Health Insurance Premium Credits in the
Patient Protection and Affordable Care Act
(ACA)

Bernadette Fernandez
Specialist in Health Care Financing
Thomas Gabe
Specialist in Social Policy
July 9, 2013
Congressional Research Service
7-5700
www.crs.gov
R41137
CRS Report for Congress
Pr
epared for Members and Committees of Congress

Premium Credits in the Patient Protection and Affordable Care Act (ACA)

Summary
ACA requires health insurance exchanges to be established in every state by January 1, 2014,
either by the state itself or by the Secretary of Health and Human Services (HHS). Exchanges will
not be insurers, but will provide eligible individuals and small businesses with access to private
health insurance plans. Generally, the plans offered through the exchanges will provide
comprehensive coverage and meet all ACA market reforms, as applicable. One of the
requirements that most exchange plans must meet is to provide a certain level of coverage
generosity based on actuarial value. Each level of coverage generosity is designated according to
a precious metal and corresponds to a specific actuarial value: Bronze (actuarial value of 60%),
Silver (70%), Gold (80%), and Platinum (90%).
To make exchange coverage more affordable, certain individuals will receive premium assistance
in the form of federal tax credits. The premium credit will be an advanceable, refundable tax
credit, meaning taxpayers need not wait until the end of the tax year in order to benefit from the
credit, and may claim the full credit amount even if they have little or no federal income tax
liability. Although the premium credits will not be available until 2014, the examples provided in
this report estimate premium credit amounts by income levels and age, if the credits were
available in 2012.
Under ACA, the amount received in premium credits is based on income tax returns. These
amounts are reconciled in the next year and can result in overpayment of premium credits if
income increases, which must be repaid to the federal government. ACA limited the amount of
required repayments. Since the enactment of ACA, these limits have been amended twice, under
P.L. 111-309 and P.L. 112-9).
In addition to premium credits, ACA authorized new cost-sharing subsidies. Certain premium
credit recipients will also be eligible for reductions in their annual cost-sharing limits. Moreover,
certain low-income individuals will receive additional subsidies in the form of reduced cost-
sharing requirements (e.g., lower copayments).
Relative affordability of health insurance premiums that 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 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 provided in the Appendix of 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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Premium Credits in the Patient Protection and Affordable Care Act (ACA)

Contents
Background ...................................................................................................................................... 1
Individual Eligibility for Premium Credits ...................................................................................... 3
Part of a Tax-Filing Unit ............................................................................................................ 3
Enrolled in an Individual Exchange .......................................................................................... 4
Household Income Is 100%-400% of Federal Poverty Level ................................................... 4
Not Eligible for “Minimum Essential Coverage” ...................................................................... 5
Exceptions to Minimum Essential Coverage Eligibility ..................................................... 5
Employer Contribution Toward Coverage in SHOP Exchanges ......................................... 6
Medicaid .............................................................................................................................. 6
Potential Premium Contributions and Premium Credit Calculations .............................................. 6
Illustrative Examples: If Premium Credits Were Available in 2012 .......................................... 8
Examples of Premium Credits for Self-Only and Family Coverage ................................. 10
Reconciliation of Premium Credits ......................................................................................... 12
Cost-Sharing Subsidies .................................................................................................................. 13

Figures
Figure 1. Total Estimated Exchange Enrollment, 2022 ................................................................... 2
Figure 2. Maximum Percentage of Income, as Measured by FPL, to go towards Premium
Contributions ................................................................................................................................ 8
Figure A-1. ACA Compared to Pre-ACA Premiums: Pre- and Post-tax Out-of-Pocket
Premiums as a Percentage of Adjusted Gross Income ................................................................ 17
Figure A-2. ACA: Pre- and Post-Tax Out-of-Pocket Premiums as a Percentage of
Adjusted Gross Income, by Age—Single Policy in a Lower-Cost Area .................................... 20
Figure A-3. ACA: Pre- and Post-Tax Out-of-Pocket Premiums as a Percentage of
Adjusted Gross Income, by Age—Single Policy in a Medium-Cost Area ................................. 21
Figure A-4. ACA: Pre- and Post-Tax Out-of-Pocket Premiums as a Percentage of
Adjusted Gross Income, by Age—Single Policy in a Higher-Cost Area .................................... 22
Figure A-5. ACA: 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 .................................................................................................................. 23
Figure A-6. ACA: 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 ............................................................................................................... 24
Figure A-7. ACA: 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 ................................................................................................................. 25
Figure A-8. ACA: 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 ............................................................................................................... 28
Figure A-9. ACA: 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 ............................................................................................................... 29
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Premium Credits in the Patient Protection and Affordable Care Act (ACA)


Tables
Table 1. Income Levels at 400% FPL, 2012 .................................................................................... 5
Table 2. Annual Income by 2012 Federal Poverty Level and Family Size ...................................... 9
Table 3. Maximum Monthly Premium Contributions, by Family Size, if Premium Credits
were Available in 2012 ................................................................................................................. 9
Table 4. Illustrative Examples of Premium Contributions and Premium Credit Amounts,
if Premium Credits were Available in 2012, by Coverage Tier .................................................. 11
Table 5. Limits on Repayment of Excess Premium Credits Enacted by the Medicare and
Medicaid Extenders Act (P.L. 111-309) ...................................................................................... 12
Table 6. Limits on Repayment of Excess Premium Credits Enacted by the
Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy
Overpayment Act of 2011 (P.L. 112-9) ....................................................................................... 13
Table 7.Cost-Sharing Subsidies in ACA: Annual Cost-Sharing Limits and Average
Percentage of Allowed Expenses Paid by Plan, by Household Income Tier .............................. 14
Table A-1. ACA: Illustrative Health Insurance Premiums, by Enrollee Age, Geographic
Cost, and Plan Type, 2009 .......................................................................................................... 18
Table A-2. ACA: 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 .......................................................................................................... 18

Appendixes
Appendix. Health Insurance “Affordability” in the Exchange ...................................................... 15

Contacts
Author Contact Information........................................................................................................... 30
Acknowledgments ......................................................................................................................... 30

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Premium Credits in the Patient Protection and Affordable Care Act (ACA)

ew federal tax credits were authorized in the Patient Protection and Affordable Care Act
(ACA, P.L. 111-148, as amended), to help certain individuals pay for health insurance
Ncoverage, beginning in 2014.1 The tax credits will go towards covering premiums for
health insurance offered through exchanges2—marketplaces offering comprehensive, private
health plans. ACA also establishes subsidies to reduce cost-sharing expenses.
This report describes who will be eligible for the premium tax credits and cost-sharing subsidies,
and how the credit and subsidy amounts will be calculated. It also highlights selected issues
addressed in the final regulation on premium credits.3 The Appendix provides analysis of the
concept of “affordability” as applicable to the premium credits.4
Background
ACA requires health insurance exchanges to be established in every state by January 1, 2014,
either by the state itself or by the Secretary of Health and Human Services (HHS). The ACA
exchanges are not insurance companies; rather, they will coordinate the offer of private health
plans to qualified individuals and small businesses.5 Generally, the plans offered through the
exchanges will provide comprehensive coverage and meet all ACA market reforms, as
applicable.6 One of the requirements that most exchange plans must meet is to provide a certain
level of coverage generosity based on actuarial value.7 Each level of coverage generosity is
designated according to a precious metal and corresponds to a specific actuarial value: Bronze
(actuarial value of 60%), Silver (70%), Gold (80%), and Platinum (90%).
Given that exchanges are designed specifically to offer insurance options to individuals and small
businesses, exchanges must be structured to assist these two different types of “customers.”
States, therefore, must establish an exchange to serve individuals and another to serve small
businesses (“SHOP exchanges”). ACA gives states the option to merge both exchanges and
operate it under one structure.

1 §1401 of ACA; new §36B of the Internal Revenue Code of 1986 (IRC).
2 For a comprehensive discussion about the exchanges established under ACA, see CRS Report R42663, Health
Insurance Exchanges Under the Patient Protection and Affordable Care Act (ACA)
, by Bernadette Fernandez and
Annie L. Mach.
3 77 Federal Register 30377, May 23, 2012.
4 The affordability analysis was conducted during ACA enactment (March 2010), incorporating information available
at the time, in order to estimate premiums for exchange plans and depict the “affordability” of such plans for exchange
enrollees. Given the timing of this analysis, more recent cost data, as well as relevant regulations and guidance, are not
reflected in the analysis. Furthermore, assumptions regarding eligibility for premium credits have not been updated to
reflect the potential impact of the relevant Supreme Court decision. While the specific estimates do not incorporate
more recent information, the discussion of the relative affordability of exchange plans for enrollees based on age,
family size and composition, and geography is still relevant to understanding how these different factors interact and
may potentially affect enrollee costs.
5 Exchanges are designed to offer individual (nongroup) policies and small group plans. Before 2016, states will have
the option to define “small employers” either as those with (1) 100 or fewer employees, or (2) 50 or fewer employees.
Beginning in 2016, small employers will be defined as those with 100 or fewer employees. Beginning in 2017, large
groups may participate in exchanges, at state option.
6 See CRS Report R42069, Private Health Insurance Market Reforms in the Patient Protection and Affordable Care
Act (ACA)
, by Annie L. Mach and Bernadette Fernandez.
7 Actuarial value (AV) is a summary measure of a plan’s generosity, expressed as the percentage of medical expenses
estimated to be paid by the insurer for a standard population and set of allowed charges. In other words, the higher the
percentage, the lower the cost-sharing, on average. AV is not a measure of premiums or the benefits package. Two
plans with the same AV may have different premiums and different sets of covered benefits.
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Certain enrollees in the individual exchanges will be eligible for premium assistance in the form
of federal tax credits. Since individuals who are eligible for employer-provided insurance are not
eligible for the premium tax credits (with exceptions), such credits will not be provided through
the SHOP exchanges. The premium credit will be an advanceable, refundable tax credit,8 meaning
taxpayers need not wait until the end of the tax year in order to benefit from the credit, and may
claim the full credit amount even if they have little or no federal income tax liability.
The Congressional Budget Office estimates that 30 million individuals will be enrolled in
exchange coverage in 2022. Of those exchange enrollees, 20 million are projected to receive
premium credits.9 (see Figure 1).
Figure 1. Total Estimated Exchange Enrollment, 2022
Receiving
premium credits
Receiving
(regular
premium credits
eligibility)
(employer's
19 million, 63%
coverage "not
affordable")
1 million, 3%
Enrolled in SHOP
exchanges with
employer subsidy
No employer
(no premium
subsidy, no
credit)
premium credit
5 million, 17%
5 million, 17%

Source: U.S. Congressional Budget Office, Estimates for the Insurance Coverage Provisions of the Affordable Care Act
Updated for the Recent Supreme Court Decision
, July 2012, http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/
113xx/doc11379/amendreconprop.pdf; and CBO letter to Speaker Pelosi, March 2010, http://www.cbo.gov/sites/
default/files/cbofiles/ftpdocs/113xx/doc11379/amendreconprop.pdf.
Notes: Beginning in 2014, an employer’s coverage is not “affordable” when the employee’s contribution toward
the employer’s lowest-cost self-only premiums would exceed 9.5% of household income. Employees with an
employer offer of coverage may also be eligible for premium credits if the employer plan does not provide
minimum value (i.e., covers less than 60% of total allowed costs). However, the CBO projection of individuals
eligible for premium credits (besides meeting other eligibility criteria) because the employer plan would not
provide minimum value was well under 1 million, and therefore not included in CBO published estimates or in
this figure.
As part of ACA’s implementation process, the Treasury Department promulgated final regulation
on the premium credits on May 23, 2012.10 The final regulation confirmed certain eligibility and

8 For tax years beginning after December 31, 2013, 31 U.S.C. 1324 appropriates necessary amounts to the Treasury
Secretary for disbursements due under §36B of the IRC. This permanent appropriation means that the premium credits
do not require annual appropriations.
9 U.S. Congressional Budget Office, Estimates for the Insurance Coverage Provisions of the Affordable Care Act
Updated for the Recent Supreme Court Decision
, July 2012, available at http://www.cbo.gov/sites/default/files/
cbofiles/attachments/43472-07-24-2012-CoverageEstimates.pdf.
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other requirements, as specified in the statute; such requirements are discussed in applicable
sections of this report.
Individual Eligibility for Premium Credits
ACA specifies that premium credits will be available to “applicable taxpayers” in a “coverage
month” beginning in 2014.11
An applicable taxpayer is an individual who
• is part of a tax-filing unit;
• is enrolled in an exchange plan; and
• has household income at or above 100% of the federal poverty level (FPL), but
not more than 400% FPL.
A coverage month refers to a month in which the applicable taxpayer paid for coverage offered
through an exchange, not including any month in which the taxpayer was eligible for “minimum
essential coverage” with exceptions.
These eligibility criteria are discussed in greater detail below.
Part of a Tax-Filing Unit
Given that the premium assistance will be provided in the form of tax credits, they will be
administered through individual tax returns (although advance payments will go directly to
insurers).12 The credits can only be obtained by qualifying individuals who file federal tax
returns.
Couples married at the end of the taxable year will have to file joint returns to be eligible for the
credit.13 The final regulation includes special rules relating to the calculation and allocation of
credit amounts in response to changes in filing status (e.g., taxpayers who marry or divorce
during tax year). The final regulation acknowledges that certain circumstances may make filing
jointly a challenge (e.g., domestic abuse, abandonment, etc.); it states that the IRS will propose
additional rules to address these kinds of circumstances.

(...continued)
10 77 Federal Register 30377, May 23, 2012.
11 §1401(a) of ACA; new §36B(c)(1) of the IRC.
12 §1412(a)(3) of ACA.
13 On June 26, 2013, in United States v. Windsor, the U.S. Supreme Court struck down Section 3 of the Defense of
Marriage Act (DOMA), finding that it violated the equal protection guarantees of the Fifth Amendment. Section 3 had
required that, for purposes of federal enactments, marriage be defined as the union of one man and one woman. In
Windsor, the plaintiff and her late spouse were New York residents who had been legally married in Canada and whose
same-sex marriage was legally recognized in New York. Because of DOMA, the decedent’s estate could not claim the
unlimited marital deduction for purposes of the federal estate tax. The unlimited marital deduction is just one of many
federal tax-related benefits available to opposite sex married couples that, through DOMA, were denied to same-sex
couples whose marriages are legally recognized by the state in which the couple resides. Post-Windsor, these benefits
would appear to be available to such couples. It is not clear, however, whether the same is true for a couple who was
legally married in one state, but resides in a state that does not recognize the marriage. Given this uncertainty, it is not
clear how the Court’s decision will affect eligibility for and calculation of the premium tax credit. For additional
information about these issues, see CRS Legal Sidebar, “DOMA, Taxes, and Uniformity.”
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Enrolled in an Individual Exchange
Premium credits will only be available to individuals enrolled in a plan offered through an
individual exchange; premium credits are not available through the small business exchanges.
Individuals may enroll in a plan through their state’s exchange if they are (1) residing in a state in
which an exchange was established; (2) not incarcerated, except individuals in custody pending
the disposition of charges; and (3) lawful residents.14
Only lawful residents may obtain exchange coverage. Undocumented immigrants will be
prohibited from obtaining coverage through an exchange, even if they could pay the entire
premium without any subsidy.15 Because ACA prohibits undocumented immigrants from
obtaining exchange coverage, they will not be eligible for premium credits.
The final regulation clarifies the potential credit eligibility for family members of individuals who
themselves may not be eligible to enroll in an exchange due to incarceration or legal status (e.g.,
when there is a family of four and one of the family members is incarcerated and is the applicable
taxpayer).
Household Income Is 100%-400% of Federal Poverty Level
To be eligible for premium credits, individuals must have “household income” within statutorily
defined guidelines based on the federal poverty level (FPL).16 For purposes of premium credit
eligibility, household income is measured according to the definition for “modified adjusted gross
income” (MAGI).17 An individual whose MAGI is at or above 100% FPL up to and including
400% FPL may be eligible to receive premium credits,18 beginning in 2014.19
For illustrative purposes only, Table 1 displays the income levels at 400% FPL, the amount
beyond which individuals would not be eligible for premium credits, if the credits were available
in 2012 (using 2012 HHS poverty guidelines).

14 §1401(a) of ACA; new §36B of the IRC.
15 §1312(f)(3) of ACA. For more information about the treatment of noncitizens under ACA, see CRS Report R40889,
Noncitizen Eligibility and Verification Issues in the Health Care Reform Legislation.
16 The FPL used for public program eligibility varies by family size, and by whether the individual resides in the 48
contiguous states and the District of Columbia, Alaska, or Hawaii. See “Annual Update of the HHS Poverty
Guidelines,” 77 Federal Register 4034, January 26, 2012, http://aspe.hhs.gov/poverty/12fedreg.pdf.
17 In §2002(a) and §1401(a) of ACA, household income is defined to be MAGI, in compliance with the Internal
Revenue Code (IRC). With respect to the federal tax code, gross income is total income minus certain exclusions (e.g.,
public assistance payments, employer contributions to health insurance payments). From gross income, adjusted gross
income (AGI) is calculated to reflect a number of deductions, including trade and business deductions, losses from sale
of property, and alimony payments. MAGI is defined as AGI plus certain foreign earned income and tax-exempt
interest. However, for premium credit eligibility purposes, the definition of MAGI will include nontaxable Social
Security benefits (as amended by P.L. 112-56). For additional discussion about the use of MAGI with respect to ACA
premium credits, see CRS Report R41997, Definition of Income for Certain Medicaid Provisions and Premium Credits
in ACA
.
18 An exception is made for lawfully present aliens with income below 100% FPL, who are not eligible for Medicaid
for the first five years that they are lawfully present. These taxpayers will be treated as though their income is exactly
100% FPL for purposes of premium credit eligibility.
19 ACA includes provisions to expand Medicaid for individuals with income up to 133% FPL (with a 5% income
disregard). If a state chooses to undertake the ACA Medicaid expansion, eligibility for premium credits would begin
above that income level.
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Table 1. Income Levels at 400% FPL, 2012
Number of Persons
48 Contiguous States
Alaska Hawaii
in Family
and DC
1
$44,680 $55,880 $51,440
2
$60,520 $75,680 $69,640
3
$76,360 $95,480 $87,840
4 $92,200
$115,280
$106,040
5
$108,040 $135,080 $124,240
6
$123,880 $154,880 $142,440
7
$139,720 $174,680 $160,640
8
$155,560 $194,480 $178,840
Source: CRS computation based on “Annual Update of the HHS Poverty Guidelines,” 77 Federal Register 4034,
January 26, 2012, http://aspe.hhs.gov/poverty/12fedreg.pdf.
Notes: Under ACA, premium credits for eligible exchange coverage will not be available until 2014; the data in
this table are for illustrative purposes only. The data are the income levels beyond which individuals would not be
eligible for premium credits, if such credits were available in 2012. The poverty guidelines are updated annual y
for inflation. “DC” is the District of Columbia.
Not Eligible for “Minimum Essential Coverage”
To receive a premium credit, an individual may not be eligible for “minimum essential coverage,”
with exceptions (described below). ACA broadly defines minimum essential coverage to include
Medicare Part A, Medicaid, the State Children’s Health Insurance Program (CHIP), Tricare,
Tricare for Life, a health care program administered by the Department of Veterans Affairs, the
Peace Corps program, any government plan (local, state, federal) including the Federal
Employees Health Benefits Program (FEHBP), any plan established by an Indian tribal
government, any plan offered in the individual health insurance market, any employer-sponsored
plan, any grandfathered health plan,20 and any other coverage (such as a state high risk pool)
recognized by the HHS Secretary.21
Exceptions to Minimum Essential Coverage Eligibility
ACA provides certain exceptions regarding eligibility for minimum essential coverage and receipt
of premium credits. An individual who is only eligible to obtain coverage through the individual
(nongroup) health insurance market may be eligible to receive a premium credit. Also, an
individual eligible for an employer-sponsored plan may still be eligible for premium credits if the
employer’s coverage is either (1) not affordable; that is, the employee’s premium contribution
toward the employer’s self-only plan would exceed 9.5% of household income;22 or (2) does not

20 A grandfathered health plan is a group health plan or health insurance coverage (including coverage from the
individual health insurance market) in which a person was enrolled since the date of enactment of ACA. For additional
information about grandfathered plans, see CRS Report R41166, Grandfathered Health Plans Under the Patient
Protection and Affordable Care Act (ACA).

21 The final regulation on premium credits addresses various circumstances when individuals transition between
exchange coverage and public coverage, such as Medicaid. For example, the regulation discusses the process and time
period applicable to an individual who becomes eligible for “government-sponsored coverage,” and therefore becomes
ineligible for premium credits.
22 The final regulation on premium credits confirms that an employee safe harbor will be provided to an individual who
(continued...)
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provide minimum value; that is, the plan’s payments cover less than 60% of total allowed costs
on average.23 As depicted in Figure 1, of the 30 million individuals estimated by CBO to enroll in
exchanges in 2022, approximately 1 million are estimated to be enrolled because their employer’s
coverage is unaffordable.
Employer Contribution Toward Coverage in SHOP Exchanges
Certain small employers (and in later years, large employers at state option) may offer and
contribute toward coverage through SHOP exchanges. If an individual is enrolled in an exchange
through an employer who contributed toward that coverage, the individual will not be eligible for
premium credits.24
Medicaid
Although Medicaid is generally beyond the scope of this report, ACA’s Medicaid expansion
provisions have the potential for affecting eligibility for premium credits if certain low to middle
income individuals and families seek health insurance through the exchanges. Under ACA, states
have the option to expand Medicaid eligibility to include all non-elderly, non-pregnant
individuals (i.e., childless adults and certain parents, except for those ineligible based on certain
noncitizenship status) with income up to 133% FPL; 25 states that choose to implement the ACA
Medicaid expansion will receive substantial federal subsidies. (ACA does not change noncitizens’
eligibility for Medicaid.26) If a person who applied for premium credits in an exchange is
determined to be eligible for Medicaid, the exchange must have them enrolled in Medicaid.27
Therefore, any state that expands Medicaid eligibility to include persons with income at or above
100% FPL (or any state that currently includes such individuals) would make such individuals
ineligible for premium credits, beginning in 2014.
Potential Premium Contributions and Premium
Credit Calculations
The amount of the premium tax credit will vary from person to person: it depends on the
household income of the taxfiler (and dependents), the premium for the exchange plan in which
the taxfiler (and dependents) is (are) enrolled, and other factors. In certain instances, the credit

(...continued)
is determined to be eligible for premium credits, but later determined that the worker was eligible for affordable
employer coverage. Moreover, the employer would not be subject to a penalty because a full-time employee receives a
premium credit under the safe harbor.
23 §1401(a) of ACA; new §36B(c)(2)(C) of the IRC.
24 §1401(a) of ACA; new §36B(c)(2)(A)(ii) of the IRC.
25 ACA specifies that an income disregard in the amount of 5% FPL will be used to determine Medicaid eligibility
based on modified adjusted gross income; thus, the effective minimum income eligibility threshold for such individuals
in this new Medicaid eligibility group will be 138% FPL.
26 As under law prior to ACA, certain lawfully present 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).
27 §§1311(d)(4) and 1413(a) of ACA. Nonetheless, nothing in ACA prohibits a Medicaid-eligible individual from
enrolling in an exchange on his/her own. However, that individual will be responsible for the entire cost of exchange
coverage, which will likely be prohibitive for a low-income individual.
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amount may cover the entire premium and the taxfiler pays nothing towards the premium (see
text box, scenario A). In other instances, the taxfiler may be required to pay part (or all) of the
premium (see text box, scenario B).
Calculation of Premium Credit Amount
The premium credit amount will be the lesser of either:
(A) The cost of the exchange plan that the taxfiler (and dependents) is (are) enrolled in;
Or
(B) The excess, if any, resulting from the following formula:
The age-adjusted premium for the second lowest cost silver plan in the taxfiler’s area,
Minus
The product of the taxfiler’s household income and the “applicable percentage” (based on the taxfiler’s
household income relative to the federal poverty level).

Required Premium Contribution
If the premium credit amount (i.e., the lesser amount calculated above) is:
(A), the taxfiler (and dependents) pay(s) nothing towards the premium for exchange coverage.
Or
(B), the taxfiler (and dependents) pay(s) some (or al ) of the premium for exchange coverage.

Choice of Plan Enrollment
While the calculation in Scenario B is based on the second lowest cost silver plan in the taxfiler’s area, the
qualifying individual/family may enroll in any tiered plan in an exchange and still be eligible for a tax credit.
However, if the individual/family enrol s in a plan with a premium that exceeds the premium for the reference
plan, the individiual/family is responsible for paying that additional amount.

Under scenario B, the amount that a taxfiler who receives a premium credit would be required to
contribute towards the premium is capped as a percent of household income; that is, the required
premium contribution
would be the product of the taxfiler’s household income and the
“applicable percentage,” as specified in ACA. In general, the applicable percentage will be less
for those with lower incomes compared with those with higher incomes; where income is
measured relative to the federal poverty level.
Under scenario B, the amount that taxfilers with income between 100% FPL and 133% FPL will
be required to contribute towards the premium will be capped at 2 percent of household income.
For taxfilers with income 300%-400% FPL, their premium contribution will be capped at 9.5% of
income. ACA further specifies the applicable percentages that taxfilers, whose incomes are
between those two income bands, would be required to pay towards the cost of exchange
coverage under scenario B (see Figure 2).
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Figure 2. Maximum Percentage of Income, as Measured by FPL,
to go towards Premium Contributions
10%
9.5%
9.5%
9.5%
ions
9%
but
8.05%
ri
8%
ont
C

7%
m
iu

6.3%
6%
rem
r P

5%
o
4%
e f
m

4%
co
3%
n
I

3%
of
2%
2%
2%
m %
u

1%
axim
M

0%
100
150
200
250
300
350
400
Federal Poverty Level (%)

Source: CRS analysis of ACA.
Calculation of the premium credit amount (under scenario B) would be the arithmetic difference
(if any) after subtracting the taxfiler’s required premium contribution from the premium for the
second lowest cost silver plan (“reference plan”) available to the taxfiler. (While the credit
amount under this scenario is based on the reference plan, the individual/family may enroll in any
metal-tier plan.) It is theoretically possible that a taxfiler’s premium contribution could be equal
to or exceed the premium for the reference plan, leaving that taxfiler with a premium credit
amount of zero. Moreover, taxfilers who enroll in plans that are more expensive than the
reference plan would have to pay the additional premium amount.
Illustrative Examples: If Premium Credits Were Available in 2012
For illustrative purposes only, if the premium credits were available in 2012, the annual income
levels displayed in Table 2 would be used in the calculation of premium credit amounts and
required contributions, as discussed above.
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Table 2. Annual Income by 2012 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% $5,585 $7,565 $9,545 $11,525
100% $11,170
$15,130 $19,090 $23,050
133% $14,856
$20,123 $25,390 $30,657
150% $16,755
$22,695 $28,635 $34,575
200% $22,340
$30,260 $38,180 $46,100
250% $27,925
$37,825 $47,725 $57,625
300% $33,510
$45,390 $57,270 $69,150
350% $39,095
$52,955 $66,815 $80,675
400% $44,680
$60,520 $76,360 $92,200
Source: CRS computation based on “Annual Update of the HHS Poverty Guidelines,” 77 Federal Register 4034,
January 26, 2012, http://aspe.hhs.gov/poverty/12fedreg.pdf.
Notes: Under ACA, premium credits for eligible exchange coverage will not be available until 2014; the data in
this table illustrate the income levels that would apply if premium credits were available in 2012. Different
income levels, as measured against the FPL, apply separately to Alaska and Hawaii (see “Annual Update of the
HHS Poverty Guidelines” referenced under Source). The poverty guidelines are updated annually for inflation.
Also for illustrative purposes, Table 3 displays the maximum monthly amounts that individuals
and families would be required to contribute towards exchange coverage (provided that they
enrolled in the reference plan or a less expensive metal-tier plan).
Table 3. Maximum Monthly Premium Contributions, by Family Size, if Premium
Credits were Available in 2012
For the 48 contiguous states and the District of Columbia
Maximum Premium
Maximum Monthly Premium Contribution (2012), by Family
Federal
Contribution as a %
Size
Poverty
of Income
Line
(“Applicable
(FPL)
Percentages”)
1 2 3 4
100% 2.0% $19
$25 $32 $38
133.00% 2.0%
$25 $34 $42 $51
133.01% 3.0%
$37 $50 $63 $77
150% 4.0% $56
$76 $95
$115
200% 6.3% $117
$159
$200
$242
250% 8.05% $187
$254
$320
$387
300% 9.5% $265
$359
$453
$547
350% 9.5% $310
$419
$529
$639
400% 9.5% $354
$479
$605
$730
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Source: CRS computation based on ACA, and “Annual Update of the HHS Poverty Guidelines,” 77 Federal
Register
4034, January 26, 2012, http://aspe.hhs.gov/poverty/12fedreg.pdf.
Notes: Under ACA, premium credits for eligible exchange coverage will not be available until 2014; the data in
this table are for illustrative purposes only. Different income levels, as measured against the FPL, apply separately
to Alaska and Hawaii (see “Annual Update of the HHS Poverty Guidelines” referenced under Source). The
poverty guidelines are updated annual y for inflation. If individuals enrol in more expensive plans than the second
lowest-cost silver plan in their respective areas, they would be responsible for the additional premium amounts.
The monthly premium contribution amounts are rounded to the nearest dol ar.
Both Figure 2 and Table 3 illustrate the “cliff effect” that occurs at 133% FPL. For those
individuals with income at or below 133% FPL, the credits will ensure that such individuals pay
no more than 2% of their income (if any) for exchange coverage. Above 133% FPL, a formula is
applied so that a family at 133.01% FPL could be required to contribute 3% of their income
towards those premiums. For example, as shown in Table 3, a family of three with income at
133% FPL ($25,390 in annual income) may be required to pay $42 in monthly premiums, if the
exchange and premium credit provisions were available in 2012. With two additional dollars of
income ($25,392 in annual income), they would be required to pay $63 in monthly premiums.
Thus, in this example, that additional $2 in income would lead to $21 more in required premium
payments for the family per month (an additional $252 in premium contributions for the year).
Some might observe that prior to implementation of the ACA premium credits in 2014, an even
larger cliff exists for Medicaid beneficiaries when an incremental increase in income makes them
ineligible for public coverage, at which point no premium credits were available.
Examples of Premium Credits for Self-Only and Family Coverage
For illustrative purposes only, assume that premium credits were available in 2012. The examples
in Table 4 were calculated using the formula specified in ACA.28 The examples assume that the
individual/family is/are enrolled in an exchange plan with a premium that exceeds the amount of
the premium credit they would receive, and therefore the credit would be based on the reference
plan.
Note that individuals at the same income level will face different premium amounts based on age.
(This reflects the limited age rating allowed for individual health insurance policies, including
those offered in the individual exchanges.29) Moreover, the premium credit amounts are greater
for those with lower incomes, compared with higher-income individuals of the same age,
reflecting the income-based structure of the premium credits.

28 See Scenario B in the text box “Calculation of Premium Credit Amount” for the premium credit formula.
29 For additional information about this issue, see the “Rating Restrictions” discussion in CRS Report R42069, Private
Health Insurance Market Reforms in the Patient Protection and Affordable Care Act (ACA)
, by Annie L. Mach and
Bernadette Fernandez.
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Table 4. Illustrative Examples of Premium Contributions and Premium Credit
Amounts, if Premium Credits were Available in 2012, by Coverage Tier
Required
Income
Federal
Maximum
Monthly
Level
Poverty
Premium
Age of
Contribution
Monthly
Coverage
(based
Level
Contribution as
youngest
Monthly
from
Credit
Tier
on FPL)
(FPL)
a % of Income
adulta
Premiumb
Enrollee(s)
Amount
Self-Only
$16,755
150% 4.0% 20 $190
$56 $134
$39,095
350% 9.5% 20 $190 $190 $0
$16,755
150% 4.0% 60 $569
$56 $513
$39,095
350% 9.5% 60 $569 $310 $259
Family of
$28,635
150% 4.0% 20 $514
$95 $419
Threec
$66,815
350% 9.5% 20 $514 $514 $0
$28,635
150%
4.0% 60
$1,542 $95
$1,447
$66.815 350%
9.5%
60
$1,542
$529
$1,013
Source: CRS computation based on ACA; “Annual Update of the HHS Poverty Guidelines,” 77 Federal Register
4034, January 26, 2012, http://aspe.hhs.gov/poverty/12fedreg.pdf; and “National Health Care Calculator,” U.C.
Berkeley Labor Center, http://laborcenter.berkeley.edu/healthpolicy/calculator/.
Notes: Under ACA, premium credits for eligible exchange coverage will not be available until 2014; the data in
this table are for illustrative purposes only. The monthly premium and contribution estimates reflect 2012
dollars. With respect to the poverty guidelines, different income levels apply in Alaska and Hawaii (see “Annual
Update of the HHS Poverty Guidelines” referenced under Source). The poverty guidelines are updated annually
for inflation.
a. Premiums for exchange plans will be age-adjusted to allow for a 3:1 variation based on age.
b. The actual premiums for exchange plans are not known at this time. The premium estimates are based on
the Congressional Budget Office’s national estimates for silver-tier plans, as incorporated in the National
Health Care Calculator.
c. Premiums for exchange plans are allowed to vary based on family size. However, premiums typically are not
adjusted for coverage of more than three family members.
Self-Only Coverage Examples
Assume that the premium credits are available in 2012 (see Table 4). Further assume the
following monthly premiums for self-only coverage in the reference plan (second lowest-cost
silver plan) are: $190 for a 20-year-old, and $569 for a 60-year-old. An individual at age 20 with
income at 150% FPL ($16,755 in 2012), would have a required monthly contribution of $56 (i.e.,
$16,755 annual income multiplied by 4.0%, then divided by 12). This individual would receive a
tax credit of $134 a month (i.e., $190 monthly premium minus $56 required monthly
contribution).30
Assume the $569 monthly premium for an individual at age 60 with income at 150% FPL.
Because this 60-year-old has the same income as the 20-year-old discussed in the previous
example, they both are required to contribute the same amount towards the monthly premium:

30 As discussed in the text box “Calculation of Premium Credit Amount,” the actual credit amount will either be the
premium of the exchange plan in which the taxfiler is actually enrolled (Scenario “A”), or the amount derived from the
formula based on the second lowest cost silver plan (Scenario “B”). Given this requirement, the examples included in
this report assume that the hypothetical indivdiuals/families enroll in the reference plan, even though credit recipients
are allowed to enroll in any tier plan.
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$56. However, since the older individual faces a higher premium, the 60-year-old receives a
larger premium credit, compared to the 20-year-old. In this example, the older individual would
receive a monthly tax credit of $513.
Family Coverage Examples
The examples discussed above for self-only coverage may be replicated for purposes of
estimating contributions and credit amounts for family coverage. For example, assume the
monthly premium for family coverage31 in the reference plan is $514 for a family in which the
youngest adult is 20-years-old. Such an family with income at 150% FPL ($28,635 in 2012),
would have a required monthly contribution of $95 (i.e., $28,635 annual income multiplied by
4.0%, then divided by 12). This family would receive a tax credit of $419 a month (i.e., $514
monthly premium minus $95 required monthly contribution).
Reconciliation of Premium Credits
Under ACA, the amount received in premium credits is based on the prior year’s income tax
returns. These amounts are reconciled in the next year when individuals file tax returns for the
actual year in which they received a premium credit. If a tax filing unit’s income changes, and the
filer should have received a higher amount, this additional credit would be included in their tax
refund for the year. On the other hand, any excess amount that was overpaid in premium credits
would have to be repaid to the federal government as a tax payment. However, ACA imposed a
limitation on the excess amount repaid for certain households. Specifically, for households with
incomes below 400% of the FPL, the amount of repayment cannot exceed $400 (joint filers) and
$250 (single filers). This amount will be indexed by inflation in future years.
Since the enactment of ACA, these limits have been amended twice. On December 15, 2010, the
Medicare and Medicaid Extenders Act of 2010 (P.L. 111-309) was enacted. It included a
provision to change the repayment limit for overpayment of premium credits to vary by income
class (see Table 5).
Table 5. Limits on Repayment of Excess Premium Credits Enacted by the Medicare
and Medicaid Extenders Act (P.L. 111-309)
If the Household Income
(Expressed as a Percentage of
The Applicable Dollar Limit for
Poverty Line) Is:
Joint Filers Is:
Less than 200%
$600
At least 200% but less than 250%
$1,000
At least 250% but less than 300%
$1,500
At least 300% but less than 350%
$2,000
At least 350% but less than 400%
$2,500
At least 400% but less than 450%
$3,000
At least 450% but less than 500%
$3,500
Note: The applicable dollar limit for single filers is 50% of the joint filer limit.

31 The calculations for family coverage in Table 4 assumes a family of three. Premiums typically are not adjusted for
coverage of more than 3 family members. Therefore premiums for one person compared with a family of three will
likely give you the range of premiums that apply to a given age group.
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On April 14, 2011, the Comprehensive 1099 Taxpayer Protection and Repayment of Exchange
Subsidy Overpayment Act of 2011 (P.L. 112-9) was passed. The law lowered the maximum
applicable limits for repayment of excess amount paid in premium credits to those shown in
Table 6
. In addition, those with household income of more than 400% of the FPL and up to 500%
of FPL (at the time they filed their tax returns) were no longer subject to caps on repayment of
overpayment amounts.
Table 6. Limits on Repayment of Excess Premium Credits Enacted by the
Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy
Overpayment Act of 2011 (P.L. 112-9)
If the Household Income (Expressed as a
The Applicable Dollar Limit for
Percentage of Poverty Line) Is:
Married Filers Is:
Less than 200%
$600
At least 200% but less than 300%
$1,500
At least 300% but less than 400%
$2,500
Note: The applicable dollar limit for single filers is 50% of the joint filer limit.
Cost-Sharing Subsidies
In addition to the premium credits, ACA establishes subsidies that are applicable to cost-sharing
expenses. An individual who qualifies for the premium credit and is enrolled in a silver plan
(actuarial value of 70%) through an exchange, will also be eligible for cost-sharing assistance.32
The assistance will be provided in two forms, and both are based on income.
ACA requires each tier plan to limit the total amount an enrollee will be required to pay out of
pocket for use of covered services (referred to as a cost-sharing limit in this report), and
establishes separate limits for self-only coverage and family coverage.33 Given that tiered plans
will already be required to comply with annual cost-sharing limits, one form of cost-sharing
assistance will reduce such limits, based on income (see Table 7). The cost-sharing assistance
will reduce the limit by two-thirds for qualifying individuals with income between 100% and
200% FPL, by one-half for those with income between 201% and 300% FPL, and by one-third
for those with income between 301% and 400% FPL.34 This cost-sharing assistance targets
individuals and families who use a great deal of health care in a year and, therefore, would have
high cost-sharing expenses. Enrollees who use very little health care would not generate enough
cost-sharing expenses to reach the total limit.
The second form of cost-sharing assistance targets individuals with income between 100% and
250% FPL. Such individuals will receive reductions to cost-sharing requirements to ensure that

32 ACA establishes different eligibility criteria for cost-sharing subsidies for certain American Indians and Alaska
Natives. For more information, see CRS Report R41152, Indian Health Care: Impact of the Affordable Care Act
(ACA)
, by Elayne J. Heisler.
33 The cost-sharing limits established under this provision in ACA uses existing limits applicable to high-deductible
health plans (HDHPs) that qualify to be paired with health savings accounts (HSAs). In 2012, the cost-sharing limits
for HSA-qualified HDHPs are $6,050 for single coverage, and $12,100 for family coverage. Given that these existing
limits are updated annually and ACA cost-sharing requirements become effective in 2014, the cost-sharing limits in
2014 will likely be different than the 2012 levels.
34 Note that these reductions in the cost-sharing limit do not change specific cost-sharing requirements (e.g., it does not
change the amount of a co-payment).
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the exchange plan covers a certain percentage of allowed health care expenses, on average (see
Table 7
). This form of cost-sharing assistance will directly affect cost-sharing requirements;
therefore, both enrollees who use minimal health care and those who use a great deal of services
may potentially benefit from this assistance.
Table 7.Cost-Sharing Subsidies in ACA: Annual Cost-Sharing Limits and Average
Percentage of Allowed Expenses Paid by Plan, by Household Income Tier
Beginning in 2014
Percent of Allowed Health Care
Household Income Tier,
Reduction of Annual Cost-
Expenses that Must be Covered
by Federal Poverty Level
Sharing Limit
by Exchange Plan, on Average
Up to 150%
Reduced by two-thirds
94%
151% - 200%
Reduced by two-thirds
87%
201% - 250%
Reduced by one-half
73%
251% - 300%
Reduced by one-half
70%
301% - 400%
Reduced by one-third
70%
Source: CRS analysis of ACA, as amended.
Notes: The cost-sharing limits applicable to tiered plans established under ACA uses existing limits applicable to
high-deductible health plans (HDHPs) that qualify to be paired with health savings accounts (HSAs). In 2012, the
cost-sharing limit for HSA-qualified HDHPs is $6,050 for single coverage and $12,100 for family coverage. While
the cost-sharing provisions are not effective until 2014, for illustrative purposes only, a two-thirds reduction in
2012 would result in cost-sharing limits of approximately $2,000 for single coverage and $4,000 for family
coverage; a one-half reduction would result in cost-sharing limits of approximately $3,000 and $6,000,
respectively; and a one-third reduction would result in limits of approximately $4,000 and $8,000, respectively.
ACA does not specify how a plan would reduce cost-sharing requirements to ensure a greater percentage of
al owed expenses are covered by the plan, for individuals who qualify for such assistance.
For illustrative purposes only, if exchanges were operational in 2012, an exchange plan could
impose an annual cost-sharing limit up to $6,050 for self-only coverage. For an exchange enrollee
with income at 200% FPL who is eligible for a cost-sharing subsidy, the plan would have to
reduce that limit by two-thirds; resulting in a cost-sharing limit of approximately $2,000. In
addition, ACA requires the plan to cover 87% of allowed health care expenses, on average, for
enrollees at that income level. In other words, for individuals who receive cost-sharing subsidies
with income at 200% FPL, the plan must reduce cost-sharing requirements to meet an actuarial
value (AV) of 87%. ACA does not specify how a plan would reduce cost-sharing requirements to
go from an AV of 70% to 87%,35 in the case of an individual with income at 200% FPL.36
The HHS Secretary will provide full reimbursements to exchange plans that provide cost-sharing
subsidies.37

35 Since eligibility for a cost-sharing subsidy depends, in part, on enrollment in a silver plan, the coverage already has
an actuarial value of 70%. But for any individual who receives such a subsidy, with income at or below 250% FPL,
their coverage must meet a higher AV, as specified in the law.
36 HHS published a bulletin in which it proposes for each issuer offering a qualified health plan that is subject to these
cost-sharing reductions to submit, for exchange approval, variations of its silver plan that comply with the higher levels
of actuarial value (73%, 87%, and 94%). See “Actuarial Value and Cost-Sharing Reductions Bulletin,” Centers for
Medicare & Medicaid Services, Feb. 24, 2012, http://cciio.cms.gov/resources/files/Files2/02242012/Av-csr-
bulletin.pdf.
37 §1402(c)(3) of ACA.
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Appendix. 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,38 ACA sets insurance
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 ACA will extend to
individuals and families with modified adjusted gross income (hereinafter referred to simply as
“income” with respect to ACA) between 100% and 400% FPL. ACA will provide premium credit
support scaled to individual and family income relative to poverty such that eligible families’ and
individuals’ premium contributions 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.
In terms of the premiums, ACA 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 or AGI),39 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. (Note: this analysis
was conducted during ACA enactment (March 2010), incorporating information available at the
time, in order to estimate premiums for exchange plans and depict the “affordability” of such
plans for exchange enrollees. Given the timing of this analysis, more recent cost data, as well as
relevant regulations and guidance, are not reflected in the analysis. Furthermore, assumptions
regarding eligibility for premium credits have not been updated to reflect the potential impact of
the relevant Supreme Court decision. 40 While the specific estimates do not incorporate more
recent information, the discussion of the relative affordability of exchange plans for enrollees
based on age, family size and composition, and geography is still relevant to understanding how
these different factors interact and may potentially affect enrollee costs.)

38 ACA includes provisions to study affordability issues. It requires GAO to conduct a survey of the cost and
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. ACA 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.
39 While the definition of income for the purposes of premium credit eligibility uses MAGI, for ease of analysis the
illustrations discussed in this section uses AGI as the definition of income.
40 For a brief discussion about the possible impact of the Supreme Court’s decision regarding Medicaid expansion on
premium credit eligibility, see the section titled “Interaction with Other ACA Provisions” in CRS Report R42663,
Health Insurance Exchanges Under the Patient Protection and Affordable Care Act (ACA), by Bernadette Fernandez
and Annie L. Mach.
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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 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), the
use of tools by the plan to reduce health care utilization (e.g., prior authorization for certain tests),
and other factors. The estimates shown here are based on illustrative premiums developed by the
Kaiser Family Foundation (KFF) in 2009.41 The illustrated plans are estimated to have a 70%
actuarial value, meaning that the plans are expected to cover 70% of plan members’ covered
health care costs, with members’ spending on cost-sharing (e.g., deductibles and copayments)
covering the remaining 30%. In the exchanges, insurers will be allowed to age-rate premiums
within prescribed bands—under ACA, the highest age-adjusted premium can be no more than
three times the lowest age-adjusted premium. ACA also will allow premiums to vary by tobacco
use (by no more than 1.5:1 ratio) and geographic area.
Figure A-1 depicts the relative “affordability” of health insurance premiums prior to the
application of the credits and ACA 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 ACA, and 10.0% after ACA.
The figure shows that at 100% of poverty, the illustrated insurance plan would cost individuals
half of their pre-tax income prior to ACA—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 ACA, 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 ACA, 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 ACA’s subsidies
would range from 3% of income at just above 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.

41 http://healthreform.kff.org/SubsidyCalculator.aspx, accessed on March 23, 2010.
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Figure A-1. ACA Compared to Pre-ACA 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)

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 ACA, 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). ACA provides premium credits up to 400% of FPL, but increases the excess medical expense
deduction threshold to 10.0% of AGI.
Illustrated Potential Effects of Age-Banding and Area Cost
Adjustments on “Affordability”
Table A-1
shows illustrative KFF plan premiums in the exchange based on 2009 plan costs.42 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

42 Given that KFF developed their illustrative premiums in 2009, the original analysis compared such amounts to the
federal poverty levels applicable for that year. Since FPLs are adjusted annually, the FPLs used in the analysis in the
Appendix of the paper are different from the FPLs used elsewhere in the report.
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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). 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, premiums are only 84%
higher than for 20-year-olds, and for 60-year-olds, 1.6 times higher.43 Further discussion will
focus on single individuals and couples (married and unmarried) under single premium and
single+1 premium plans.
Table A-1. ACA: 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
enrol ees being three times those of youngest enrol ees. 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.
Table A-2. ACA: 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%

43 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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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.
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 ACA’s premium cap of 9.5% of income, extending up to 400% of FPL.
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 A-2 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
ACA. 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 ACA’s implicit 9.5% affordability limit. For
40-year-olds in higher-cost areas, illustrated premiums (9.7% of income) are slightly above the
law’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.44
Figure A-2 through Figure A-4 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 A-2, 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—ACA’s affordability cap—due to the law’s premium
credits. However, the impact of age-rating premiums will differ for younger vs. older individuals,
as their income increases. For example, for individuals age 30 and 40, the illustrated premiums as
a percentage of income naturally decline before reaching the 400% FPL, because they face
relatively low premiums (compared with older individuals) as their income increases. In contrast,
individuals 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 A-3, 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 A-4, 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 A-5 through Figure A-7 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 A-2 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

44 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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threshold,” and range up to 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 ACA only, unlike Figure A-
1
, which illustrates pre- and post-tax premiums both before and after ACA.
Figure A-2. ACA: 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

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 ACA (absent other effects the law might have on reducing the
price of health insurance). Net post-tax premiums are based ACA’s excess medical expense deduction threshold
of 10.0%.
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Figure A-3. ACA: 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

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 ACA (absent other effects the law might have on reducing the
price of health insurance). Net post-tax premiums are based ACA’s excess medical expense deduction threshold
of 10.0%.
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Figure A-4. ACA: 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

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 ACA (absent other effects the law might have on reducing the
price of health insurance). Net post-tax premiums are based ACA’s excess medical expense deduction threshold
of 10.0%.
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Figure A-5. ACA: 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

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 ACA (absent other effects the law might have on reducing the
price of health insurance). Net post-tax premiums are based ACA’s excess medical expense deduction threshold
of 10.0%.
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Figure A-6. ACA: 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

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 ACA (absent other effects the law might have on reducing the
price of health insurance). Net post-tax premiums are based ACA’s excess medical expense deduction threshold
of 10.0%.
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Premium Credits in the Patient Protection and Affordable Care Act (ACA)

Figure A-7. ACA: 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

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 ACA (absent other effects the law might have on reducing the
price of health insurance). Net post-tax premiums are based ACA’s excess medical expense deduction threshold
of 10.0%.
Relative “Affordability” of Premiums for Married and
Unmarried Couples
Some have described the structure of the premium support provided under ACA’s health
insurance exchanges, with respect to the phase out of premium support relative to enrollees’
income, as resulting in a “marriage penalty.”45 Under ACA’s health insurance exchanges, a couple
may receive a lesser subsidy, and consequently incur higher out-of-pocket insurance premiums, if
they are married, as opposed to unmarried, all other things being equal, thus resulting in a

45 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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“marriage penalty.”46 ACA 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 their 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).47
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.48 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.49 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

46 The Treasury Department, in the NPRM on premium credits, requested comments on providing relief to individuals
who would receive less premium support after they marry during the tax year. The comment period ended on October
31, 2011. Federal Register, Vol. 76, No. 159, August 17, 2011.
47 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.
48 The 2009 federal poverty levels were $10,830 for an individual, and $3,740 for each additional person.
49 Because premium credit amounts 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 A-8 and Figure A-9 compare premiums under ACA 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, even though their incomes and insurance
premiums are the same.50
In the illustrated example at age 30 (Figure A-8), 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 their combined income. In the illustration, the married couple no longer receives
premium support once their income exceeds $56,337. At that point their premium as a percentage
of income naturally falls below ACA’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 A-9, 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 their income reaches $58,280,
and their premium nearly doubles, amounting to 18.6% of their 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.

50 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 A-8. ACA: 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)

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 ACA (absent other effects the law might have on reducing the
price of health insurance). Net post-tax premiums are based ACA’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.
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Figure A-9. ACA: 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)

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 ACA (absent other effects the law might have on reducing the
price of health insurance). Net post-tax premiums are based ACA’s excess medical expense deduction threshold
of 10.0%.
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.
ACA 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, ACA will extend Medicaid coverage to 133% of poverty
for many individuals, which will permit them to enroll with relatively little or no premiums and
cost-sharing. Persons and families with incomes of 400% of poverty and above will be ineligible
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for premium subsidy support, and their premiums will be the same they would have faced before
ACA (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 ACA’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, ACA
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 ACA than before, all other things being equal.
ACA 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 ACA 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

Bernadette Fernandez
Thomas Gabe
Specialist in Health Care Financing
Specialist in Social Policy
bfernandez@crs.loc.gov, 7-0322
tgabe@crs.loc.gov, 7-7357

Acknowledgments
The authors thank Chris L. Peterson, former Specialist in Health Care Financing, who co-authored the
original report. Janemarie Mulvey, Specialist in Health Care Financing, authored the section on
Reconciliation of Premium Credits.

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