The premium tax credit (PTC) is a mechanism established by the Affordable Care Act (ACA) through which the United States federal government partially subsidizes the cost of private health insurance for certain lower- and middle-income individuals and families.
[1][2] The PTC is only available to those who purchase insurance through the ACA-established health exchanges and meet the law's household income eligibility requirements.
[3] The eligibility criteria for the premium tax credit is determined by section 1401 of the Affordable Care Act (Obamacare).
The Act was signed into law on March 23, 2010, and specified that the credits are only available to individuals and families who have enrolled in a health plan offered on a healthcare exchange.
On May 23, 2012, the Internal Revenue Service (IRS) adopted a regulation that said tax credits would be made available to eligible individuals who enroll in a health plan through either a state or a federally-facilitated exchange.
Had the challenges regarding the premium tax credits succeeded, the subsidy that was one of the key provisions of the ACA would've been unavailable to most people who the framers of the law intended to receive it.
The PTC subsidizes the difference between the cost of the plan and the law's assessment of a household's ability to pay; because the cost of insurance can vary widely depending on the age and home address of the insured, the PTC can also vary depending on those factors, even for two families of the same size and income.