One of the key accomplishments of the Affordable Care Act (ACA) was the introduction of subsidies for health insurance bought on the health insurance Marketplace. The Marketplace is the government’s platform for health insurance. And these Obamacare subsidies lower the cost of monthly premiums for ACA plans bought there. In turn, this makes Marketplace health insurance more accessible, affordable, and attainable for more people. You can see health plans and prices for Obamacare plans here.
What types of subsidies are available?
The Affordable Care Act made it so that low- to moderate-income people who are not otherwise eligible for insurance through their employer or a federal health insurance program like Medicaid can get enrolled in Obamacare with less concern for cost. There are two types of subsidies for Marketplace insurance. (also known as Obamacare or Affordable Care Act insurance). These subsidies are based on your income level. Marketplace insurance — sometimes called Obamacare or Affordable Care Act insurance — allows enrollees to see if they qualify for these premium tax credits and cost-sharing subsidies.
Premium tax credits
The Premium Tax Credit is one kind of Affordable Care Act plan subsidy. It allows people at one to four times the Federal Poverty Level (FPL) to qualify for a subsidy on their monthly premiums. This then reduces the amount they pay for their premiums each month for Marketplace plans.
In 2020, if an individual makes between $12,760 to $51,040 or a family of four’s combined household income is between $26,200 and $104,800, these people are likely to be eligible for a subsidy through the Premium Tax Credit, which would then lower the cost of their health insurance premium each month.
Premium tax credits do not, however, apply to catastrophic health plans. Catastrophic health plans offer lower monthly premiums than standard metal tiered plans. Only certain people can qualify for catastrophic plans:
- People under the age of 30
- Those with a hardship exemption
- Those with an affordability exemption
Qualify for a catastrophic plans? Then you will see them displayed as part of your options when you shop the Marketplace. But if you qualify for premium tax credits, you will not be able to apply those to these plans.
Metal Tiers on the Marketplace
Marketplace plans are tiered into four “metal” levels of coverage: Bronze, silver, gold and platinum. Bronze plans have the lowest monthly premiums, but come with higher out-of-pocket costs for enrollees when they use their plan. This ratio changes as you go up through the metal tiers. Platinum plans, conversely, have the highest monthly premiums, but lowers out-of-pocket costs associated with care.
Your premium tax credits can be applied for any metal-level Obamacare plan. These plans are available only through the Marketplace or a verified Marketplace partner like HealthSherpa. When you shop for a health insurance plan in the Marketplace, you will see the reduced amount for your monthly premiums based on the premium tax credit for which you qualify.
Cost-sharing subsidies
Silver-level Marketplace plans are also often eligible for what’s known as Cost Sharing Reductions, which are extra savings that lower the amount you have to pay for copays, deductibles, and coinsurance. It’s important to note that only Silver plans are eligible for these extra savings, which also lower the out-of-pocket maximum you will pay for your health care services before your insurance plan starts to pay 100% of your costs.
Cost-sharing subsidies reduce a family’s out-of-pocket costs when they use health care services. This means reductions on deductibles, copayments, and coinsurance. Because of the added subsidies available for silver-level plans, they can hold the same amount of value as a gold or even platinum plan.
You can see if you’re eligible for subsidies by entering your zip code below.
Who is eligible for subsidies?
Eligibility for premium tax credits
For 2020, you may qualify for premium tax credits if you meet the following eligibility criteria:
- Have a household income from one to four times the Federal Poverty Level (FPL)—in 2020, that’s $12,760 to $51,040 for an individual or $26,200 and $104,800 for a family of four
- Not have access to affordable coverage through an employer (including a family member’s employer)
- Not eligible for coverage through Medicare, Medicaid, or the Children’s Health Insurance Program (CHIP)
- Have U.S. citizenship or proof of legal residency
- If married, must file taxes jointly in order to qualify
Eligibility for cost-sharing subsidies
For 2020, you may qualify for cost-sharing subsidies if you already receive a premium tax credit subsidy and have a combined household income between 100% and 250% of the FPL. Cost-sharing subsidies are only available to lowest-income Obamacare enrollees who meet the requirements for the premium tax credit and also purchase a silver-level plan.
Subsidies and taxes
These subsidies are based on your estimated income for the year. If your income ends up being different than what you estimated? Then the subsidy amount will be reconciled on your income tax returns when you file with the IRS. If you estimated your annual income to be lower than it was, you may have to pay some of the subsidy back. If you estimated your income to be higher than it was, then you may get an additional subsidy in the form of a tax credit. Learn more about subsidies and taxes here.