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Are Out-of-Pocket Medical Expenses Covered by ACA?

Updated for Tax Year 2021 • October 16, 2021 04:20 AM


The Affordable Health Care Act offers a premium tax credit to help with a portion, or all, of your out-of-pocket expenses, depending on your income. The credit helps individuals and families with moderate income who purchase health insurance through the Health Insurance Marketplace. To determine your eligibility, you must file a tax return to establish your income.

Out-of-pocket expenses

“Out-of-pocket expenses” refers to money you spend on medical costs such as co-pays, coinsurance, deductibles and other similar payments associated with your essential health benefits. Any help with these expenses can only apply to plans purchased through the health insurance marketplace.

out of pocket medical expenses affordable care act

Costs incurred by using non-network and out-of-network providers, as determined by your plan, are not eligible to be covered as out-of-pocket expenses.

Cap on expenses

A limit is set on the amount of money you spend to maintain your health insurance plan through the marketplace. After you reach this amount, the insurance company is required to pay 100 percent of any additional costs for that year.

The government has set this limit on out-of-pocket expenses to ensure health care remains affordable. For High Deductible Health Plans, the maximum out-of-pocket expenditure, as of publication, is $8,550 for an individual and $17,100 for a family plan in 2021. However, it may be less, depending on the plan you choose and your annual income determined when you file your taxes.

Premium tax credit

The premium tax credit provides money to help individuals and families in moderate income brackets to afford their health insurance premiums. Your eligibility to receive the credit, and how much of a credit you are eligible for, is determined by your income when you file your taxes.

This tax credit only applies to insurance purchased through the marketplace.

If you opt to estimate your income and receive advance payments, any money that you are entitled to will be paid directly to your insurance company. Essentially, it works like a discount on your insurance premiums. If your income ends up being significantly higher than you estimated for the year, you may be asked to pay back some of the credit you received. This will come out of your tax return (The American Rescue Plan Act of 2021 suspended this requirement for tax year 2020).

If you choose instead to receive your tax credit as a refund at tax time, it will either reduce the tax you owe at the end of the year, or boost your tax refund. You’ll pay for your insurance premiums on your own and be “paid back” for the credit, through your tax return.


To be eligible for the premium tax credit, and assistance with out-of-pocket costs, you must fit a number of criteria:

  • You must buy your insurance plan through the marketplace (If your plan is provided through your employer or the government, you don’t qualify.)
  • You must be within certain income limits. These are established when you do your tax filing.
  • If you’re married, you need to file a joint return.
  • And you can’t be claimed as a dependent on another tax return.

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