What is the Affordable Care Act? Under the Affordable Care Act (ACA), the federal government, state governments, insurers, employers, and individuals share responsibility for improving the quality and availability of health insurance coverage in the United States. The ACA reforms the existing health insurance market by prohibiting insurers from deny- ing coverage or charging higher premiums because of an individual’s preexisting conditions. The ACA also creates the Health Insurance Marketplace (Marketplace, also known as the Exchange).

The Marketplace is where taxpayers find information about health insurance options, purchase health insur- ance, and, if eligible, obtain help paying premiums and out-of-pocket costs. A new tax credit, the premium tax credit, is available through the Marketplace and helps eligible taxpayers pay for coverage.

The ACA also includes the individual shared responsibility provision, which requires individuals to have qualifying health care coverage (called minimum essential coverage) for each month of the year, qualify for a coverage exemption, or make a shared responsibility payment (SRP) when filing their federal income tax returns. Many taxpayers were enrolled in minimum essential coverage prior to 2014 and will need only to maintain that coverage in 2014 and report their enrollment on their 2014 tax return.

Some taxpayers are exempt from individual shared responsibility provision and do not have to make an SRP when filing a federal income tax return. Coverage exemptions are available for individuals specifically described as having a religious, economic, or other justification for not having minimum essential coverage. Taxpayers who do not have minimum essential coverage and do not qualify for a coverage exemption must make an SRP with their 2014 tax return.