Beginning January 1, 2014, PPACA required most citizens and legal residents of the United States to maintain health insurance that qualifies as minimum essential coverage for themselves and their dependents or pay a tax penalty. Individuals are exempt from this requirement if they would have to pay more than 8 percent of their household income for the lowest-cost self-only health plan that is available to the individual. Beginning October 1, 2013, individuals were able to shop for private health insurance coverage that qualifies as minimum essential coverage through marketplaces, also referred to as exchanges, which offer choices of qualified health plans. In 34 states, the federal government operated the individual exchanges, known as federally facilitated exchanges, while 17 states operated state-based exchanges in 2014.purchase self-only plans, or they can purchase family plans for themselves, their spouses, and their dependents. Individuals can Qualified health plans on the exchanges may provide minimum essential coverage at one of four levels of coverage that reflect out-of-pocket costs that may be incurred by an enrollee. The four levels of coverage correspond to a plan’s actuarial value—the percentage of the total average costs of allowed benefits paid by a health plan—and are designated by metal tiers: 60 percent (bronze), 70 percent (silver), 80 percent (gold), and 90 percent (platinum). For example, a gold plan with an 80 percent actuarial value would be expected to pay, on average, 80 percent of a standard population’s expected medical expenses for the essential health benefits. The individuals covered by the plan would be expected to pay, on average, the remaining 20 percent of the expected cost-sharing expenses in the form of deductibles, copayments, and coinsurance. Under PPACA, issuers are allowed to adjust premium rates within specified limits for plans, based on the number of people covered under a particular policy and the covered individuals’ age, tobacco use, and area of residence. Each state must divide its state into one or more rating areas that all issuers must use in setting premium rates. The rating area is the lowest geographic level by which issuers can vary premiums. Individuals obtaining insurance through the exchanges may be eligible for the APTC under PPACA if they meet applicable income requirements and are not be eligible for coverage under another qualifying plan or program, such as ESI or Medicaid. To meet the APTC’s income requirements, individuals must have household incomes between 100 and 400 percent of the FPL (see table 1). The amount of the APTC is calculated based on an eligible individual’s household income relative to the cost of premiums for the “reference plan,” even if the individual chooses to enroll in a different plan. The reference plan is the second-lowest-cost silver plan available. The APTC in effect caps the maximum amount of income that an individual would be required to contribute to the premiums for the reference plan. The capped amount varies depending on the enrollee’s household income relative to the FPL and is less for enrollees with lower household income. Table 2 shows the maximum percentage of household income a qualifying enrollee would have to pay if they enrolled in the reference plan. If the enrollee chooses a more expensive plan, such as a gold or platinum plan, they would pay a higher percentage of their income. If the enrollee chooses a less expensive plan, such as a bronze plan, they would pay less. The amount of the APTC is determined based on an enrollee’s family size and anticipated household income for the year, which is subject to adjustment—or reconciliation—the following year. Specifically, the final amount of the credit is determined when the enrollee files an income tax return for the taxable year, which may result in a tax liability or refund if the enrollee’s actual, reported household income amount is greater or less than the anticipated income on which the amount of APTC was based. To further improve access to care, certain low-income individuals may also be eligible for an additional type of income-based subsidy established by PPACA, known as cost-sharing subsidies, which reduce out-of-pocket costs for such things as copayments for physician visits or prescription drugs. To be eligible for these cost-sharing subsidies, individuals must have household incomes between 100 and 250 percent of the FPL, not be eligible for coverage under another qualifying plan or program such as Medicaid or ESI, and be enrolled in a silver plan through an exchange.of the silver plan. Cost-sharing subsidies effectively raise the actuarial value As a practical matter, because individuals eligible for Medicaid are not eligible for the APTC, the minimum income level for these subsidies differs between states that chose to expand Medicaid under PPACA and those that did not. In states that chose to expand Medicaid under PPACA, nonelderly adults are eligible for Medicaid when their household income is less than 138 percent of the FPL. Because those eligible for Medicaid are not eligible for the APTC, the minimum income level for the APTC in Medicaid expansion states is effectively 138 percent of the FPL. In states that chose not to expand Medicaid, the minimum income level for individuals to qualify for APTC and cost-sharing subsidies is 100 percent of the FPL, as specified in PPACA, assuming the state’s As of January Medicaid eligibility threshold is at or below this level.2015, 27 states and the District of Columbia opted to expand Medicaid under PPACA. Under PPACA, employers that meet certain conditions must offer health insurance to some employees. Employers with at least 50 full-time equivalent employees—which includes employees whose hours average at least 30-hours per week—must offer qualifying health insurance to their full time employees or face tax penalties if at least one full-time employee receives the APTC. In contrast to PPACA’s affordability threshold of 8 percent of household income for the purpose of assessing penalties for failure to maintain minimum essential coverage, PPACA requires ESI to meet two different affordability tests for the purposes of determining eligibility for the APTC. First, the employee’s share of the ESI premiums covering an individual, also referred to as a self-only plan, must not exceed 9.5 percent of the employee’s household income. Second, the insurance offered must cover 60 percent of the actuarial value of health care for the average person to qualify as affordable for purposes of the APTC. Employees who are offered ESI that meets both of these tests are not eligible for the APTC. Some employees may be offered qualifying ESI that costs between 8 and 9.5 percent of household income. If these individuals do not have access to insurance on an individual exchange that costs less than 8 percent of household income, they are exempt from the individual mandate and will not have to pay a tax penalty if they forgo coverage. However, these individuals are not eligible for the APTC. Because small employers are not required to offer health insurance and have been less likely to offer health insurance than large employers, PPACA established a small employer tax credit as an incentive for them to provide insurance by making it more affordable.available to certain employers—small business and tax-exempt entities— with employees earning low wages and that pay at least half of their employees’ health insurance premiums. To qualify for the credit, employers must employ fewer than 25 full-time equivalent employees (excluding certain employees, such as business owners and their family The credit is members), and pay average annual wages per employee of less than $50,800 per year in 2014. The amount of the credit depends on several factors, such as the number of full-time equivalent employees and their total annual wages. In addition, the amount of the credit is limited if the premiums paid by an employer are more than the state’s average small group market premiums, as determined by HHS. Employers may claim the small employer tax credit for up to 6 years—the initial 4 years from 2010 through 2013 and, starting in 2014, any 2 consecutive years if they buy insurance through the Small Business Health Option Programs (SHOP). PPACA required the establishment of SHOPs in each state by January 1, 2014, to allow small employers to compare available health insurance options in their states and facilitate the enrollment of their employees in coverage. In states electing not to establish and operate a state-based SHOP, PPACA required the federal government to establish and operate a federally facilitated SHOP in the state. Starting in 2014, employers that wanted to claim the small employer tax credit had to enroll their employees through the SHOP exchanges. Early evidence suggests that the APTC likely contributed to an expansion of health insurance coverage because it significantly reduced the cost of premiums for those eligible, though there are limitations to measuring the effects of the APTC using currently available data. In contrast, few employers claimed the small employer tax credit, limiting its effect on health insurance coverage. Early evidence suggests that the APTC likely contributed to an expansion in health insurance coverage. We identified three surveys that estimated the uninsured rate by household income. Although limitations exist in measuring the direct, causal effects of the APTC on health insurance coverage using currently available data, these surveys can be used to make early observations about changes in the rate of uninsured. They found that the uninsured rate declined among households with incomes between 139 and 400 percent of the FPL—that is, households financially eligible for the APTC in all states (see table 3). For example, one study found that the rate of uninsured among individuals with household incomes between 139 and 400 percent of the FPL fell 9 percentage points between January 1, 2012, and June 30, 2014, in Medicaid expansion states. Further, the results from this survey found that gains in insurance coverage were statistically significant for individuals in this income bracket regardless of the states’ Medicaid expansion decisions. This expansion in health insurance coverage is likely partially a result of the APTC having reduced the cost of health insurance premiums for those deemed eligible.