During open enrollment in 2014, 8.7 million people out of the 13.5 million who were eligible to enroll in a plan through the Marketplace actually met the criteria for subsidies or the premium tax credit — and of those 8.7 million, 6.7 million enrolled in a plan and took advantage of the financial assistance [source: ASPE Office of Health Policy].
As we've already mentioned, the premium tax credit is available only when you purchase your insurance through the Marketplace. But that's not a done deal. You aren't eligible if someone claims you as a dependent (they may be eligible for subsidies, but as a dependent, you aren't). And even if you meet the income and household criteria, if you have a government or employer-sponsored health plan you don't qualify. And are you married? You can't claim the premium tax credit if you file your tax return as married filing separately (single, married filing jointly, head of household or qualifying widow/widower are all eligible filing statuses, though).
While the qualifications may seem a bit restrictive, they've been making a difference for those who do use them. In 2014, about 70 percent of people who purchased health insurance through the Marketplace qualified for coverage costing no more than $100 a month; for 46 percent, the premium tax credit dropped coverage costs to $50 a month or less [source: HHS].
If you do qualify for premium tax credit, you can claim it credit in one of two ways: You may apply it as an advance payment that's made directly to your insurance company, or you may claim it as a credit on that year's federal tax return (as a refund). Regardless of the method you choose, the premium tax credit must be reported on your federal income tax return.
Applying your financial assistance in advance lowers the amount of the cost of the monthly premium payments you pay to your insurance company that year. Because advance credit payment amounts are decided based on your estimated income and family size for that year, your actual final expenses may end up differing from the expected expenses. That means it's important to report any changes in your family size or your income to the Marketplace. If your income is greater than the estimate for that year, you'll have a balance due when you file your tax return; if your income is less, you'll be eligible for a refund.
Alternatively, you can choose to claim your total tax credit as a refund when you file your federal tax return. The premium tax credit is refundable, so if you or your household have no tax liability (which means your income level is either zero or below the amount required to owe income tax) you're still eligible to receive the benefit.
But this tax reporting applies only to the premium tax credit. While you need to qualify for subsidies to be eligible for cost-sharing reductions, unlike the premium tax credit, the amount of cost-sharing assistance you receive isn't reconciled when you file your taxes for that year. Instead, the funds for those estimated costs are paid directly from the federal government to your health insurer, who then applies the reduction when you use your benefits.
In the end, if you feel you or your family should qualify for the premium tax credit but were denied by the Marketplace when you applied, you have the right to appeal.
Oh, and don't overlook that if you're one of 42 million who remain without health insurance, and you don't have an exemption, you're expected to pay what's called an individual shared responsibility payment, which is a penalty paid when you file your federal income tax return [source: Mangan].