ACA Health Insurance: How the Affordable Care Act Marketplace Works

What Is the ACA (Obamacare)?

The Affordable Care Act, signed into law in March 2010, is the most significant overhaul of the American healthcare system since Medicare and Medicaid were created in 1965. Commonly known as Obamacare, the law established a regulated marketplace where individuals and families can shop for health insurance plans, compare benefits side by side, and access financial assistance to make coverage more affordable.

Before the ACA, insurers could deny coverage based on pre-existing conditions, impose lifetime limits on benefits, and charge women higher premiums simply because of their gender. The law eliminated all of those practices. Enrollment has grown steadily, with more than 23 million Americans selecting or being re-enrolled in marketplace plans during the most recent open enrollment period. This record-breaking number does not include the millions more who gained coverage through the ACA's Medicaid expansion, which extended eligibility to adults with incomes up to 138% of the federal poverty level in the 40 states plus Washington, D.C. that adopted it.

How the Marketplace Works

The Health Insurance Marketplace is the online platform where consumers shop for, compare, and enroll in ACA-compliant health insurance plans. There are two types of marketplaces: the federal marketplace operated at HealthCare.gov and state-based exchanges run by individual states.

HealthCare.gov serves residents in the majority of states that do not operate their own exchange. The federal platform handles eligibility determinations, subsidy calculations, and plan comparisons in a single application.

State-based exchanges operate independently in states like California (Covered California), New York (NY State of Health), Colorado (Connect for Health Colorado), and Massachusetts (Massachusetts Health Connector). These exchanges offer the same ACA-compliant plans and financial assistance, but the websites, enrollment timelines, and available insurers may differ.

Regardless of which marketplace you use, the enrollment process follows the same steps. You create an account, fill out a single application covering household size, income, and current coverage status, and the system determines whether you qualify for Medicaid, CHIP, or marketplace plans with financial assistance. All plans sold on the marketplace must cover the same essential health benefits, accept all applicants, and cap annual out-of-pocket costs.

Metal Tiers: Bronze, Silver, Gold, Platinum, and Catastrophic

ACA marketplace plans are organized into four metal tiers based on actuarial value, which is the average percentage of total healthcare costs the plan covers. A higher actuarial value means the plan pays more of your costs but charges a higher monthly premium.

• Bronze (60% actuarial value): Lowest premiums, highest deductibles. The plan covers about 60% of average costs. Best for healthy people who want catastrophic protection at minimal monthly cost.
• Silver (70% actuarial value): The most popular tier. Covers about 70% of costs and is the only tier eligible for cost-sharing reductions (CSRs) that dramatically lower deductibles and copays. Also the benchmark tier for calculating premium tax credits.
• Gold (80% actuarial value): Higher premiums, but significantly lower deductibles and out-of-pocket costs. A strong choice for people who use healthcare services regularly or take expensive medications.
• Platinum (90% actuarial value): Highest premiums, lowest cost-sharing. Deductibles are often zero or near-zero. Not available in all markets. Best for people with significant, predictable healthcare needs.
• Catastrophic plans: Available only to individuals under age 30 or those with a hardship or affordability exemption. Very low premiums and very high deductibles. They cover three primary care visits per year and preventive services before the deductible but are not eligible for premium tax credits.

Essential Health Benefits: What Every ACA Plan Must Cover

Every marketplace plan must cover ten categories of essential health benefits (EHBs), ensuring a baseline level of comprehensive coverage regardless of which plan or tier you choose:

1. Ambulatory patient services (outpatient care, doctor visits, outpatient surgery)
2. Emergency services (ER visits, including out-of-network emergencies without prior authorization)
3. Hospitalization (inpatient stays, surgeries, overnight care)
4. Maternity and newborn care (prenatal, labor and delivery, postnatal care)
5. Mental health and substance use disorder services (counseling, psychotherapy, inpatient treatment)
6. Prescription drugs (generic and brand-name medications per the plan formulary)
7. Rehabilitative and habilitative services and devices (physical therapy, occupational therapy, speech therapy)
8. Laboratory services (blood tests, imaging, diagnostic testing)
9. Preventive and wellness services and chronic disease management (vaccinations, screenings, checkups — covered at no cost before your deductible)
10. Pediatric services, including dental and vision (children's healthcare, dental checkups, and vision exams; adult dental and vision are not required)

While all plans must cover these ten categories, specific services, drug formularies, and provider networks vary from plan to plan. Always review a plan's Summary of Benefits and Coverage to understand exactly what is covered and what your costs will be.

Premium Tax Credits and Cost-Sharing Reductions

The ACA provides two forms of financial assistance: premium tax credits (PTCs) that lower your monthly premium, and cost-sharing reductions (CSRs) that lower your deductibles, copays, and out-of-pocket maximums.

Premium Tax Credits

Premium tax credits are available to individuals and families with household incomes between 100% and 400% of the federal poverty level (FPL) who purchase coverage through the marketplace. Under the enhanced credits originally introduced by the American Rescue Plan Act and extended through the Inflation Reduction Act, consumers with incomes above 400% FPL can also receive credits if their benchmark premium would otherwise exceed 8.5% of household income. For reference, 100% FPL is approximately $15,060 for an individual and $31,200 for a family of four in 2026.

The credit amount is calculated on a sliding scale based on income and is benchmarked to the second-lowest-cost Silver plan in your area. You can take the credit in advance to reduce your monthly premium or claim it on your federal tax return. The enhanced credits are currently set to expire after 2025 unless Congress extends them, which could significantly affect premiums for millions of enrollees.

Cost-Sharing Reductions

CSRs are only available if you choose a Silver plan and your income is between 100% and 250% FPL. They increase the actuarial value of your Silver plan:

• 100% to 150% FPL: Enhanced to about 94% actuarial value — better than Platinum. Deductibles often drop to $0 to $75 with out-of-pocket maximums as low as $1,300.
• 150% to 200% FPL: Enhanced to about 87% actuarial value with significantly reduced deductibles and out-of-pocket maximums.
• 200% to 250% FPL: Enhanced to about 73% actuarial value with more modest but still meaningful reductions.

If you qualify for CSRs, choosing any tier other than Silver means leaving money on the table. The combination of premium tax credits and cost-sharing reductions makes Silver plans the best value for most low- and moderate-income consumers.

Open Enrollment vs. Special Enrollment Periods

You cannot sign up for a marketplace plan at any time. The ACA uses defined enrollment windows to manage the insurance risk pool.

Open Enrollment is the annual window during which anyone can enroll in, renew, or change a marketplace plan. For the federal marketplace, open enrollment for 2026 coverage typically runs from November 1 through January 15. Some state exchanges extend their deadlines through January 31 or later. During this period you can enroll for the first time, switch plans or tiers, and update household and income information.

Special Enrollment Periods (SEPs) allow enrollment outside of open enrollment if you experience a qualifying life event. SEPs generally last 60 days from the event. Qualifying events include:

• Losing existing health coverage (job loss, COBRA expiration, aging off a parent's plan)
• Getting married or divorced
• Having a baby, adopting a child, or placing a child for foster care
• Moving to a new zip code or county with different plan options
• Losing Medicaid or CHIP eligibility
• Becoming a U.S. citizen or gaining lawful presence

Voluntarily dropping your coverage does not qualify you for a Special Enrollment Period. You will generally need documentation to verify your qualifying event.

How to Apply for ACA Marketplace Coverage

There are several ways to apply for marketplace coverage:

1. Apply online at HealthCare.gov or your state exchange. Create an account, complete the application with household and income information, review plans and subsidies, and select a plan.
2. Call the marketplace at 1-800-318-2596 (TTY: 1-855-889-4325) to apply by phone with a representative who can walk you through the process.
3. Work with a licensed agent or broker who can help you compare plans and enroll at no cost to you. Agents are paid by the insurance company.
4. Get help from a Navigator or certified application counselor. These are trained, impartial assistors who provide free enrollment help without recommending specific plans.

To apply, have Social Security numbers for household members, employer and income information, current health coverage policy numbers, and your most recent tax return handy. Your subsidy amount depends on your projected annual household income, so accuracy matters.

The Individual Mandate and State Penalties

The original ACA included a federal individual mandate requiring most Americans to have qualifying health insurance or pay a tax penalty. The Tax Cuts and Jobs Act of 2017 reduced the federal penalty to $0 starting in 2019, so there is currently no federal tax penalty for being uninsured.

However, several states and the District of Columbia have enacted their own mandates with financial penalties:

• California: The greater of 2.5% of household income above the filing threshold or a flat amount ($900 per adult, $450 per child, up to $2,700 family maximum).
• Massachusetts: Has maintained a mandate since 2006. The penalty varies by income, age, and months without coverage and can reach several hundred dollars.
• New Jersey: Mirrors the original federal structure — 2.5% of household income or approximately $695 per adult, whichever is greater.
• Rhode Island and Washington, D.C.: Both follow structures similar to the original federal penalty, assessed through state tax filings.

Purchasing a marketplace plan satisfies all state mandates. Exemptions are typically available for financial hardship, religious objections, short coverage gaps under three months, and incomes below the filing threshold.

Key ACA Consumer Protections

The ACA established consumer protections that apply to all ACA-compliant plans, including employer-sponsored coverage:

• Pre-existing conditions protection: Insurers cannot deny coverage, charge higher premiums, or exclude conditions based on your health history.
• No lifetime or annual benefit limits: The ACA prohibits dollar limits on essential health benefits. Before the law, a single serious illness could exhaust a plan's lifetime cap.
• Dependent coverage to age 26: Young adults can stay on a parent's plan until turning 26, regardless of marital status, residency, or financial independence.
• Free preventive care: Over 60 preventive services — vaccinations, cancer screenings, blood pressure checks, well-child visits, contraception — are covered at no cost, with no copay or deductible.
• Out-of-pocket maximum: Every plan must cap your annual in-network out-of-pocket spending. For 2026, the limit is $9,200 for an individual and $18,400 for a family.
• Gender equality in pricing: Insurers cannot charge women more than men. The only rating factors allowed are age, location, tobacco use, and plan selection.
• Appeals process: You have the right to an internal appeal and an independent external review if your insurer denies a claim or ends your coverage.

Average Costs by Metal Tier

Actual costs vary significantly by state, age, and plan design. The figures below represent national averages for individual coverage before subsidies are applied.

Bronze Plans

• Average monthly premium: $350 to $450
• Typical deductible: $6,000 to $8,000
• Out-of-pocket maximum: $8,000 to $9,200

Silver Plans

• Average monthly premium: $450 to $575
• Typical deductible: $4,000 to $6,000 (without CSRs); $0 to $2,500 (with CSRs)
• Out-of-pocket maximum: $7,000 to $9,200 (without CSRs); $1,300 to $6,500 (with CSRs)

Gold Plans

• Average monthly premium: $525 to $675
• Typical deductible: $1,000 to $2,500
• Out-of-pocket maximum: $6,000 to $8,500

Platinum Plans

• Average monthly premium: $650 to $850
• Typical deductible: $0 to $500
• Out-of-pocket maximum: $2,000 to $4,500

The majority of marketplace enrollees receive subsidies that bring their actual monthly premium well under $100. Your costs depend on income, household size, age, location, and plan selection.

Tips for Choosing the Right ACA Marketplace Plan

Selecting the best marketplace plan requires balancing your budget, expected healthcare needs, and comfort with financial risk.

1. Estimate total annual costs, not just the premium. Add up annual premiums, expected deductible spending, and likely copays or coinsurance to compare your true cost across plans.
2. Verify your doctors are in-network. Provider networks vary even within the same metal tier. Confirm your preferred doctors, specialists, and hospitals participate before enrolling.
3. Check the drug formulary. If you take prescription medications, verify they are covered and check which cost tier they fall into.
4. Choose Silver if you qualify for CSRs. A CSR-enhanced Silver plan is often more valuable than Gold or Platinum for those with incomes between 100% and 250% FPL.
5. Consider your risk tolerance. If an unexpected $7,000 bill would be a crisis, a higher-tier plan offers more predictability. If you have savings and are comfortable with higher upfront costs, a lower-premium plan may save money.
6. Understand the plan type. HMOs require referrals and limit you to in-network providers. PPOs offer more flexibility but cost more. EPOs require no referrals but generally offer no out-of-network coverage except emergencies.
7. Keep your income estimate accurate. Underestimating income may require repaying credits at tax time. Overestimating means paying more in premiums than necessary. Report changes as they occur.
8. Do not auto-renew blindly. Premiums, networks, and formularies change annually. Always review all available options during open enrollment.

The Bottom Line

The ACA marketplace has made health insurance accessible to more than 23 million Americans who previously could not afford coverage or were denied it due to pre-existing conditions. The metal tier system provides a clear framework for comparing plans, premium tax credits and cost-sharing reductions can bring monthly costs to near-zero for eligible individuals, and the law's consumer protections ensure you cannot be denied coverage or hit with lifetime benefit limits.

The most important step you can take is to actively shop during open enrollment each year. Compare total estimated costs across tiers, verify that your doctors and medications are covered, and confirm you are receiving every dollar of financial assistance you are entitled to. If you need help, licensed agents, Navigators, and the marketplace call center are all available at no cost. Health insurance is complicated, but the marketplace was designed to simplify the process of finding and affording quality coverage.