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Calculating The Premium Tax Credit

Questions answered

Premium tax credits are based on annual household income, family size, and the cost of a silver level (AV 70%) essential health benefit (EHB) benchmark plan for that individual or family. The Individual Marketplaces will use this information to compute a maximum premium tax credit for each individual or family, which can then be applied to the purchase of one or more QHPs.

The amount of the premium tax credit depends on the plan that the individual or family selects. If the premium for the selected plan is greater than the maximum premium tax credit, the individual or family may elect to receive the maximum premium tax credit in advance, and pay the difference in a monthly premium cost. If the premium for the selected plan is less than the maximum payment, the individual or family may elect to receive the maximum premium tax credit in advance, and have no additional premium cost.

Example 1: Family A is eligible for a maximum advance payment of the premium tax credit of $800/month. Family A selects a QHP that costs $1,000/month. If they elect to receive the full amount of the premium tax credit in advance, $800/month will be paid directly to the QHP issuer, and Family A will pay the remaining $200/month premium.

Example 2: Individual B is eligible for a maximum advance payment of the premium tax credit of $400/month. Individual B selects a QHP that costs $350/month. If he or she elects to receive the full amount of the premium tax credit in advance, $350/month will be paid directly to the QHP issuer, and Individual B will have no monthly premium payment.

Next Topic: Cost Sharing



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