What is the income limit for Obamacare 2021?
Under the ACA, you must pay no more than 8.5% of your household income when purchasing health insurance – regardless of income level.
Subsidies can reduce the cost of your monthly premiums based on an estimate of your expected income for a coverage year. If actual earnings differ from what was expected, any subsidies may need to be repaid when filing taxes.
Individual
For 2021, the income limit for Obamacare subsidies will increase from $12,880 to $51,040 for an individual and $26,500 to $106,000 for families of four. This represents an increase from the initial income limit of $20,960 – $43,880 that took effect in 2014.
People with higher household incomes, particularly those living in regions where health insurance costs are high, may qualify for premium subsidies under the American Rescue Plan (ARPA). Their subsidy eligibility is determined by how much their benchmark plan would cost if sold on the exchange – up to 8.5% of their income.
However, it’s essential to know that contributions made to a health savings account (HSA) or pre-tax retirement plan will reduce your income for subsidy eligibility purposes. This could lower your ACA-specific MAGI, potentially leading to an increased subsidy if eligible.
Family
If your family income in 2021 (based on the 2020 federal poverty level) falls between $12,760 and $51,040, then you may qualify for an Obamacare premium tax credit. This credit is given directly to insurers when you enroll in a plan through the health insurance exchange and available immediately instead of waiting until after filing taxes.
The government offers the Advanced Premium Tax Credit as a subsidy to lower-income individuals for their marketplace plan premiums, which is administered directly by insurers. With this credit, you can reduce your monthly premium payments by an amount equal to what would have been charged if not eligible for the subsidy.
Congress passed the American Rescue Plan (ARP) in 2021 in response to concerns that Obamacare premiums might become too expensive for middle class families. This plan made two changes to subsidies: increasing assistance that people below 400% of the poverty line (FPL) can receive from a premium subsidy; and capping the maximum premium that an individual could pay for a benchmark Silver plan at 8.5% of their income.
Employer
Employers who offer health insurance to employees have the option of providing it to all full-time workers, part-time workers or those working 30 or more hours each week. However, in order for employees and their dependents to qualify for a premium tax credit, the offer of coverage must pass both “adequacy” and “minimum value” tests.
To make health insurance affordable, the Affordable Care Act requires health plans to meet certain standards, such as limiting lifetime and annual caps on coverage and allowing enrollees to spend no more than $9,100 out-of-pocket for in-network services in 2023. Furthermore, all health plans must cover ten categories of essential benefits.
Jose and Alma, married with two children, earn a combined annual income of $35,000. Jose’s employer provides employee-only coverage at $2,500 ($7.1% of their family income), as well as family coverage at $4,500 ($12.8%) of that same amount.
State
If you are shopping for health insurance in a state covered by Obamacare 2021, you may qualify for a premium subsidy. Subsidies are tax credits based on your estimated income during the coverage year rather than on what was reported on your previous tax return.
If your income increases during the year, it could affect your subsidy amount or coverage eligibility. Be sure to report any significant adjustments to Covered California or Medi-Cal so that you receive the correct level of assistance.
Prior to 2021, those making more than 400% of the federal poverty line (FPL) could not access an Obamacare subsidy. However, due to legislation passed in 2021, those between 100% and 400% FPL can now qualify for a tax credit on premiums.
Additionally, pre-tax retirement plan and HSA contributions can be used to reduce your ACA-specific MAGI for subsidy eligibility purposes. These savings will remain available from 2021-2025.
