The Affordable Care Act offers enrollees of marketplace plans two types of financial assistance: premium tax credits and cost sharing reductions.
The premium tax credit reduces monthly insurance payments for enrollees while cost sharing reduction helps them minimize out-of-pocket health care expenses when seeking health services.
RAND analysis found that without this provision of law’s individual mandate, approximately 12 million would remain uninsured and without coverage altogether.
Taxes
Taxes are payments made directly or indirectly to the government by individuals or entities; they may take the form of direct money payments or labor equivalent payments.
The Affordable Care Act (ACA) instituted several new taxes to finance health insurance coverage and reduce costs while simultaneously increasing tax revenues and decreasing deficits. This included measures such as premium tax credits, excise taxes on drugmakers and medical devices, as well as penalties on employers that offer inadequate insurance policies.
Taxes on high-income Americans were estimated to bring in over $200 billion between 2010 and 2019 as revenue for the Affordable Care Act (ACA).
Subsidies
Obamacare subsidies (known as premium tax credits) help cover health insurance premiums for people whose earnings exceed Medicaid eligibility but who cannot afford coverage themselves. Subsidies are calculated based on the cost of a benchmark plan in your state (for instance, it could be the second-lowest Silver plan in your area), with increments depending on income.
Subsidies were made available to individuals and families earning between $12,760 and $51,040 annually in 2021; thanks to recent legislation, people earning above this threshold may now qualify for premium subsidies in 2022 and beyond.
Cost Sharing Reductions (CSR), another type of Affordable Care Act subsidy, helps enrollees lower out-of-pocket costs by reducing deductibles, copays and coinsurance premiums. Unfortunately this benefit isn’t open to everyone but instead provided for many low-income people who qualify for premium subsidies but who have high deductibles or out-of-pocket costs.
Premiums
Premiums for Obamacare vary based on a range of factors including your age, income, family size and type of plan selected. Plus they vary between states and can even change annually!
People who qualify for subsidies get financial help with their monthly premium costs through a premium tax credit, which covers most or all of them.
If your income exceeds 138% of the poverty line, you could qualify for a premium tax credit. Use our Premium Tax Credit Calculator to see if this applies to you!
An example is a family with two adults and two children earning 250 percent of the federal poverty level, who can receive an annual subsidy of $2,775 – this equates to payments of $1,019 every month in advance payments.
Out-of-pocket expenses
Out-of-pocket expenses experienced by insured people often include deductibles, copayments and coinsurance premiums, which must be covered until 100% of medical expenses have been reimbursed by the insurer.
The Affordable Care Act limits deductibles, coinsurance and copayments in plans sold on health insurance exchanges to an annual maximum of $8,700 for individuals and $17,400 for families.
People looking for plans should carefully consider both their budget and health situation when making an informed choice. In particular, it’s essential that those choosing plans carefully consider all available plan options and insurers, including deductibles, copayments and out-of-pocket maximums before selecting their plan.
