In California, to receive federal premium tax credits (APTC), an eligible individual must:
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Answer & full 3-part explanation (select an option above, or peek)
Why D is correct
Premium tax credits are available only for QHPs purchased through the exchange. In California, that means buying through Covered California; plans sold off-exchange, even comprehensive ones, do not qualify for APTC. Covered California calculates and forwards the credit directly to the insurer, reducing the enrollee's monthly premium. This only-through-the-exchange rule is the reason eligible consumers are directed to Covered California rather than off-exchange products. The premium tax credit is administered through the exchange because the exchange reconciles household income, determines eligibility, and pays the credit directly to the insurer. That is why the same plan purchased off-exchange carries no subsidy, and why access to affordable employer coverage can still block the credit.
Why the other options are wrong
- A) Off-exchange plans do not carry premium tax credits; the credit attaches only to exchange-purchased QHPs. Off-exchange plans do not generate premium tax credits because the credit is administered through the exchange and paid to the insurer on the exchange's behalf.
- B) Enrolling in a grandfathered employer plan is not a precondition; employer coverage may even reduce subsidy eligibility. Offers of affordable, minimum-value employer coverage generally disqualify an individual from APTC, so enrolling in a grandfathered employer plan first would not secure the credit.
- C) Medigap supplements Original Medicare and is irrelevant to APTC eligibility. Medigap is a Medicare supplement product and is not a precondition for receiving premium tax credits on an exchange plan.
Memory hook
Tax credit needs the exchange stamp: Covered California or no APTC.