, the
amount at which individuals will no longer be eligible for any premium credit, is shown in Table
1.14
Table 1. Income Levels for 400% of the Current Federal Poverty Line (FPL)
Number of Persons
48 Contiguous States
in Family
and DC
Alaska
Hawaii
1
$43,320
$54,120
$49,840
2
$58,280
$72,840
$67,040
3
$73,240
$91,560
$84,240
4
$88,200
$110,280
$101,440
5
$103,160
$129,000
$118,640
6
$118,120
$147,720
$135,840
7
$133,080
$166,440
$153,040
8
$148,040
$185,160
$170,240
Source: CRS computation based on “Annual Update of the HHS Poverty Guidelines,” 74 Federal Register 4200,
January 23, 2009, http://aspe.hhs.gov/poverty/09fedreg.pdf.
Notes: Under PPACA, premium credits for eligible exchange coverage will not be available until 2014;
individuals will get less or potentially no premium credit as their income approaches 400% FPL. “DC” is the
District of Columbia. The Federal Poverty Guidelines are updated annual y for inflation.

12 Sec. 1401 of PPACA, adding a new Sec. 36B(c)(2)(A)(ii) to the Internal Revenue Code.
13 Subsections (a) and (b) of Sec. 1004 of http://www.congress.gov/cgi-
lis/bdquery/R?d111:FLD002:@1(111+152)P.L. 111-152 define Modified Adjusted Gross Income
(MAGI) and apply it to the premium and cost-sharing credits and well as to Medicaid and CHIP. MAGI is defined as
the Internal Revenue Code’s Adjusted Gross Income (AGI), which reflects a number of deductions, including trade and
business deductions, losses from sale of property, and alimony payments, increased (if applicable) by tax-exempt
interest and income earned by U.S. citizens or residents living abroad.
14 The FPL used for public program eligibility, the Federal Poverty Guideline, varies by family size and by whether the
individual resides in the 48 contiguous states and the District of Columbia versus Alaska or Hawaii. See 74 Federal
Register 4200, January 23, 2009, http://aspe.hhs.gov/poverty/09fedreg.pdf. Per P.L. 111-144, the 2009 FPLs will be
used through at least March 31, 2010.
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PPACA says premium credits are available to those whose income “exceeds 100 percent [FPL]
but does not exceed 400 percent [FPL]….” PPACA then provides for lawfully present noncitizens
who are at or below 100% FPL and who are not eligible for Medicaid to obtain premium credits.
Non-aged citizens and legal permanent residents at or below 133% FPL will be eligible for
Medicaid and therefore ineligible for premium credits.
Maximum Out-of-Pocket Premium Amounts
For individuals eligible for a premium credit, the credit is based on what might be considered an
affordable premium amount, based on a percentage of individuals’ income relative to the FPL.
Table 2 shows the current annual dollar income that various percentages of FPL represent, up to
400% FPL, where the premium credits end. Although the premium credits will not be available
until 2014 under the bill, the current FPLs are provided to reflect how the premium credits would
compare to families’ current income levels.
Table 2. Annual Income, by Current Federal Poverty Level and Family Size
For the 48 contiguous states and the District of Columbia
Federal
Family Size
Poverty
Line (FPL)
1 2 3 4
0%
$0
$0
$0
$0
50%
$5,415
$7,285
$9,155
$11,025
100%
$10,830
$14,570
$18,310
$22,050
133%
$14,404
$19,378
$24,352
$29,327
150%
$16,245
$21,855
$27,465
$33,075
200%
$21,660
$29,140
$36,620
$44,100
250%
$27,075
$36,425
$45,775
$55,125
300%
$32,490
$43,710
$54,930
$66,150
350%
$37,905
$50,995
$64,085
$77,175
400%
$43,320
$58,280
$73,240
$88,200
Source: CRS computation based on “Annual Update of the HHS Poverty Guidelines,” 74 Federal Register 4200.
Premium credits under the bill are based on the “applicable percentage”—that is, the maximum
percentage of income that individuals will be required to pay toward the second-lowest cost
“silver” exchange plan in the area. Silver plans are those in one of four cost-sharing tiers
established in exchanges (the other tiers being bronze, gold, and platinum). Of the four tiers,
silver plans will have the second-highest enrollee cost-sharing (deductibles and copayments) and
thus likely the second-lowest premiums. But individuals eligible for premium credits would also
be eligible for cost-sharing subsidies.
The applicable percentage is shown in Table 3 and Figure 1. Individuals above 400% FPL will
not be eligible for credits. Qualifying individuals between 300% and 400% FPL will have to pay
no more than 9.5% of their incomes in premiums (if they enrolled in a plan not more expensive
than the second lowest cost silver plan). For qualifying individuals with income above 133% to
300% FPL, the percentage of income they will have to pay would range from 3% of income to
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9.5% of income, as shown in Table 3. Qualifying individuals at or below 133% FPL will pay no
more than 2% of income toward premiums.15
Table 3 and Figure 1 also illustrate the “cliff effect” that occurs at 133% FPL. For those at or
below 133% FPL who are not eligible for Medicaid but eligible for premium credits (e.g., certain
legal permanent residents), the credits will ensure that individuals pay no more than 2% of their
income for premiums in the second-lowest-cost silver plan. Above 133% FPL, a formula is
applied so that a family at 133.01% FPL will pay 3% of their income for those premiums. For
example, as shown in Table 3, a family of four at 133% FPL ($29,327 in annual income) would
have to pay up to $587 in annual premiums, if the bill were currently in effect. With one
additional dollar of income ($29,328 in annual income), they would be required to pay $992 in
premiums. Thus, in this example, that additional $1 in income would lead to $405 more in
required premium payments for the family (i.e., $992-$587). Some might observe that prior to the
implementation of the PPACA premium credits in 2014, an even larger cliff exists for citizens and
qualified aliens, whose extra dollar of income makes them ineligible for Medicaid, at which point
no premium credits are available.
As mentioned above, the premium credit amount would be based on the second-lowest-cost silver
plan available to the individual in an exchange.16 Individuals who enrolled in more expensive
plans would have to pay any additional amount. However, the cost-sharing subsidies would only
be available to credit-eligible individuals enrolled in a silver plan. In addition, although states
would be permitted to mandate benefits not in the essential benefits package, states would have to
make payments to, or on behalf of, exchange-enrolled individuals for those additional state-
mandated benefits.17

15 After 2014, the applicable percentages for maximum out-of-pocket premium payments relative to income will be
adjusted to reflect any percentage by which premium growth exceeded income growth.
http://www.congress.gov/cgi-lis/bdquery/R?d111:FLD002:@1(111+152)P.L. 111-152 added a
provision (Sec. 1001(b)) that, after 2018, if the premium and cost-sharing subsidies exceeded 0.504% of gross domestic
product (GDP) for the preceding year, then the required percentage of income paid toward premiums will also be
increased by how much premium growth exceeded overall inflation for the preceding year.
16 Premiums faced by individuals in exchanges will be permitted to vary by only two personal characteristics: (1) age,
with premiums for adults permitted to vary by no more than a 3-to-1 ratio, and (2) tobacco use, with no more than 1.5-
to-1 variation. The premium credits will reflect applicable adjustments for age but not for tobacco use. Thus, if a state
permitted tobacco use as a rating factor in its exchange(s), credit-eligible tobacco users would pay more in out-of-
pocket premiums than non-tobacco users.
17 Sec. 1311(d)(3) as amended by Sec. 10104(e) of PPACA.
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Figure 1. Maximum Out-of-Pocket Premiums for Eligible Individuals,
by Federal Poverty Level (FPL)
10%
9.5%
9%
8.05%
8%
s
m

iu 7%
e
6.3%
m
em
o
c
6%
n
r pr
f i
o
o
t f
5%
m %
4%
pocke 4%
imu
x
of
a
3%
M
out 3%
id
a
p
2%
2%
1%
0%
100%
150%
200%
250%
300%
350%
400%
Federal Poverty Level

Source: CRS analysis.
Note: Starting in 2014, under PPACA, citizens and qualifying legal residents at or below 133% FPL will be eligible
for Medicaid rather than premium credits.
Table 3 also shows the maximum dollar amount individuals and families would have to pay
toward premiums for the second-lowest-cost silver plan, if the subsidies were currently available.
Again, if individuals chose a plan with a premium greater than the second-lowest-cost silver plan,
they would have to pay the difference, as well. If they chose a less expensive plan, then they
would pay less than the amounts shown.
Examples of Premium Credit for Single Coverage
As an example, assume the area’s second-lowest-cost silver plan charges a premium of $4,500 for
single coverage (family size of one) and that premium credits were currently available.
Individuals just under 400% FPL in that plan would receive a premium credit of $385 (i.e.,
$4,500 premium minus $4,115 affordable premium amount).18

18 If the premium were less than the affordable premium amount of $4,115, however, then the individual would not get
any premium credit.
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Using the same example ($4,500 single-coverage premium), an individual at 350% FPL
(currently $37,905) would receive a premium credit of $899 (i.e., $4,500 premium minus $3,601
affordable premium amount).
Using the same example, credit-eligible individuals at 100% FPL (currently $10,830) would be
required to pay $217 per year toward the $4,500 premium and would therefore receive a credit of
$4,283. (However, citizens at 100% FPL not enrolled in employer coverage would likely be
ineligible for premium credits due to their Medicaid eligibility.)
Table 3.Maximum Out-of-Pocket Premium Payments
Under PPACA, If Currently Implemented
for the 48 contiguous states and the District of Columbia
Federal
Maximum
Maximum Annual Premium (current), by Family Size
Poverty
Premium as a %
Line (FPL)
of Income (2014)
1 2 3 4
100%
2.0%
$217 $291 $366 $441
133.00%
2.0%
$288 $388 $487 $587
133.01%
3.0%
$487 $656 $824 $992
150%
4.0%
$650 $874 $1,099 $1,323
200%
6.3%
$1,365 $1,836 $2,307 $2,778
250%
8.05%
$2,180 $2,932 $3,685 $4,438
300%
9.5%
$3,087 $4,152 $5,218 $6,284
350%
9.5%
$3,601 $4,845 $6,088 $7,332
400%
9.5%
$4,115 $5,537 $6,958 $8,379
Source: CRS computation based on “Annual Update of the HHS Poverty Guidelines,” 74 Federal Register 4200,
January 23, 2009, http://aspe.hhs.gov/poverty/09fedreg.pdf, and PPACA, for the second-least-expensive silver plan
available to eligible individuals. If individuals choose more expensive plans, they would be responsible for
additional premiums.
Example of Premium Credit for a Family of Four
Assume the second-lowest-cost silver plan in an area charged a premium of $12,000 for family
coverage and that premium credits were currently available. A family of four at 100% FPL
($22,050) in that plan would be required to pay no more than $441 per year toward the $12,000
premium and would therefore receive a credit of $11,559. A family of four just below 400% FPL
would be required to pay $8,379 toward their premium and would therefore receive a credit of
approximately $3,621 (i.e., $12,000-$8,379).
Health Insurance “Affordability” in the Exchange
While there is no widely accepted definition of individual “affordability” when it comes to health
insurance premiums, and other health-care related out-of-pocket costs,19 PPACA sets insurance

19 PPACA includes provisions to study affordability issues. It requires GAO to conduct a survey of the cost and
(continued...)
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premium credits for persons, and their covered dependents, such that individuals and families will
be required to spend no more than a specified percentage of income on premiums for specified
health insurance plans in an exchange. Insurance premium credits under PPACA will extend to
individuals and families with modified adjusted gross income (hereafter referred to simply as
“income” with respect to PPACA) below 400% FPL. PPACA will provide premium credit support
scaled to individual and family income relative to poverty such that eligible families’ and
individuals’ premiums will be limited from 2.0% to 9.5% of income. Individuals and families
with income at or above 400% of poverty will be ineligible for premium credits.
Prior to PPACA, individual and family paid premiums, alone or in combination with other
qualified health expenses, can be applied toward claiming a medical expense deduction under
federal income tax provisions. PPACA raises the excess medical deduction limit from 7.5% of
AGI to 10% of AGI. Individuals who are eligible for premium credits (beginning in 2014) will
also be eligible for subsidies to help them pay for cost-sharing (e.g., deductibles and copayments).
In terms of the premiums, PPACA implicitly sets a pre-tax “affordability cap” of 9.5% of income
on base coverage plans in the exchange (i.e., plans with a beginning actuarial value of 70%, not
including the impact of cost-sharing subsidies), for individuals and families with income up to
400% of poverty.
This section examines only the relative “affordability” of enrollee premiums in health insurance
exchanges as a percentage of enrollee’s income (adjusted gross income), considering illustrative
plan premiums, after subsidies and, if applicable, any federal tax deduction due to excess medical
(i.e., qualifying health insurance and health care) expenses.
The insurance premiums used in the examples are for purposes of illustration only. Ultimately, the
premiums individuals would face in the health insurance exchanges will depend on a host of
factors, including the health of the people actually enrolled in the plan, the varying prices paid by
plans for medical goods and services, the breadth of the provider network, the provisions
regarding how out-of-network care is paid for (or not), and the use of tools by the plan to reduce
health care utilization (e.g., prior authorization for certain tests). The estimates shown here are
based on illustrative premiums developed by the Kaiser Family Foundation (KFF).20 The
illustrated plans are estimated to have a 70% actuarial value, meaning that premiums are expected
to cover 70% of plan members’ covered health care costs, with deductibles and copayments
covering the remaining 30%. In the exchanges, insurers will be allowed to age-rate premiums
within prescribed bands—under PPACA, the highest age-adjusted premium can be no more than

(...continued)
affordability of health care insurance provided under the exchanges for owners and employees of small business
concerns, including data on enrollees in exchanges and individuals purchasing health insurance coverage outside of
exchanges. GAO is also required to conduct a study on the affordability of health insurance coverage (including the
impact of credits for individuals and small businesses), the availability of affordable health benefits plans (including a
study of whether the percentage of household income used for credit purposes is appropriate for determining whether
employer-provided coverage is affordable and whether such level may be lowered without significantly increasing the
costs to the federal government and reducing employer-provided coverage), and the ability of individuals to maintain
essential health benefits coverage. PPACA also requires the HHS Secretary to conduct a study examining the feasibility
and implication of adjusting the FPL for premium and cost-sharing credits for different geographic areas so as to reflect
the variations in cost-of-living among different areas. If the Secretary determines that an adjustment is feasible, the
study should include a methodology to make such an adjustment.
20 http://healthreform.kff.org/SubsidyCalculator.aspx, accessed on March 23, 2010.
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Health Insurance Premium Credits Under PPACA (P.L. 111-148)

three times the lowest age-adjusted premium. PPACA will allow premiums to vary by geographic
area.
Figure 2 depicts the relative “affordability” of health insurance premiums prior to the application
of the credits and PPACA as of 2014, depicting out-of-pocket premiums as a percentage of
income. The figure is based on KFF’s illustrated health insurance plan cost of $5,428 for a 50-
year-old with single coverage living in a medium-cost area. Out-of-pocket premiums are shown
based on pre-tax as well as post-tax premiums, using the excess medical expense threshold limit
of 7.5% of adjusted gross income prior to PPACA, and 10.0% after PPACA.
The figure shows that at 100% of poverty, the illustrated insurance plan would cost individuals
half of their pre-tax income prior to PPACA—insurance premiums at this level, amounting to
50% of pre-tax income, would be considered unaffordable by many, and could crowd out
spending on other basic needs such as food, shelter and utilities, and clothing. Prior to PPACA,
the 7.5% excess medical expense deduction was the only federal subsidy toward the cost of their
medical insurance that these individuals were eligible to receive; at lower-income levels the
deduction had little or no effect on net post-tax premiums. Under PPACA, Medicaid will be
expanded to 133% FPL, which will permit individuals to enroll with relatively limited or no
premiums and cost-sharing. Under the depicted plan, health insurance premiums after reflecting
PPACA’s subsidies would range from 3% of income at 133% of poverty, up to 9.5% of income at
just under 400% FPL. At 400% FPL, individuals are shown bearing the full pre-tax cost of the
illustrated plan ($5,428), which would amount to 12.5% of their pre-tax income; after applying
the excess medical expense deduction under current law, the post-tax premium amounts to 11.7%
of adjusted gross (pre-tax) income.
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Health Insurance Premium Credits Under PPACA (P.L. 111-148)

Figure 2. PPACA Compared to Pre-PPACA Premiums:
Pre- and Post-tax Out-of-Pocket Premiums
as a Percentage of Adjusted Gross Income
Based on Illustrated Annual Insurance Plan Cost for a 50-Year-Old with Single Coverage
in a Medium-Cost Area ($5,428)
Prem ium as a Percent of Incom e
50%
45%
40%
35%
30%
Pr e-PPACA
pr e-tax prem ium
25%
Pr e-PPACA:
20%
post-tax prem ium
PPACA:
pos t-tax pre mium
15%
n
io
ns
L
P
PPACA:
pa
pre-tax prem ium
10%
x
f F
E
o
L
id
3%
P
a
c
13
F
5%
di
%
Me
400
0%
$0
00
00
00
,000
000
000
000
000
000
000
000
000
000
000
000
000
000
000
000
000
$5
0,0
5,0
0,
5,
0,
5,
0,
5,
0,
5,
0,
5,
0,
5,
0,
5,
00,0
$1
$1
$2
$2
$3
$35,
$40,
$4
$5
$5
$6
$6
$7
$7
$8
$8
$9
$9
$1
Adjusted Gross Income

Source: Prepared by CRS based on Kaiser Family Foundation (KFF) illustrative health insurance premiums, for
plans with an estimated actuarial value of 70%, in 2009.
Notes: Estimates are for illustration only, based on illustrated KFF health insurance premiums. Actual premiums
would likely vary among health insurance exchanges based on a wide range of factors. The figure shows that
prior to PPACA, no premium credits are provided to individuals under 400% FPL, with the only federal subsidy
being the effect of the deduction of medical expenses in excess of the 7.5% AGI threshold (as illustrated by the
post-tax premium). PPACA provides premium credits up to 400% of FPL, but increases the excess medical
expense deduction threshold to 10.0% of AGI. PPACA premium credits will not become available until 2014.
The figure illustrates the effect of PPACA premium credits as if they were in effect today.
Illustrated Potential Effects of Age-Banding and Area Cost
Adjustments on “Affordability”
Table 4 shows illustrative KFF plan premiums in the exchange based on 2009 plan costs. The
examples shown here reflect the possible effects of age-banding of premiums and geographic cost
variation on health insurance premium affordability. In the examples shown, KFF illustrative
premiums in higher-cost areas are set at 20% above those in medium-cost areas, and premiums in
lower-cost areas are set 20% below. Under KFF’s age-banding, premiums for 30-year-olds are
only slightly above those of 20-year-olds. At age 40, premiums are one-third higher than at age
20; at age 50, just over twice; and at age 60, three times as high (consistent with the age-banding
limits under the reconciliation bill). KFF estimates single+1 premiums as simply twice those of
single coverage. Premiums for a family of four follow a similar age progression, except at age 50,
Congressional Research Service
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Health Insurance Premium Credits Under PPACA (P.L. 111-148)

premiums are only 84% higher than for 20-year-olds, and for 60-year-olds, 1.6 times higher.21
Further discussion will focus on single individuals and couples (married and unmarried) under
single premium and single+1 premium plans.
Table 4. PPACA: Illustrative Health Insurance Premiums, by Enrollee Age,
Geographic Cost, and Plan Type, 2009
Single premium
Single+1 premium
Family of four premium
Lower-
Medium-
Higher-
Lower-
Medium-
Higher-
Lower-
Medium-
Higher-
cost
cost
cost
cost
cost
cost
cost
cost
cost
Age
area
area
area
area
area
area
area
area
area
20 $2,110 $2,637 $3,165 $4,220 $5,274 $6,330 $5,687 $7,108 $8,530
30 $2,141 $2,676 $3,211 $4,282 $5,352 $6,422 $6,290 $7,862 $9,435
40 $2,800 $3,500 $4,200 $5,600 $7,000 $8,400 $7,548 $9,435 $11,321
50 $4,342 $5,428 $6,513 $8,684 $10,856 $13,026 $10,489 $13,112 $15,734
60 $6,329 $7,911 $9,494
$12,658 $15,822 $18,988 $14,960 $18,700 $22,440
Source: Prepared by CRS from Kaiser Family Foundation (KFF) illustrative health insurance premiums, for plans
with an estimated actuarial value of 70%, in 2009. Available online at http://healthreform.kff.org/
SubsidyCalculator.aspx, accessed on March 23, 2010.
Note: Estimates are for illustration only. Illustrated premiums reflect a 3:1 age-banding, with premiums of oldest
enrollees being three times those of youngest enrollees. Illustrated premiums in lower-cost areas are 20% lower
than in medium-cost areas, and in higher-cost areas, 20% higher. Actual premiums will likely vary among health
insurance exchanges based on a wide range of factors. Health insurance premiums will most likely be higher than
those shown when PPACA premium credits first become available in 2014.
Table 5. PPACA: Illustrative Health Insurance Premiums as a Percentage of Income
at an Income Level of 400% of the Federal Poverty Level,
by Enrollee Age, Geographic Cost, and Plan Type, 2009
Single premiuma
Single+1 premiumb
Family of four premiumc
Lower-
Medium-
Higher-
Lower-
Medium-
Higher-
Lower-
Medium-
Higher-
cost
cost
cost
cost
cost
cost
cost
cost
cost
Age
area
area
area
area
area
area
area
area
area
20 4.9% 6.1% 7.3% 7.2% 9.0% 10.9%
6.4% 8.1%
9.7%
30 4.9% 6.2% 7.4% 7.3% 9.2% 11.0%
7.1% 8.9%
10.7%
40 6.5% 8.1% 9.7% 9.6% 12.0% 14.4% 8.6%
10.7% 12.8%
50
10.0% 12.5% 15.0% 14.9% 18.6% 22.4% 11.9% 14.9% 17.8%
60
14.6% 18.3% 21.9% 21.7% 27.1% 32.6% 17.0% 21.2% 25.4%
Source: Prepared by CRS based on Kaiser Family Foundation (KFF) illustrative health insurance premiums, for
plans with an estimated actuarial value of 70%, in 2009. Available online at http://healthreform.kff.org/
SubsidyCalculator.aspx, accessed on March 23, 2010.

21 Presumably the smaller difference for family coverage by age, compared to single coverage, is due to an assumption
that by age 50, couples’ children tend to be older than those of younger couples, and older children generally have
lower health care utilization rates than younger children.
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Health Insurance Premium Credits Under PPACA (P.L. 111-148)

Note: Estimates are for illustration only, based on illustrated KFF health insurance premiums. Actual premiums
will likely vary among health insurance exchanges based on a wide range of factors. Values in bold italic are
above PPACA’s premium cap of 9.5% of income, extending up to 400% of FPL. Health insurance premiums as a
percent of income will most likely be higher than those shown when PPACA premium credits first become
available in 2014.
a. Premium as a percentage of income based on 400% of FPL for a single person ($43,320).
b. Premium as a percentage of income based on 400% of FPL for a 2-person family ($58,280).
c. Premium as a percentage of income based on 400% of FPL for a 4-person family ($88,200).
Table 5 shows the illustrative KFF plan premiums as a percentage of income at 400% of the FPL,
the point at which an individual or family no longer is eligible for premium subsidies under
PPACA. The table shows, for example, that 20- to 40-year-olds in the illustrated single plans have
premiums ranging from 4.9% of income (for the youngest group in lower-cost areas), up to 8.1%
for 40-year-olds in medium-cost areas—all below the PPACA’s implicit 9.5% affordability limit.
For 40-year-olds in higher-cost areas, illustrated premiums (9.7% of income) are slightly above
the bill’s affordability limit. For 50 and 60-year-olds, the illustrated premiums are above the 9.5%
affordability limit in all markets, ranging from 10.0% to 15.0% of income for 50-year-olds, and
14.6% to 21.9% of income for 60-year-olds.22
Figure 3 through Figure 5 depict pre- and post-tax premiums as a percentage of income under
illustrated self-coverage plans, by enrollee age, in lower-cost, medium-cost, and higher-cost
areas, respectively. Figure 3, for example, shows that under the illustrated premiums for a lower-
cost area all enrollees with incomes below 400% of poverty would have pre-tax premiums
amounting to less than 9.5% income—PPACA’s affordability cap—due to the bill’s premium
credits. For some (those age 30 and 40), illustrated premiums as a percentage of income naturally
decline before reaching the 400% FPL income-eligibility limit, as their premiums become
relatively more affordable under PPACA’s specified “affordability levels” as their income
increases. Others in the illustration (age 40 and 50) face higher exchange premiums and benefit
from the 9.5% income affordability cap all the way up to the 400% income-eligibility limit. At
400% of poverty, illustrated premiums for the 50-year-olds increase slightly, to 10.0% of income,
and for 60-year-olds, more substantially, to 14.6% of income.
In medium-cost areas, illustrated in Figure 4, pre-tax premiums for 50-year-olds amount to
12.5% of income, and for 60-year-olds, 18.3% at 400% of the FPL. In higher-cost areas,
illustrated in Figure 5, pre-tax premiums at 400% of poverty amount to 15% of income for 50-
year-olds, and 21.9% of income for 60-year-olds. For 60-year-olds, pre-tax premiums fall back to
9.5% of income once income reaches $99,937 or 923% FPL.
Figure 6 through Figure 8 depict pre- and post-tax premiums as a percentage of income under
illustrated plans, for a married couple with no children having “single+1” insurance coverage, by
enrollee age, in three geographic cost areas. The illustrated premiums for “single+1” coverage are
twice those for single coverage. Table 5 shows that for a married couple with a single+1 policy, at
400% of poverty, illustrated premiums in lower-cost areas for 50- and 60-year-olds are well above
the 9.5% “affordability threshold” with illustrated premiums at 14.9% of income for 50-year-olds,
and 21.7% for 60-year-olds. In medium-cost areas, illustrated premiums at 400% of poverty for a
40-year-old (12.0% of income) are above the 9.5% “affordability threshold,” and range up to

22 One study found that annual premiums in the nongroup market for 60- to 64-year-olds averaged $5,755 in 2009,
which would be 13.3% of income for an individual at 400% FPL. See Table 2, “Individual Health Insurance,” AHIP
Center for Policy and Research, October 2009.
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Health Insurance Premium Credits Under PPACA (P.L. 111-148)

27.1% of income for 60-year-olds. For married-couples in higher-cost areas, illustrated premiums
at 400% of poverty are higher than the 9.5% “affordability threshold” at all ages, ranging from
10.9% of income for a 20-year-old, up to 32.6% for 60-year-old enrollees.
It should be noted that the figures that follow reflect estimates under PPACA only, unlike Figure
2, which illustrates pre- and post-tax premiums both before and after PPACA.
Figure 3. PPACA: Pre- and Post-Tax Out-of-Pocket Premiums as a Percentage of
Adjusted Gross Income, by Age—Single Policy in a Lower-Cost Area
Based on Illustrated Annual Insurance Plan Costs—
Age 30: $2,141, Age 40: $2,800, Age 50: $4,342, Age 60: $6,329
Pr emium as a Pe rcent of Income
20%
19%
Pr e-Tax
18%
Post-Tax 10% Med. Exp. Deduct. Thre sh.
17%
16%
15%
14%
13%
12%
11%
10%
9%
8%
7%
Age 60
6%
5%
Age 50
4%
3%
Age 40
2%
Age 30
1%
0%
$0
00
00
00
00
,000
000
000
000
000
000
000
000
000
000
000
000
000
000
000
000
$5
5,
0,
5,0
5,
0,
5,0
5,
0,
5,0
5,
0,
5,
5,
00,0
$10,
$1
$2
$2
$30,
$3
$4
$4
$50,
$5
$6
$6
$70,
$7
$8
$8
$90,
$9
$1
Adjusted Gross Income

Source: Prepared by CRS based on Kaiser Family Foundation (KFF) illustrative health insurance premiums, for
plans with an estimated actuarial value of 70%, in 2009.
Notes: Estimates are for illustration only, based on illustrated KFF health insurance premiums. Actual premiums
would likely vary among health insurance exchanges based on a wide range of factors. Persons and families with
incomes of 400% of poverty and above would be ineligible for premium subsidy support, and their pre-tax
premiums would be the same they faced prior to PPACA (absent other effects the law might have on reducing
the price of health insurance). Net post-tax premiums are based on PPACA’s excess medical expense deduction
threshold of 10.0%. PPACA premium credits will not become available until 2014. The figure illustrates the effect
of PPACA premium credits as if they were in effect today.

Congressional Research Service
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Health Insurance Premium Credits Under PPACA (P.L. 111-148)

Figure 4. PPACA: Pre- and Post-Tax Out-of-Pocket Premiums as a Percentage of
Adjusted Gross Income, by Age—Single Policy in a Medium-Cost Area
Based on Illustrated Annual Insurance Plan Costs—
Age 30: $2,676, Age 40: $3,500, Age 50: $5,428, Age 60: $7,911
Pre mium as a Per cent of Income
20%
19%
Pre -Tax
18%
Pos t-Tax 10% M ed. Exp. De duct. Thre sh.
17%
16%
15%
14%
13%
12%
11%
10%
9%
8%
Age 60
7%
6%
Age 50
5%
4%
Age 40
3%
Age 30
2%
1%
0%
$0
00
,000
000
000
000
000
000
000
000
000
000
000
000
000
000
000
000
000
000
,000
$5
5,
0,
5,0
5,
0,
5,
5,
0,
5,
0,
5,
0,
5,
0,
5,
00
$10,
$1
$2
$2
$30,
$3
$4
$4
$50,
$5
$6
$6
$7
$7
$8
$8
$9
$9
$1
Adjusted Gross Income

Source: Prepared by CRS based on Kaiser Family Foundation (KFF) illustrative health insurance premiums, for
plans with an estimated actuarial value of 70%, in 2009.
Notes: Estimates are for illustration only, based on illustrated KFF health insurance premiums. Actual premiums
would likely vary among health insurance exchanges based on a wide range of factors. Persons and families with
incomes of 400% of poverty and above would be ineligible for premium subsidy support, and their pre-tax
premiums would be the same they faced prior to PPACA (absent other effects the law might have on reducing
the price of health insurance). Net post-tax premiums are based on PPACA’s excess medical expense deduction
threshold of 10.0%. PPACA premium credits will not become available until 2014. The figure illustrates the effect
of PPACA premium credits as if they were in effect today.



Congressional Research Service
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Health Insurance Premium Credits Under PPACA (P.L. 111-148)

Figure 5. PPACA: Pre- and Post-Tax Out-of-Pocket Premiums as a Percentage of
Adjusted Gross Income, by Age—Single Policy in a Higher-Cost Area
Based on Illustrative Annual Insurance Plan Costs—
Age 30: $3,211, Age 40: $4,200, Age 50: $6,513, Age 60: $9,494
Prem ium as a Percent of Incom e
24%
Pre -Tax
23%
Pos t-Tax 10% M ed. Exp. De duct. Thres h.
22%
21%
20%
19%
18%
17%
16%
15%
14%
13%
12%
11%
10%
Age 60
9%
8%
7%
Age 50
6%
5%
Age 40
4%
Age 30
3%
2%
1%
0%
$0
00
00
00
00
,000
000
000
000
000
000
000
000
000
000
000
000
000
000
000
$5
5,
0,
5,0
5,
0,
5,0
5,
0,
5,0
5,
0,
5,0
5,
00,000
$10,
$1
$2
$2
$30,
$3
$4
$4
$50,
$5
$6
$6
$70,
$7
$8
$8
$90,
$9
$1
Adjusted Gross Income

Source: Prepared by CRS based on Kaiser Family Foundation (KFF) illustrative health insurance premiums, for
plans with an estimated actuarial value of 70%, in 2009.
Notes: Estimates are for illustration only, based on illustrated KFF health insurance premiums. Actual premiums
would likely vary among health insurance exchanges based on a wide range of factors. Persons and families with
incomes of 400% of poverty and above would be ineligible for premium subsidy support, and their pre-tax
premiums would be the same they faced prior to PPACA (absent other effects the law might have on reducing
the price of health insurance). Net post-tax premiums are based on PPACA’s excess medical expense deduction
threshold of 10.0%. PPACA premium credits will not become available until 2014. The figure illustrates the effect
of PPACA premium credits as if they were in effect today.



Congressional Research Service
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Health Insurance Premium Credits Under PPACA (P.L. 111-148)

Figure 6. PPACA: Pre- and Post-Tax Out-of-Pocket Premiums as a Percentage of
Adjusted Gross Income, by Age—
Married Couple with no Children, Single+1 Policy in a Lower-Cost Area
Based on Illustrated Annual Insurance Plan Costs—
Age 30: $4,282, Age 40: $5,600, Age 50: $8,684, Age 60: $12,658
Prem ium as a Percent of Incom e
24%
Pr e-Tax
23%
Post-Tax 10% Me d. Exp. Deduct. Thre sh.
22%
21%
20%
19%
18%
17%
16%
15%
14%
13%
12%
Age 60
11%
10%
9%
Age 50
8%
7%
6%
Age 40
5%
Age 30
4%
3%
2%
1%
0%
$0
0
0
0
0
0
000
000
00
,000
000
,000
000
,000
000
,000
000
$5,
5,00
5,00
0,000 5,00
0,000 5,00
0,000 5,00
0,0
$10,
$1
$20
$25,000$30,
$3
$40
$45,
$5
$5
$60
$65,
$7
$7
$80
$85,
$9
$9
$10
Adjuste d Gross Income

Source: Prepared by CRS based on Kaiser Family Foundation (KFF) illustrative health insurance premiums, for
plans with an estimated actuarial value of 70%, in 2009.
Notes: Estimates are for illustration only, based on illustrated KFF health insurance premiums. Actual premiums
would likely vary among health insurance exchanges based on a wide range of factors. Persons and families with
incomes of 400% of poverty and above would be ineligible for premium subsidy support, and their pre-tax
premiums would be the same they faced prior to PPACA (absent other effects the law might have on reducing
the price of health insurance). Net post-tax premiums are based on PPACA’s excess medical expense deduction
threshold of 10.0%. PPACA premium credits will not become available until 2014. The figure illustrates the effect
of PPACA premium credits as if they were in effect today.



Congressional Research Service
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Health Insurance Premium Credits Under PPACA (P.L. 111-148)

Figure 7. PPACA: Pre- and Post-Tax Out-of-Pocket Premiums as a Percentage of
Adjusted Gross Income, by Age—
Married Couple with no Children, Single+1 Policy in a Medium-Cost Area
Based on Illustrated Annual Insurance Plan Costs—
Age 30: $5,352, Age 40: $7,000, Age 50: $10,856, Age 60: $15,822
Pr em ium as a Pe rce nt of Incom e
28%
27%
26%
25%
24%
Pre -Tax
23%
Pos t-Tax 10% M ed. Exp. De duct. Thre sh.
22%
21%
20%
19%
18%
17%
16%
Age 60
15%
14%
13%
12%
11%
Age 50
10%
9%
8%
7%
Age 40
6%
Age 30
5%
4%
3%
2%
1%
0%
$0
000
00
,000
,000
,000
000
,000
,000
,000
000
,000
,000
,000
000
,000
,000
,000
000
,000
,000
$5,
0,0
$10
$15
$20
$25,
$30
$35
$40
$45,
$50
$55
$60
$65,
$70
$75
$80
$85,
$90
$95
$10
Adjuste d Gross Income

Source: Prepared by CRS based on Kaiser Family Foundation (KFF) illustrative health insurance premiums, for
plans with an estimated actuarial value of 70%, in 2009.
Notes: Estimates are for illustration only, based on illustrated KFF health insurance premiums. Actual premiums
would likely vary among health insurance exchanges based on a wide range of factors. Persons and families with
incomes of 400% of poverty and above would be ineligible for premium subsidy support, and their pre-tax
premiums would be the same they faced prior to PPACA (absent other effects the law might have on reducing
the price of health insurance). Net post-tax premiums are based on PPACA’s excess medical expense deduction
threshold of 10.0%. PPACA premium credits will not become available until 2014. The figure illustrates the effect
of PPACA premium credits as if they were in effect today.



Congressional Research Service
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Health Insurance Premium Credits Under PPACA (P.L. 111-148)

Figure 8. PPACA: Pre- and Post-Tax Out-of-Pocket Premiums as a Percentage of
Adjusted Gross Income, by Age—
Married Couple with no Children, Single+1 Policy in a Higher-Cost Area
Based on Illustrated Annual Insurance Plan Costs—
Age 30: $6,422, Age 40: $8,400, Age 50: $13,026, Age 60: $18,988
Premium as a Percent of Income
34%
33%
32%
31%
30%
29%
28%
27%
26%
25%
Pre-Tax
24%
23%
Pos t-Tax 10% M ed. Exp. De duct. Thres h.
22%
21%
20%
19%
Age 60
18%
17%
16%
15%
14%
13%
Age 50
12%
11%
10%
9%
8%
Age 40
7%
Age 30
6%
5%
4%
3%
2%
1%
0%
$0
0
0
0
0
0
000
000
00
,000
000
000
,000
000
,000
000
,000
000
$5,
5,00
5,00
0,000 5,00
0,000 5,00
0,000 5,00
0,0
$10,
$1
$20
$25,
$30,
$3
$40
$45,
$5
$5
$60
$65,
$7
$7
$80
$85,
$9
$9
$10
Adjuste d Gross Income

Source: Prepared by CRS based on Kaiser Family Foundation (KFF) illustrative health insurance premiums, for
plans with an estimated actuarial value of 70%, in 2009.
Notes: Estimates are for illustration only, based on illustrated KFF health insurance premiums. Actual premiums
would likely vary among health insurance exchanges based on a wide range of factors. Persons and families with
incomes of 400% of poverty and above would be ineligible for premium subsidy support, and their pre-tax
premiums would be the same they faced prior to PPACA (absent other effects the law might have on reducing
the price of health insurance). Net post-tax premiums are based on PPACA’s excess medical expense deduction
threshold of 10.0%. PPACA premium credits will not become available until 2014. The figure illustrates the effect
of PPACA premium credits as if they were in effect today.
Relative “Affordability” of Premiums for Married and
Unmarried Couples
Some have described the structure of the premium support provided under PPACA’s health
insurance exchanges, with respect to the phase out of premium support relative to enrollees’
income, as resulting in a “marriage penalty.”23 Under PPACA’s health insurance exchanges, a
couple may receive a lesser subsidy, and consequently incur higher out-of-pocket insurance

23 Martin Vaughan, “Married Couples Pay More than Unmarried Under Health Bill,” Wall Street Journal, January 6,
2010, online edition. Available online at http://online.wsj.com/article/SB126281943134818675.html.
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premiums, if they are married, as opposed to unmarried, all other things being equal, thus
resulting in a “marriage penalty.” PPACA phases out premium support on the basis of income
relative to the Federal Poverty Level. Premium support in the exchanges for a married couple
would be based on their combined income relative to the FPL for two persons ($14,570), and if
unmarried, based on their individual incomes relative to the FPL for one person ($10,830).
Because the FPL for the married couple is not twice that of a single person, but only 35% higher
(i.e., $14,570/$10,830), premium support phases out at a faster rate for the married couple than
for the unmarried couple, with equal incomes and combined (pre-subsidy) insurance plan costs. If
married, the couple would be ineligible for premium support in the exchange once its income
reaches $58,280 (i.e., 400% of the FPL), but if unmarried, premium support could potentially be
retained until each individual’s income reaches 400% for a single person ($43,320), or potentially
until their combined income reaches $86,640 (which would be 595% FPL for a married couple).24
The FPL, as originally constructed, recognized that while two persons cannot live as cheaply as
one, they can live more cheaply living together, than living apart. In other words, there are
economic gains that result from “economies of scale” from living jointly, rather than apart.
“Marriage penalties” can result to the extent that FPLs assign lower cost to each additional family
member, regardless of whether that family member is a spouse, children, etc.25 In addition,
“marriage penalties” may result more directly from the definition of the economic unit to which
the FPL, or other income criteria, is applied.26 Following are two examples of other federal
programs that illustrate how the definition of the economic unit can affect couples’ eligibility.
Many federal programs use the FPL as the basis for determining eligibility, setting benefit levels,
and phasing out benefits. For example, the Supplemental Nutrition Assistance Program (SNAP)
(formerly named the Food Stamp program) counts household income for purposes of determining
household income eligibility. Households with gross income above 100% of poverty are
ineligible for the program, as are households with net income (after certain disregards) above
130% of poverty. With respect to SNAP, a married couple is treated the same as an unmarried
couple, if living together in the same household. So, in this context, there is no inherent “marriage
penalty” in SNAP, even though it uses the FPL. However, there is a potential “penalty” for two
persons living apart, where one or both are receiving SNAP benefits, if they choose to live
together, as their combined household income might make them ineligible for SNAP benefits.
However, by living together, rather than separately, two individuals, whether married or
unmarried, could benefit from implied economies of scale.
In contrast, the Earned Income Tax Credit (EITC) may be said to have a “marriage penalty,” even
though it does not use the FPL to scale benefits. This is because two unrelated unmarried
individuals are treated as individuals under the tax code (single filers), whereas if married their
incomes are combined and they are treated as married joint filers. With respect to the EITC, one
or both individuals could be eligible for the EITC based on their individual earnings, if

24 This assumes that the two members of the unmarried couple have individual incomes that are equal. For the married
couple, it makes no difference how their income is split.
25 The federal poverty guideline for an individual is $10,830, and $3,740 for each additional person.
26 Because benefits under the exchanges will be scaled based on income relative to poverty, other types of individuals
might find differences in their premiums depending on their living arrangements, other than just whether they’re
married or not. For example, the total premiums for a single parent with two older children (e.g., age 18 to 25) might
differ depending on whether the children enroll separately, based on their individual income, or under the umbrella of a
family policy, based on the parent’s and children’s combined income.
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unmarried, but become ineligible, or receive a lesser benefit, if they were married, as the EITC
would then be based on their combined earnings.
Figure 9 and Figure 10 compare premiums under PPACA as a percentage of income for a
married couple relative to an unmarried couple, in a medium-cost area, at age 30 and age 50,
respectively. The figures show that premiums as a percentage of income would be higher for a
married couple than if the couple were unmarried over the income range for which premium
support would be provided, even though their incomes and insurance premiums are the same.27
In the illustrated example at age 30 (Figure 9), the difference in premiums between married and
unmarried couples, and as a percentage of income, is much greater, as the married couple’s
premium subsidy phases out at a faster rate based on its income than it does for the unmarried
couple based on its combined income. In the illustration, the married couple no longer receives
premium support once its income exceeds $56,337, as at that point their premium as a percentage
of income naturally falls below PPACA’s 9.5% “affordability cap,” and they are deemed to no
longer need premium subsidy support. For the unmarried couple at the same combined income
level, assuming their income is equally split, they are individually eligible for premium support of
$326 each, based on their individual income ($28,168), and thereby would receive combined
premium support of $652. In the example, the unmarried couple’s combined premiums amount to
8.3% of their combined income, compared to 9.5% for their married counterpart.
The “marriage penalty” effect increases to the extent premiums exceed the 9.5% “affordability
cap” at the point at which a married couple no longer qualifies for premium support (i.e., 400% of
poverty, or $58,280). For example, for the 50-year-old couple depicted in Figure 10, at an income
level just below $58,280 (i.e., 400% of poverty for the married couple) their premium as a
percentage of income is at the 9.5% cap if they are married and 8.6% if they are unmarried.
However, the married couple loses premium subsidy support once its income reaches $58,280,
and its premium nearly doubles, amounting to 18.6% of its income. In contrast, the unmarried
couple continues to be eligible for premium support, at the same combined income level and plan
cost as their married counterpart; their combined premiums amount to 8.6% of their combined
income—less than half that of the married couple. In the example, both members of the
unmarried couple would continue to receive premium support until their individual income
reaches $43,320 (400% of the FPL for a single individual), which amounts to a combined income
of $86,640. At that, and higher, combined income levels, the unmarried and married couples’
premiums are identical, since neither would then qualify for premium credits.

27 For the 30-year-old couple, if they’re married, $5,352 for a single+1 policy, and if they’re unmarried, each with a
$2,676 single policy, amounting to $5,352 combined. For the 50-year-old couple, if they’re married, $10,586 for a
single+1 policy, and if they’re unmarried, each with a $5,428 single policy, amounting to $10,586 combined. The
figures assume the two members of the unmarried couple have equal income. Results would differ if their income were
split unequally. For the married couple, it makes no difference as to how their income is split.
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Figure 9. PPACA: Pre- and Post-Tax Out-of-Pocket Premiums as a Percentage of
Adjusted Gross Income, Comparison of Two Couples Age 30
(Married and Unmarried) in a Medium-Cost Area
Based on Illustrative Annual Insurance Plan Costs—
Married Single+1: $5,352, Unmarried Couple: $5,352 ($2,676 Each)
Pre mium as a Per cent of Income
20%
19%
18%
Pr e-Tax
Post-Tax 10% Med. Exp. Deduct. Thre sh.
17%
16%
15%
14%
13%
12%
11%
10%
Marrie d
Couple
9%
8%
7%
Unmarrie d Couple
6%
5%
4%
3%
2%
1%
0%
0
$0
00
000
000
000
000
000
000
000
000
000
000
000
000
00
000
000
000
00
000
00
$5,0
0,
5,
0,
5,
0,
5,
0,
5,
0,
5,
0,
5,
0,0
0,
5,
0,0
00,
$1
$1
$2
$2
$3
$3
$4
$4
$5
$5
$6
$6
$7
$75,
$8
$8
$9
$95,
$1
Adjusted Gross Income (AGI)
and Combined AGI for Unmarried Couples

Source: Prepared by CRS based on Kaiser Family Foundation (KFF) illustrative health insurance premiums, for
plans with an estimated actuarial value of 70%, in 2009.
Notes: Estimates are for illustration only, based on illustrated KFF health insurance premiums. Actual premiums
would likely vary among health insurance exchanges based on a wide range of factors. Persons and families with
incomes of 400% of poverty and above would be ineligible for premium subsidy support, and their pre-tax
premiums would be the same they faced prior to PPACA (absent other effects the law might have on reducing
the price of health insurance). Net post-tax premiums are based on PPACA’s excess medical expense deduction
threshold of 10.0%. Under this example, gross premiums are below the 10% excess medical expense deduction
threshold at all income levels. PPACA premium credits will not become available until 2014. The figure illustrates
the effect of PPACA premium credits as if they were in effect today.

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Figure 10. PPACA: Pre- and Post-Tax Out-of-Pocket Premiums as a Percentage of
Adjusted Gross Income, Comparison of Two Couples Age 50
(Married and Unmarried) in a Medium-Cost Area
Based on Illustrative Annual Insurance Plan Costs—
Married Single+1: $10,856, Unmarried Couple: $10,856 ($5,428 Each)
Pre mium as a Per cent of Income
20%
19%
18%
Pre-Tax
Post-Tax 10% M ed. Exp. De duct. Thres h.
17%
16%
15%
14%
13%
12%
11%
10%
M arried
Couple
9%
8%
7%
Unmarrie d Couple
6%
5%
4%
3%
2%
1%
0%
0
$0
00
000
000
000
000
000
000
000
000
000
000
000
000
00
000
000
000
00
000
00
$5,0
0,
5,
0,
5,
0,
5,
0,
5,
0,
5,
0,
5,
0,0
0,
5,
0,0
00,
$1
$1
$2
$2
$3
$3
$4
$4
$5
$5
$6
$6
$7
$75,
$8
$8
$9
$95,
$1
Adjusted Gross Income (AGI)
and Combined AGI for Unmarried Couple

Source: Prepared CRS based on Kaiser Family Foundation (KFF) illustrative health insurance premiums, for
plans with an estimated actuarial value of 70%, in 2009.
Notes: Estimates are for illustration only, based on illustrated KFF health insurance premiums. Actual premiums
would likely vary among health insurance exchanges based on a wide range of factors. Persons and families with
incomes of 400% of poverty and above would be ineligible for premium subsidy support, and their pre-tax
premiums would be the same they faced prior to PPACA (absent other effects the law might have on reducing
the price of health insurance). Net post-tax premiums are on based PPACA’s excess medical expense deduction
threshold of 10.0%. PPACA premium credits will not become available until 2014. The figure illustrates the effect
of PPACA premium credits as if they were in effect today.
Conclusion
Relative affordability of health insurance premiums individuals and families might face within
health insurance exchanges will likely vary from exchange to exchange based on a host of factors.
The examples shown in this report are for illustration only, depicting a range by which premiums
might reasonably be expected to vary.
PPACA will directly improve health insurance affordability for individuals and families with
income up to 400% of poverty, by ensuring that no individual or family would pay more than
9.5% of their income for a health insurance plan with an actuarial value of 70% (not including the
impact of cost-sharing subsidies). Additionally, PPACA will extend Medicaid coverage to 133%
of poverty, which will permit individuals to enroll with relatively little or no premiums and cost-
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sharing. Persons and families with incomes of 400% of poverty and above will be ineligible for
premium subsidy support, and their premiums will be the same they would have faced before
PPACA (absent other effects the law might have on reducing the price of health insurance).
Individuals and families who are younger and/or who live in lower-cost areas, as opposed to
higher-cost areas, may be able to find plans offered in the exchange costing 9.5% or less of
income at some income ranges below 400% of poverty. Others might face exchange premiums
that well exceed 9.5% of income, but due to PPACA’s premium subsidy support their premiums
will be capped until their income reaches 400% of poverty. At that point, enrollees might incur
abrupt, and in some cases substantial, increases in their health insurance premiums. Additionally,
PPACA raises the excess medical expense deduction threshold from 7.5% to 10.0% of AGI.
Consequently, some individuals and families may find their post-tax insurance premiums to be
higher after PPACA than before, all other things being equal.
PPACA phases out premium support subsidies based on individuals’ or families’ income relative
to poverty. Because the FPL for the married couple is not twice that of a single person, but only
35% higher (i.e., $14,570/$10,830), premium support under PPACA phases out at a faster rate
relative to income for a married couple than it does for a single person, even though the phase-out
rate relative to the FPL is the same. The structure of the phase-out results in what some might
describe as a “marriage penalty.” One or both individuals in a couple who are unmarried might be
eligible for premium support subsidies based on their individual incomes, but if they married they
might not, based on their combined income; if found eligible, the premium subsidy they might
receive as a married couple could be less than the combined premium subsidies they might
receive as an unmarried couple.



Author Contact Information

Chris L. Peterson
Thomas Gabe
Specialist in Health Care Financing
Specialist in Social Policy
cpeterson@crs.loc.gov, 7-4681
tgabe@crs.loc.gov, 7-7357


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