What are health insurance Marketplace subsidies?
Subsidies, which are also known as premium tax credits, are offered by the Affordable Care Act (ACA) which is commonly referred to as Obamacare. These subsidies are designed to help individuals who purchase plans through the Health Insurance Marketplace afford health insurance. By reducing premiums with subsidies, the goal is to ensure that even those with lower and middle income levels can access affordable health coverage without sacrificing other essential expenses.
How do ACA (Obamacare) subsidies work?
There are two types of ACA subsidies;
Advance Premium Tax Credits: This type of subsidy is more prevalent and can be used to decrease premium payments for Marketplace health plans throughout the year. Eligible individuals have the option to receive this tax credit directly from their insurance provider thereby lowering their obligations.
Cost Sharing Reductions (CSRs): CSRs offer assistance in reducing out-of-pocket expenses such as deductibles, copayments, and coinsurance for individuals with incomes ranging from 100% to 250% of the federal poverty level. Additionally, to qualify for CSRs an individual must enroll in a silver level plan.
How do you know if you’re eligible for a subsidy?
Before 2021 individuals and families earning between 100% and 400% of the poverty level could be eligible for tax credit subsidies. Recent legislation like the American Rescue Plan Act and the Inflation Reduction Act, however, have broadened subsidy eligibility significantly.
Now there is no limit on income for subsidy eligibility. Instead, the subsidy amount depends on ensuring that the cost of the Silver plan remains below 8.5% of the households’ Modified Adjusted Income (MAGI). This means that even those with incomes above the 400% poverty level threshold may now be eligible for subsidies if their premiums would otherwise exceed 8.5% of their income.
Income Thresholds and Requirements for Subsidy Eligibility
To qualify for tax credit subsidies you need to meet these criteria:
Your household income should fall between 100% and 400% of the poverty level (or above 138% of FPL if you reside in a state with expanded Medicaid).
You should not be eligible for employer-sponsored coverage or government programs like Medicaid or Medicare.
You must be enrolled in a health plan bought through the Health Insurance Marketplace.
You need to be a U.S. Citizen or a lawfully present immigrant.
The income thresholds for subsidy eligibility vary annually. For 2024 they are as follows;
Individuals; up to $58,320.
Family of 4; up to $120,000.
Determining Your ACA Subsidy Size
What factors determine the size of your premium tax credit subsidy?
Your household modified adjusted income (MAGI) compared to the federal poverty level (FPL).
The cost of the lowest-cost Silver plan (benchmark plan) in your region.
Here’s how you can calculate your subsidy:
Figure out your MAGI for the year. This is usually similar to your adjusted income, from your tax filings.
Use the federal poverty level chart to see where your MAGI stands as a percentage of the poverty level. First, check the subsidy percentage chart to figure out your expected contribution towards the premium of the benchmark plan depending on your income level. Then, look up the cost of the Silver plan in your area that serves as the benchmark. Finally, subtract what you’re supposed to contribute from the benchmark plan premium to determine your subsidy amount.
How to Apply for ACA Subsidies
To apply for premium tax credit subsidies you can call Enhance Health and one of our licensed agents will help you enroll in a Marketplace plan. Our licensed agents will assess if you qualify for subsidies based on details like your household size, income, and other relevant factors that you provide.
Once approved you can opt to have the subsidy sent directly to your insurer monthly, reducing your premium payments. Alternatively, you can pay the premium all year and claim a tax credit when filing your taxes.
Can I get Premium Subsidies with any insurance?
No, premium subsidies are exclusively offered for health plans bought through the Health Insurance Marketplace. Plans purchased outside of this platform do not qualify for subsidies.
Conclusion
The premium subsidies under ACA are vital in making health insurance more affordable and accessible, especially for those with moderate incomes.
By covering some of the premium expenses these subsidies play a role in making sure people and families can access necessary insurance without it being too costly. Knowing the criteria for qualification and figuring out how much subsidy you might receive is key to navigating the Marketplace and choosing a suitable health insurance plan that meets your requirements.
