Obamacare subsidies can help low-income households cover the costs associated with health insurance. You typically qualify for premium subsidies if your income falls between 100% and 400% of the poverty line; additionally, cost-sharing reductions could lower out-of-pocket expenses like deductibles and copayments.
Subsidies
The Affordable Care Act offers two forms of assistance to help reduce the costs of marketplace health insurance: premium subsidies and cost-sharing reductions. Individuals and families whose income falls near the federal poverty line can take advantage of premium subsidies. Their amount is calculated based on projected annual income; should your actual annual income differ, some or all of this subsidy may need to be returned.
At present, consumers can qualify for a $0 premium bronze plan using both federal and state subsidies combined, according to an analysis conducted by Kaiser Family Foundation. According to this data set in 2021 alone, an estimated 4.5 million individuals qualified. With new legislation such as American Rescue Plan 2022 and Inflation Reduction Act of 2022 expanding eligibility of income levels that qualify for subsidies; it’s expected this number will grow even higher by 2023.
However, it’s vitally important that you actively shop for marketplace coverage every year. Otherwise, you could miss out on new subsidies and cost-sharing reductions exclusively available with silver plans.
Cost-sharing reductions
Obamacare allows many Americans access to free or low-cost health care coverage thanks to cost assistance subsidies like Premium Tax Credits and Cost Sharing Reductions. Premium Tax Credits serve as advance payments that can be applied towards your monthly premium and reconciled on your tax return, while Cost Sharing Reductions don’t need to be claimed on federal income tax returns as reimbursement was previously reimbursed directly by health insurers for cost Sharing Reductions.
Cost-sharing reductions differ from premium tax credits in that they can only be applied towards silver plans on the marketplace. They lower deductibles, coinsurance and copays associated with silver plans – making them look more like gold or platinum plans for those that qualify. Unfortunately, under Trump administration there will no longer be funding to cover cost-sharing reductions and consumers may incur higher out-of-pocket costs when selecting non-silver plans.
Tax credits
Under Obamacare, tax credits can help pay for health insurance premiums. Your eligibility depends on both income and family size; those with lower incomes typically contribute less toward costs while some households qualify for free coverage altogether. Furthermore, the Affordable Care Act sets annual caps on how much a household can spend in terms of healthcare premiums that vary based on modified adjusted gross income (MAGI) thresholds – meaning your coverage could change every year!
The Premium Assistance Credit (or PTC), is available to anyone enrolling in a marketplace plan. Most people receive their credits directly to their insurer, which reduces monthly premium payments. However, if your actual income differs significantly from what was estimated when enrolling on an exchange, some or all of your credits may have to be repaid upon filing taxes; any overage will be reported back accordingly.
Premiums
As an enrollee of a marketplace, you may qualify for cost assistance subsidies like Premium Tax Credits and Cost-Sharing Reductions to help cover your monthly health insurance premium payments. These are calculated based on estimated income; should your earnings surpass expectations, any advanced premium tax credits may need to be returned when filing taxes; it’s also important to report changes to your income so the marketplace can adjust your subsidy amount appropriately.
Prior to recent legislation, households earning 400% or more of the poverty level were ineligible for Obamacare premium subsidies; but now thanks to changes to this rule will receive subsidies covering their benchmark plan costs up to this threshold. These rules will remain in place through 2025. This chart illustrates what you should pay based on your household income for your benchmark plan premiums.
