On February 15, KFF released a brief examining federal health exchange subsidies available under the national health care reform law.  Noting that the subsidies will be available to individuals who are ineligible for public coverage and earn up to 400 percent of the federal poverty level (FPL), the authors project that 19 million individuals will be eligible for the subsidies by 2019.  The brief explains that, unlike tax credits, the subsidies are advance payments made directly to individuals.  The authors explain how the advance payment process will work and discuss potential tax reporting issues that may arise. 

From the report:

Beginning in 2014, the Affordable Care Act (ACA) will make available federal subsidies to eligible individuals for the purchase of health insurance through newly created health insurance Exchanges. These subsidies are a centerpiece of the law and are designed to provide financial assistance to millions of Americans who cannot afford health coverage today. It is estimated that by 2019, as many as 19 million people will receive subsidies through the Exchanges. Promoting broader participation in health insurance and making coverage more affordable are fundamental goals of the law; however, requirements that may increase the tax liability for some who receive advance payments of the subsidies and later have changed circumstances could dampen the number of people who apply for the subsidies and, ultimately, limit the number of people who gain coverage.

Full Report: Reconciliation of Advance Payments for Health Insurance Subsidies (PDF | 831 KB) 

Kaiser Family Foundation. (2011). Reconciliation of advance payments for health insurance subsidies.