State RegulationsTX specificDifficulty 3/5
What is the difference between the premium tax credit provision and the cost-sharing reduction provision of the federal health care reform law?
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Answer & full 3-part explanation (select an option above, or peek)
Why C is correct
ACA Section 1401 is the premium tax credit: it is applied against what the enrollee pays each month for the coverage itself. ACA Section 1402 is cost-sharing reduction: it lowers what the enrollee pays when care is actually received, through reduced deductibles, copayments and coinsurance, and it is tied to enrollment in the silver level of coverage. Both are income-conditioned, so an agent advising a Texas marketplace applicant should know which side of the bill each provision touches.
Why the other options are wrong
- A) This reverses the two provisions: the credit goes to the premium, the reduction goes to out-of-pocket cost sharing.
- B) Both provisions are income-sensitive, and neither is keyed to a tax filing threshold as the dividing line.
- D) Neither provision is sorted by employer versus individual coverage in this way; both operate in the individual market context of the marketplace.
Memory hook
The credit helps pay the premium; the reduction helps pay the bill at the doctor's office.