17.2 The Affordable Care Act: EHBs, Marketplaces, Subsidies, Mandates

Consumer Protections

The Affordable Care Act (ACA), enacted in 2010, rebuilt the individual and small-group markets around four core protections:

• Guaranteed issue — carriers must accept all applicants regardless of health.
• No pre-existing condition exclusions — coverage cannot be denied or delayed for prior conditions.
• Modified community rating — premiums may vary only by age (up to a 3:1 ratio), tobacco use, geographic area, and family size — never by health status or gender.
• Dependent coverage to age 26 — adult children stay on a parent's plan regardless of marital, student, or residency status.

The Ten Essential Health Benefits

Non-grandfathered individual and small-group plans must cover ten Essential Health Benefit (EHB) categories, and no annual or lifetime dollar limits may apply to EHBs.

Exam trap: Preventive services (immunizations, screenings) must be covered with no cost-sharing when received in-network. Large-group and self-funded plans are not required to cover all ten EHBs, but may not impose dollar limits on any EHB they do cover.

Metal Tiers and Actuarial Value

Actuarial value (AV) is the percentage of total covered costs the plan pays for a standard population. The Marketplace sorts plans into metal tiers:

Catastrophic plans exist for people under 30 or with hardship exemptions. AV describes the average split across the group — it is not the percentage paid on any single claim.

The Health Insurance Marketplace and Premium Tax Credits

The Health Insurance Marketplace (Exchange) is where individuals shop, compare metal tiers, and apply subsidies. The Open Enrollment Period runs annually; a qualifying life event (marriage, birth, loss of coverage) triggers a Special Enrollment Period.

Premium Tax Credits (PTCs) lower monthly premiums for households generally between 100% and 400% of FPL (the upper cap has been temporarily suspended in some years). PTCs are advanceable — paid directly to the carrier each month — and reconciled on the IRS Form 8962 with the tax return.

Reconciliation example. A household estimates income that yields a $400/month advance PTC ($4,800/year). Actual income comes in higher, entitling them to only $3,600. They must repay the $1,200 excess at tax time. If actual income is lower, they receive the extra credit as a refund.

Cost-Sharing Reductions and the Mandates

Cost-Sharing Reductions (CSRs) lower deductibles, copays, and coinsurance for households between 100% and 250% of FPL — but only if they enroll in a Silver plan. A consumer who picks Bronze forfeits CSRs even if income-eligible.

Mandates today:

• Individual mandate — the federal penalty is $0 since 2019, though some states impose their own.
• Employer shared-responsibility mandate — an Applicable Large Employer (ALE) with 50+ full-time-equivalent employees must offer affordable, minimum-value coverage or face a penalty.

Subsidy Mechanics and Common Traps

The most-missed ACA distinction is Premium Tax Credit (PTC) versus Cost-Sharing Reduction (CSR). The PTC lowers the monthly premium and works on any metal tier; the CSR lowers point-of-service costs (deductible, copays, coinsurance) and exists only on Silver plans. A client who chases the cheapest Bronze premium can unknowingly throw away thousands in CSR value.

A second trap is advance payment reconciliation. Because the PTC is based on estimated annual income, a client who underestimates income must repay excess credit on Form 8962, while one who overestimates gets money back. Producers should coach clients to report income changes mid-year.

Third, know which mandate still bites: the individual penalty is federally $0, but the employer shared-responsibility rule still penalizes Applicable Large Employers (50+ full-time equivalents) that fail to offer affordable minimum-value coverage. Coverage that costs an employee no more than a set percentage of household income is deemed affordable.

Open enrollment and special enrollment on the Marketplace

Marketplace coverage can generally be purchased only during the annual open enrollment period (commonly November 1 to mid-January). Outside that window, a consumer needs a Special Enrollment Period (SEP) triggered by a qualifying life event such as loss of other coverage, marriage, birth or adoption, or a permanent move. This prevents people from waiting until they are sick to buy guaranteed-issue coverage, the same adverse-selection control that justifies the individual mandate.

Guaranteed issue, rating limits, and grandfathered plans

ACA-compliant plans are guaranteed issue (no health-based denial) and may vary premiums only by age (3:1 limit), geography, tobacco use, and family size, never by health status or gender. Grandfathered plans (in force before March 23, 2010) are exempt from some ACA rules as long as they are not materially changed. Short-term limited-duration plans are not ACA-compliant and may still medically underwrite, a frequent trap on the exam.