Commencing in 2014, the Patient Protection and Affordable Care Act (the Act) provides individuals and small businesses with the ability to purchase health insurance through state-based insurance exchanges or marketplaces. To help low-income individuals and families purchase coverage, the Act makes available refundable premium tax credits. The Act’s premium tax credit provisions are set out in newly added Internal Revenue Code § 36B. The Treasury Department and IRS recently issued a final regulation implementing the Act’s premium tax credits features.

Background

Beginning in 2014, the Act requires most U.S. citizens and green card holders to maintain health insurance that qualifies as “minimum essential coverage.” Individuals who fail to maintain minimum essential coverage, and who are not otherwise exempt, are subject to a penalty for noncompliance. Minimum essential coverage includes eligible employer coverage, individual coverage, grandfathered plans, and federal programs such as Medicare and Medicaid, among others.