The Affordable Care Act (ACA, otherwise known as Obamacare) was signed into law by President Obama in 2010. Its goal was to make health insurance more accessible so that people can get the care they need without fearing the financial strain of medical bills.
Despite this important move towards accessible health insurance, many US citizens still struggled to afford it. This necessitated the inclusion of subsidies for those living close to the poverty line. However, all the technical jargon surrounding the subsidies can be a bit confusing and difficult to understand. That’s why we have put together this guide.
So, do you need to know how the Obamacare subsidies work and if you’re eligible for them? Read this guide to learn all you need to know to access affordable health insurance that meets your needs.
An Overview Of ACA Subsidies
To understand Obamacare subsidies, you first need to understand Obamacare in general.
Medicaid, a federal-state program offering assistance with healthcare, was established in 1965. However, many people didn’t qualify for it, despite having low incomes and being unable to afford regular health insurance. This changed with the enactment of the Affordable Care Act in 2010.
Under Obamacare, as it soon became known, the initiative first started through Medicaid was expanded. Health insurance became accessible for all US citizens. It also became mandatory to have health insurance.
Why Subsidies Were Introduced
Although most states no longer enforce the individual mandate, it’s a risky move to go without insurance. Healthcare can be very expensive without insurance and is therefore out of reach of millions of US citizens. But what if, despite cheaper insurance options, you still can’t afford it?
This is where ACA subsidies come in. They make the requirement to have health insurance easier to fulfill by reducing upfront costs or offering tax credits.
Types Of Subsidies
Everything from emergency care to your annual physical costs can be very high without health insurance. That is why we urge everyone to get covered, especially if you have a family to support. Obamacare health plans are your most affordable route to good health care.
The ACA subsidies can help with your insurance plan costs in different ways, as there are different types of subsidies.
Cost-Sharing Reductions
Cost-Sharing Reductions (CSRs) don’t lower your monthly premium. Instead, they reduce the upfront payments you’ll incur when seeking medical treatment. This includes co-payments, co-insurance, and deductibles.
This makes a big difference to your budget when unexpected medical situations arise. Obamacare health insurance plans are available as bronze, silver, gold, or platinum plans, with the bronze being the most affordable and the platinum being the most expensive.
However, the lower-cost plans generally offer less coverage and have fewer participating medical facilities on the network, than higher-cost ones do. Higher-priced plans will offer a wider network of doctors and clinics to choose from and more comprehensive coverage.
CSRs are only applicable to Silver Plan Options.
Premium Tax Credits
Premium tax credits can reduce your monthly premium amount, which saves you money consistently throughout the year.
If your household’s total net income is between 100% and 400% of the Federal Poverty Level (FPL), you qualify for Premium Tax Credits. Obamacare Premium Tax Credits can reduce your monthly premiums on the benchmark Silver Plan.
This applies to plans on the state or federal Obamacare Health Insurance Exchange. You may even be eligible for a zero-premium benchmark Silver Plan if your total household net income is below 150% of the current FPL. Take note that the FPL is assessed and, if necessary, updated annually.
This subsidy is also available as an annual tax credit, which is a type of retroactive saving on your premiums.
Can Everyone Receive Premium Tax Credits?
Premium tax credits are one of the most popular ACA subsidies. But while not everyone qualifies for them, it’s available to more people than you might think. For people who don’t meet the income criteria, in states that did not adopt the ACA’s Medicaid expansion, there’s still hope for a premium tax credit.
Such individuals may receive tax credits to purchase an ACA insurance plan on the federal Health Insurance Marketplace. So, if your income is deemed too high for Medicaid or too low for ACA subsidies, you may qualify for this exception, until the year 2025.
Eligibility Requirements
Obamacare makes health insurance easier to obtain, through the federal health insurance marketplace, or state-operated exchanges. The criteria for Obamacare are determined by your income, as well as other factors like your citizenship status. But how can you know if you’re eligible for the Obamacare subsidies?
You’ll need to have a total household income of 100% to 400% of the Federal Poverty Level (FPL). You also need to meet the requirements of Obamacare applications, which are:
- US citizenship (or legal residency)
- Not incarcerated at the time of application
- Over the age of 18 years – if not, you should be covered by your parent’s health plan
- Not covered by a parent or spouse’s insurance plan
- No employer-sponsored health insurance coverage
What About Migrants/Immigrants?
Legally present migrant workers or immigrants/refugees can enroll in Obamacare plans offered through the federal exchange. They can also receive ACA subsidies. Their eligibility is determined, as with US-born citizens, by their total household income level.
They may qualify for cost-sharing reductions or reduced premiums, on Silver tier insurance plans. However, tax credits received retroactively would only apply to taxpayers. Similarly, US-born taxpayers who file taxes separately from their spouses would be ineligible for this particular benefit.
Tax Implications Of Subsidies
Depending upon your circumstances, you may receive health information forms from the Health Insurance Marketplace, health coverage providers, or your employer. These forms are meant to be filled in with your and your spouse’s or dependents’ health coverage information.
This information is required when you file your income tax return. Health coverage providers, the health insurance marketplace, and employers are also legally required to file these forms with the IRS.
How And When To Apply For Obamacare Subsidies
Depending on your individual circumstances, you may find that one type of subsidy benefits you more than another. These ACA subsidies are available to all people who meet the eligibility criteria set out by the government. But regardless of which you find more suitable, you’ll have to apply for it.
This can be done in one of several ways. On the government-run health insurance marketplace, your state’s own health insurance exchange (if they have one), through a private online marketplace, or an insurance broker like Enhance Health.
Subsidy applications must be done when applying for Obamacare, during the enrollment period from November 1st through January 15.
Once you have determined your eligibility, you can take advantage of these subsidies. Here is what you need to know to calculate your eligibility.
The Federal Poverty Level
The Federal Poverty Level (or Federal Poverty Line) is an economic measure that the government uses to determine whether individuals qualify for certain federal benefits and government-funded programs. Obamacare subsidies, because they are funded by the government, are subject to this measure.
The FPL for 2023 has been calculated as $14,580 for an individual. Add $5,140 for each additional household occupant.
Two States Have Their Own FPL Amounts
While the individual FPL figure above applies to the district of Washington DC and all US states, there are two exceptions. In the states of Hawaii and Alaska, the FPL is higher. In Hawaii, it is $16,770, and in Alaska, the FPL for an individual is $18,210.
Calculator For Subsidy Eligibility
You will only qualify for an Obamacare subsidy if your net income is within 100% to 400% of the Federal Poverty Line. But don’t worry, it’s fairly easy to determine if your income falls in this range.
This is how to calculate what percentage of the FPL your income is.
- To determine your eligibility by income level, establish what your net income figure is (what you receive after deductions).
- Add the net income figure for every member of your household.
- If you have looked at monthly figures, multiply this by 12 to get an annual net income figure.
- Divide your full net annual income figure by the total FPL figure for your household.
- Once you have done so, multiply the final result by 100 to get the household income percentage of the FPL.
Subsidy Renewal Process
You need to apply for Obamacare, and any subsidies you need/qualify for, yearly. But the rising costs of living may affect your ability to pay for health insurance, despite an otherwise good income. This means that those of you who didn’t need Obamacare subsidies before may need them now.
The expanded ACA subsidies, passed by the American Rescue Plan Act (ARPA) of 2021 were originally designed to be a temporary measure, lasting from 2021 through 2022.
ARPA temporarily extended tax credits to individuals with incomes above 400% of the FPL and made the subsidy more generous for people whose income fell below 400%. ARPA also expanded the ACA requirement that a health plan premium should not be more than 8.5% of an individual’s income.
Before this, only those with incomes below 400% of the FPL were eligible. The subsidies have, however, been renewed, thanks to the Inflation Reduction Act of 2022.
As part of the greater aims of the Inflation Reduction Act, the Senate passed a three-year extension (2022 to 2025) of ACA subsidies. This means that those already eligible receive continued subsidies without worrying about their insurance plan’s affordability once their ACA subsidy expires.
Subsidy Appeals
While you can apply for a subsidy at the same time, and through the same channels, as applying for Obamacare in general, there’s something you need to know. It is ultimately up to the government, who receives the subsidies and who doesn’t.
Therefore, you may find that even though you calculated that you are eligible, your application for a subsidy was unsuccessful. If so, what do you do?
Fortunately, there is an appeals process for the unlikely event that a genuinely eligible citizen does not get approved for a subsidy. You can appeal through the Center of Appeals on the federal marketplace or through your state-run exchange.
Extensions
There is a 90-day time frame to appeal, but in certain circumstances, such as a life event that prohibited you from instituting an appeal timeously, an extension may be granted. This is also sometimes possible in cases of late enrollment for Obamacare.
Subsidy Alternatives
Are there any alternatives to the above ACA subsidies? Yes. If you are not eligible for ACA subsidies, that doesn’t mean that you’re doomed to pay exorbitant premiums. At Enhance Health, we have the expertise you need to find affordable health insurance for your particular situation.
Employed or not, single or married with kids, everyone’s financial situation is unique. But there’s a health plan for you, no matter which category you fall into.
Our years of experience in the health insurance industry have put us at the forefront of affordable insurance coverage. We make understanding Obamacare, subsidies, and eligibility easy, with the right information. And we are qualified to help you sign up for it.
No hidden costs, no confusing legal speak, just sound advice and service.
Conclusion
If you earn a total net income of between 100% and 400% of the Federal Poverty Level and are a US citizen or legal resident, you may be eligible for a subsidy to help with Obamacare insurance plan costs. Even if you have a low income (or no income), there are options for you under the ACA.
At Enhance Health, we know that knowledge is power. That’s why we offer you the advice and assistance you need to find the most affordable health insurance plan that meets your budget and your needs. Let our team of experts guide you in selecting the right plan based on your circumstances.
