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10 Truths About the Health Insurance Premium Tax Credits

Written by: Christina Merhar
February 22, 2016 at 12:00 PM

Health insurance premium tax credits can make individual health insurance 10 Truths About the Health Insurance Premium Tax Creditsmore affordable for many Americans. And yet, as a small business owner or manager, it’s common to have questions about how the tax credits work and how they relate to your business, to your family, and to your employees.

To help, this article covers ten concise facts on the health insurance premium tax credits.

Note - This blog post is based off our new infographic, 7 Truths About The Cost of Health Insurance In America

1. Available for Marketplace Health Plans

The health insurance premium tax credits are available for individual or family health insurance policies available on the public Exchanges, also known as the Marketplaces.

2. Advanced Payable

The health insurance premium tax credits are "advanced-payable," meaning they can be applied toward your premium at the time you purchase health insurance coverage.

3. Eligibility is Based On Income

You are eligible for a premium tax credit if you meet certain income requirements and do not have access to affordable health insurance through an employer or government program such as Medicaid or Medicare.

The tax credits are available to households with income up to 400% of the federal poverty line (FPL)

This means households earning up to $47,080 for an individual in 2015, or $97,000 for a family of four, qualify.

4. 85 Percent of Marketplace Shoppers are Eligible

The Department of Health & Human Services (HHS) reported that 85 percent of people with active Healthcare.com coverage received a tax credit in 2015.

5. The Tax Credits Cap How Much You Pay 

With a tax credit, your insurance premium is capped on a sliding scale between 2 to 9.6 percent of income, depending on your income. 

For example, if you make $23,540 a year in 2015 (200 percent FPL), the maximum amount you will pay for health insurance is 6.34 percent of your income which is $1,492/year ($124/month).

There are several online calculators, like this one, available to help you understand eligibility.

6. The Average Tax Credit Is $272/Month 

According to HHS, the average tax credit is $272/month. And remember, the tax credits can be advanced payable meaning the discount is taken off at the time payment.

7. 80 Percent Pay Less Than $100/Month

Once the tax credit is applied, the vast majority (80 percent) of Marketplace shoppers purchase coverage for less than $100/month.

8. Tax Credits are Reconciled at Tax Time

Each year at tax time, those who received a tax credit report actual income and the amount of tax credit received. Some may qualify for additional credits, others may have to repay a portion of the credit. Read More: Filing Taxes? How to Deal with Premium Tax Credits

9. Offering Employer Coverage Disqualifies Employees

As an employer, just offering employer health insurance coverage to employees disqualifies them, and often their dependents, from accessing the tax credits.

10. Offering Healthcare Reimbursement Does Not Disqualify Employees

On the other hand, offering employees a healthcare reimbursement plan does not disqualify employees from the premium tax credits.

Infographic - 7 (More) Truths About Health Insurance In America

For more facts about the cost of health insurance and the premium tax credits, check out the full infographic below.

Infographic - 7 Truths About The Cost of Health Insurance in America

Source - Zane Benefits


The majority of small business owners and employees are not covered under traditional group health insurance policies. Rather, they purchase coverage on the individual market for themselves and their family. The health insurance premium tax credits add additional savings for eligible owners and employees. 

What questions do you have about the health insurance premium tax credits? Which facts did we miss? Leave a comment or question below.

Topics: Taxation