Health insurance can be expensive, and is therefore often out of reach for lower and moderate income families. To make coverage obtainable for families that otherwise could not afford it and to encourage broad participation in health insurance, the Affordable Care Act (ACA) includes provisions to lower premiums and out-of-pocket costs for people with low and modest incomes.

This brief provides an overview of the financial assistance provided under the ACA for people purchasing coverage on their own through health insurance Marketplaces (also called Exchanges).

Health Insurance Marketplace Subsidies

The ACA offers financial assistance to reduce monthly premiums and out-of-pocket costs in an effort to expand access to affordable health insurance for individuals with moderate and low-income – particularly those without access to affordable coverage through their employer, Medicaid, or Medicare. There are two types of subsidies available to Marketplace enrollees. The first, called the premium tax credit (PTC, or APTC when paid in advance), works to reduce enrollees’ monthly premium payments for insurance coverage. The second type of financial assistance, the cost-sharing reduction (CSR), reduces enrollees’ out-of-pocket costs when they go to the doctor or have a hospital stay. In order to receive either type of financial assistance, qualifying individuals and families must enroll in a plan offered through a health insurance Marketplace.