State RegulationsTX specificDifficulty 2/5
A Texas family purchases a qualified health plan through the Marketplace and receives financial assistance that is paid directly to the insurance company each month to lower what the family owes for coverage. Under the Affordable Care Act, this assistance is the what?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
ACA Section 1401 provides the refundable premium tax credit, which is generally paid in advance directly to the insurance company so the enrollee's monthly premium is reduced. ACA Section 1402 cost-sharing reductions work differently: they lower the enrollee's out-of-pocket costs such as deductibles and copayments at the point of service rather than reducing the premium. A Texas agent should keep the two straight, because the credit lowers what the client pays each month while the reduction lowers what the client pays when care is received.
Why the other options are wrong
- B) Disproportionate share payments are a Medicaid hospital funding mechanism and have nothing to do with Marketplace premium assistance.
- C) A small employer health insurance credit is a separate employer-side tax provision, not the individual assistance described in the question.
- D) A cost-sharing reduction lowers deductibles, copayments, and coinsurance at the point of service; it is not paid to the insurer to reduce the monthly premium.
Memory hook
Credit lowers the premium; cost-sharing reduction lowers the bill at the doctor.