Affordable health insurance is a must if you want to stay healthy and enjoy peace of mind in a medical emergency. The Affordable Care Act (ACA) made affordable insurance accessible for everyone. But despite this revolutionary healthcare reform, not everyone can afford insurance.
Fortunately, this issue was addressed by introducing tax credits and premium subsidies. But are you eligible for an ACA premium subsidy, and if so, how do you apply for it? This guide will tell you all you need to know about ACA premium subsidy eligibility, how they work, and how to get them.
What Is An ACA Premium Subsidy?
An ACA premium subsidy, sometimes called an Obamacare subsidy, is a tax credit that offsets some (or sometimes all) of your ACA health insurance costs. These subsidies do not apply to insurance plans that are not ACA-compliant.
You must meet specific requirements to be eligible for an ACA insurance plan. But when applying for a subsidy to help with the costs of that plan, you have to meet specific criteria as well. Subsidy eligibility is based on your net household income.
Who Is Eligible For An ACA Subsidy?
Your household must have a combined net income of at least 100% of the federal poverty level to qualify for a subsidy. In states that have expanded Medicaid, it must be at least 138% of the federal poverty level. There is an income cap of 400% of the poverty level, but until 2025, that cap will not apply.
For now, subsidy eligibility is based on the cost of the benchmark health insurance plan relative to income. (The ACA health plans are available across four tiers. The benchmark plan is a term used to describe the second-lowest-cost Silver plan available on the ACA Marketplace or state exchange for your state).
If your health insurance premium is more than 8.5% of your household’s income (a lower percentage may apply to households with very low incomes), you may be eligible for a subsidy.
How The ACA Health Insurance Subsidy Works
ACA subsidy eligibility may differ from state to state. You will receive accurate information about your state’s eligibility requirements on your health insurance exchange. If your state has yet to have its own exchange, you’ll find this information on the healthcare.gov website.
If you are unfamiliar with the ACA and its subsidies, you may think there is only one type of subsidy available. But there are, in fact, two types of ACA health insurance subsidies: the premium tax credit and cost-sharing reductions. The tax credit itself can also be received in two different ways.
Premium Tax Credit
This refundable tax credit is designed to help you pay for health plans purchased through federal or state exchanges. You may receive your premium tax credit in advance, which is paid directly to your insurer. Alternatively, you may claim it back when you file your tax return.
If married, you and your spouse must file a joint income tax return, or you won’t be eligible for a premium tax credit. If you don’t pay income tax, you are still eligible for a subsidy that will be paid directly to your insurer to offset your costs.
Cost-sharing reductions lower the monthly premium you pay for your ACA health insurance. This ACA provision is calculated on the cost of the cheapest benchmark plan on the Silver tier of the ACA Marketplace. Unlike premium tax credits, cost-sharing reduction subsidies apply only to Silver plans.
There are four metal tiers – Bronze, Silver, Gold, and Platinum. Bronze and Silver plans are generally the most affordable, but they also don’t always offer the comprehensive benefits that Gold and Platinum ones do.
Does The IRS Oversee ACA Subsidies?
Yes, they do, but to understand why, you must first understand the IRS’s role in Obamacare enforcement.
The IRS oversees certain ACA functions because ACA reforms include IRS tax provisions that affect everyone, from individuals to businesses, tax-exempt organizations, and government entities. Even the insurers themselves are affected.
That is why the IRS oversees ACA subsidies. And it’s why every US citizen and business must report their health insurance coverage status on their income tax returns.
Do I Qualify For A Tax Credit Or Subsidy?
You must meet specific criteria to qualify for a tax credit or subsidy. These are always income-specific and related to the Federal Poverty Line. So, what is this Federal Poverty Line that we keep referring to? And is it the same throughout the US? Let’s take a closer look.
Federal Poverty Level Guideline
The Federal Poverty Level (FPL) is a measure of income issued annually by the Department of Health and Human Services (HHS). It determines your eligibility for specific programs and benefits, including ACA Marketplace health insurance subsidies and even Medicaid and CHIP coverage.
The FPL for 2024 is set to $14,580 for individuals in the continental US. It is $30,000 for a family of four.
You will find more information about calculating your household’s subsidy eligibility in our guide to understanding Obamacare subsidies.
State-Specific Income Limitations
The Federal Poverty Line is the same nationwide, with two exceptions. It is higher in two states, Alaska and Hawaii. The FPL set for these states is higher than in the rest of the US due to their higher cost of living than in the continental US.
How Do People Receive The Premium Tax Credit?
You must file a tax return with form 8962 to claim this credit. This is the form used to determine the tax credit amount you are eligible for. It is submitted along with form 1095 – A, which you will receive from the ACA Marketplace.
After that, you will receive your premium tax credit in one of two ways; the choice is yours. You can have it paid directly to your insurer, meaning you’ll pay less monthly. Or you can claim it back when you file your tax return after paying the regular price for your premiums throughout the year.
Exemptions And Special Circumstances
Exemptions for special circumstances exist, such as instances where an individual did not initially qualify for a premium tax credit or cost-sharing subsidy, but subsequently experiences job loss or a decrease in income.
If you are married but not filing joint income tax returns because you live apart due to domestic violence or abandonment issues, you may still qualify for a premium tax credit. This does not apply to married people who prefer not to file joint income tax returns.
Must I Re-Apply Each Year?
No, you don’t have to re-apply if your circumstances have not changed. But you must renew your ACA insurance annually during the ACA Open Enrollment period. And when you do so, you must verify that your details are correct. You must report any changes to your income if you receive a subsidy.
Why Should You Report Changes To Your Income?
A boost in income may render you ineligible for further subsidies. Some Obamacare plans re-enroll automatically, but you must still report any employment status or income changes. The same is true for Medicaid and CHIP coverage, but not Medicare.
Are People With Medicaid Or CHIP Eligible For Premium Subsidies?
People with Medicaid or CHIP coverage are not eligible for ACA premium subsidies. Medicaid is not ACA insurance but a state-run health care program for lower-income households. It is, however, subject to the same rule under the ACA, which expanded Medicaid availability countrywide.
Likewise, CHIP, the Children’s Health Insurance Program, is not technically part of the ACA. However, it provides health insurance coverage to children from lower-income households and pregnant women who aren’t eligible for Medicaid.
Are There Age Limits For Premium Subsidies?
As a senior citizen, you may still enroll for ACA health insurance and an ACA premium subsidy. Senior citizens with retiree coverage are not eligible for premium tax credits based on that income. However, you may also qualify for premium-free Medicare Part A when you turn 65.
If this is true for you, you will not be eligible for an ACA premium subsidy.
If you can’t afford ACA insurance but don’t qualify for an ACA premium subsidy, Medicaid and CHIP are your best options. They are available at low cost and sometimes at no cost for low-income households and people who qualify for unemployment compensation.
Can I Get An ACA Subsidy If My Employer Offers Health Insurance Benefits?
No. If your employer offers affordable health insurance benefits with minimum value, you’re not eligible for an ACA subsidy. That’s because you’re already receiving a subsidy from your employer when they contribute to your premiums.
ACA subsidies are not designed for people who receive good, affordable health benefits through their employer. They are intended for people who work for a company that does not offer affordable health benefits, are self-employed, or have retired early.
Are There Ever Exceptions For People Who Get Insurance Benefits From Employers?
If your employer offers a health plan but doesn’t meet the affordability or minimum value rules, you can still buy supplemental insurance on the ACA Marketplace. And you may apply for ACA premium subsidies. But you’ll still have to meet the ACA’s eligibility criteria.
How Do I Enroll In The ACA?
Enrolling in the ACA is easy, and there are various ways to do it.
You’ll have to meet the eligibility requirements, though:
- US citizen or legally present in the US
- Residing in the US
- Not incarcerated
- Not covered by a spouse or relative’s insurance
- Not on Medicare
You may be required to submit proof of your citizenship or legal resident status, residence, employment status, and household income.
Where To Apply
You may apply on the ACA Marketplace, your state-run health plan exchange, or through a broker. You’ll see which insurers operate in your state and which plans they offer. You won’t necessarily find the same plans in all states.
For easy enrollment in an ACA plan, contact the experts at Enhance Health.
Our consultants cut through the jargon and the red tape and help you understand all you need to know about choosing health insurance. We do all the hard work for you, searching through the plans available in your state to give you the best options.
How Do You Calculate Your 2024 Obamacare Subsidy?
ACA/Obamacare coverage Open Enrollment for 2024 is between November 1, 2023, and January 15, 2024.
- For your coverage to start on January 1, 2024, you must sign up on December 15, 2023.
- If you sign up by January 15, 2024, your coverage will start on February 1, 2024.
To calculate your 2024 Obamacare subsidy, you need to know the total income for your household, the cost of the benchmark plan in your area, and the percentage you are expected to contribute based on your income. This can vary between 0 and 8,5%.
To get Affordable Care Act assistance, you must generally earn between 100% – 400% of the poverty level. For 2024, that is $14,580-$58,320 for an individual in the continental US.
But until 2025, this 400% Federal Poverty Level (FPL) Subsidy cut-off does not apply, thanks to the American Rescue Plan. It has been extended through 2025 by the Inflation Reduction Act. So, if you make over 400% of the FPL, your premium tax credits decrease as your taxable income rises.
There are many health insurance plans on the ACA Marketplace, and some are more affordable than others. But an ACA premium subsidy may be the answer if you struggle to make ends meet on your household income.
At Enhance Health, we have helped Americans like you get the best health insurance plan for their budget. We can help you choose the right ACA plan and advise you about applying for an ACA subsidy. We also help with Medicare Advantage enrollment. Give us a call today.