The Health Insurance Marketplace is where individuals and families can purchase health insurance on their own, especially when they do not have suitable coverage through an employer and do not qualify for Medicaid or Medicare.
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The Health Insurance Marketplace was created under the Affordable Care Act (ACA) to help more people gain access to health insurance and financial assistance when purchasing coverage.
Unlike Medicaid, the Marketplace is not an insurance program. It is a “marketplace” where people can compare and choose from different insurance companies and health plans with varying premiums and benefits. The health insurance plans sold through the Marketplace are offered by private insurance companies that meet federal or state Marketplace requirements.
Some states operate their own Marketplaces. In states that use the federal Marketplace, people enroll through HealthCare.gov, which is managed and operated by the Centers for Medicare & Medicaid Services (CMS).
CMS is part of the U.S. Department of Health and Human Services (HHS). It administers Medicare, operates the federal Marketplace through HealthCare.gov, and oversees Medicaid at the federal level.
Who should buy insurance through the Marketplace?
The Marketplace may be a good option in the following situations:
- You do not have suitable coverage through an employer because you are unemployed, self-employed, working part-time, or otherwise do not have access to employer-sponsored coverage;
- You do not qualify for Medicaid;
- You do not qualify for coverage through a spouse or parent;
- You recently left a job and do not yet have new coverage;
- You want to choose a health plan that fits your needs.
If your income falls within the required limits, buying insurance through the Marketplace may also allow you to receive financial assistance from the government through the Premium Tax Credit.
What is the Premium Tax Credit?
One of the biggest advantages of buying insurance through the Marketplace is the Premium Tax Credit.
The Premium Tax Credit is a federal tax credit that helps eligible individuals and families lower the cost of Marketplace health insurance.
There are two ways to receive the Premium Tax Credit:
Option 1 – Apply it directly to your monthly premium (Advance Premium Tax Credit or APTC)
This is the option most people use. When you enroll through the Marketplace, you will need to estimate your income for the year. Based on your estimated income and household situation, the Marketplace will estimate the amount of Premium Tax Credit you may qualify for and apply that assistance to your monthly premium.
For example, you purchase a Marketplace plan with a premium of $700 per month. After applying an estimated $500 tax credit, you may only have to pay about $200 per month.
If you report changes such as a raise, job loss, marriage, divorce, or the birth of a child during the year, your Premium Tax Credit may be adjusted.
Because the subsidy is based on estimated income, anyone who receives the APTC must use IRS Form 8962 to reconcile the amount of APTC received with the amount they were actually eligible for based on their final income.
If your actual income is lower than expected, you may receive additional Premium Tax Credit when you file your tax return.
If the APTC you received is higher than the amount you were actually eligible for, the difference may reduce your tax refund or increase the amount of tax you owe when you file.
Option 2 – Receive the Premium Tax Credit when you file your taxes
You may also choose not to receive this assistance in advance.
In that case, you would pay the full $700 per month yourself. At the end of the year, when you file your tax return, the IRS will calculate the amount of Premium Tax Credit you actually qualify for. If you are eligible, this credit may increase your tax refund or reduce the amount of tax you owe.
Fewer people choose this option because it requires paying a relatively large amount out of pocket during the year.
Can you have Medicaid and Marketplace coverage at the same time?
In general, a person is usually eligible for one program or the other.
When you apply through the Marketplace, the system will determine whether you qualify for Medicaid. If you do, your application will typically be transferred to your state’s Medicaid program instead of allowing you to continue purchasing Marketplace coverage and receiving the Premium Tax Credit.
However, in some special cases, members of the same household may be enrolled in different programs. For example, because the Medicaid income limits for children are often higher, a child may qualify for Medicaid or CHIP while the parents purchase coverage through the Marketplace.
Marketplace coverage and job-based health insurance
The Marketplace is a place where you can compare, choose, and enroll in health insurance. Employer-sponsored health insurance, on the other hand, is coverage that an employer purchases for employees and often helps pay for through a contribution toward the premium.
Because employers usually purchase coverage for a large group of employees and often pay a significant portion of the premium, employer-sponsored insurance can, in many cases, cost less out of pocket than buying coverage on your own through the Marketplace. However, the employer contribution, deductible, provider network, and specific benefits depend on the company and the particular health plan.
When can you enroll in Marketplace coverage?
In most years, the Marketplace has a specific period of time when people can enroll, known as the Open Enrollment Period.
Outside of this period, you can only enroll if you qualify for a Special Enrollment Period, such as:
- Losing job-based health insurance;
- Getting married;
- Having a baby;
- Moving to a new residence;
- Certain other qualifying life events.
International students and lawful permanent residents
The Marketplace is not only for U.S. citizens. Many lawful permanent residents, also known as green card holders, and other lawfully present immigrant groups may also be able to enroll in coverage through the Marketplace. If they meet the income requirements, they may also qualify for financial assistance to help lower the cost of coverage.
For international students, whether they can enroll in Marketplace coverage and receive the Premium Tax Credit depends on their lawful presence in the United States, their expected individual or household income, their tax filing obligations and filing method, and whether they have access to another qualifying source of coverage. Because each person’s situation may be different, students should check directly with the Marketplace and consult a tax professional when needed.
Key points to remember
- If you do not have coverage through an employer or Medicaid, the Marketplace may be a suitable option.
- The Marketplace is not an insurance company. It is a place where you can compare and purchase health insurance plans offered by private insurance companies that meet federal or state Marketplace requirements.
- Depending on where you live, the Marketplace may be operated by your state or by the federal government through HealthCare.gov.
- Many people who buy insurance through the Marketplace may qualify for the Premium Tax Credit.
For the most up-to-date information about eligibility, benefits, and enrollment periods, you should refer to the official Marketplace website or the health agency in the state where you live.
You can also learn more about Marketplace coverage and other health insurance programs through HealthCare.gov, the official health insurance website of the U.S. government.