ACA Tax Credit Applies for Individuals, Regardless of Exchange

Part of the Affordable Care Act was a provision for the establishment of Exchanges, or Health Insurance Marketplaces, where employees can go to purchase health insurance if they cannot obtain coverage from an employer for a legitimate reason. 

16 states and the District of Columbia have created Exchanges, and individuals who qualify to purchase health insurance from an exchange are eligible for a tax credit. The remaining 34 states have chosen to rely on the Department of Health and Human Services’ Federal Exchange. 

The original Internal Revenue Code wording regarding the Tax Credit available to those purchasing health insurance from the state Exchanges was challenged by four individuals in Virginia which has no state Exchange, but the Supreme Court ruled that the tax credit is meant to apply to all Exchanges, whether established by a state or by the Department of Health and Human Services.

Ultimately for employers, this ruling means that all compliance requirements related to ACA and the employer’s shared responsibility and reporting requirements remain unchanged and in effect as before.

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