What are health insurance Marketplace subsidies?
Subsidies in the form of premium tax credits are offered by the ACA, also referred to as Obamacare. These subsidies are aimed at helping low and middle income individuals and families who qualify buy affordable health insurance plans.
By using subsidies to offset premium costs, health insurance becomes more accessible and ensures that people don’t have to sacrifice expenses to pay for their health coverage.
How do ACA (Obamacare) subsidies work?
There are two types of ACA subsidies:
1.Premium Tax Credits: This common subsidy can be applied to reduce premium payments for ACA health plans throughout the year. Eligible individuals have the option to have this tax credit sent directly to their insurance provider decreasing their responsibility.
2. Cost Sharing Reductions (CSRs); These subsidies can further decrease out-of-pocket expenses like deductibles, copayments, and coinsurance for individuals earning between 100% and 250% of the federal poverty level. CSR subsidies are specifically for Silver level plans on the Marketplace.
How do you know if you’re eligible for a subsidy?
Prior to eligibility expansions made by the American Rescue Plan Act and Inflation Reduction Act, individuals & families earning between 100% and 400% of the poverty level could get tax credit subsidies.
Now there’s no income limit for getting a subsidy. Instead, the subsidy amount is determined by making sure that the cost of the Silver plan doesn’t go over 8.5% of the household’s modified adjusted income (MAGI). This means that even those with incomes above the 400% poverty level cutoff might now be eligible for subsidies if their premiums exceed 8.5% of their income.
Income Thresholds and Requirements for Subsidy Eligibility
To qualify for subsidies on premium tax credits you need to meet these criteria:
Your household income should be within 100% and 400% of the poverty level (or over 138% of FPL if you’re in a state with expanded Medicaid).
You should not have access to value employer-sponsored coverage or government-sponsored plans like Medicaid or Medicare.
You must be enrolled in a health insurance plan bought through the Health Insurance Marketplace.
You must be either a U.S. Citizen or a present immigrant.
The income thresholds for subsidy eligibility may vary each year. As of 2024 the income brackets are as follows:
Individuals: up to $58,320
Family of 4: up to $120,000
What factors determine the size of your premium tax credit subsidy?
Your household’s modified adjusted gross income (MAGI) relative to the poverty level (FPL).
The cost of the lowest-cost Silver plan (the 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 return.
Refer to the federal poverty level table to see where your MAGI stands as a percentage of the poverty level.
Check the subsidy percentage chart to figure out how much you need to contribute towards the benchmark plan premium based on your income level. Locate the cost of the Silver plan in your area. Deduct your expected contribution from the benchmark plan premium to determine your subsidy amount.
How to Apply for ACA Subsidies
To apply for premium tax credit subsidies you need to go through the Health Insurance Marketplace or have a licensed Enhance Health agent complete the process for you. When you sign up for a Marketplace plan your eligibility for subsidies will be assessed based on details like your household size, income, and other relevant factors that you provide.
Once approved you have the option to have the subsidy directly paid to your insurance provider monthly reducing your premium payments. Alternatively, you can pay the premium throughout the year and claim a tax credit when filing your tax return.
Can I get Premium Subsidies with any insurance?
No, premium subsidies are only accessible for health plans bought through the Health Insurance Marketplace. Plans purchased outside of this marketplace do not qualify for subsidies.
Conclusion
The ACA premium subsidies are pivotal in making health insurance more affordable and reachable for individuals with low and middle incomes.
By covering a portion of the fees these financial aids make sure that people and families can get the insurance they require without it being too costly. Knowing the qualifications and how to determine your subsidy sum is crucial when navigating the process and selecting the health coverage for your requirements.
