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, as you may know, is the government’s platform for health insurance. These ACA subsidies lower the cost of monthly premiums for plans bought there. In turn, this makes Marketplace health insurance more affordable, accessible, and attainable for more people.
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. These subsidies are based on your income level. Marketplace 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 ACA 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 reduces the amount they pay for their premiums each month for Marketplace plans.
In 2020, if an individual makes between $12,760 and $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 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 plan? 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 the 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 lower out-of-pocket costs associated with care.
Your premium tax credits can be applied for any metal tier ACA plan. These plans are available only through the Marketplace or a verified Marketplace partner like HealthSherpa, which Group Plans Inc can help you navigate.
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 lowers 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, copays, and coinsurance. Because of the added subsidies available for silver-level plans, they can hold the same amount of value as gold or even a platinum plan.
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 – in 2020, that’s $12,700 to $51,040 for an individual or $26,200 and $104,800 for a family of four.
- Not have access to affordable health 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 jointly 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 expected? 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 might have to pay some of the subsidies 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.
Group Plans Inc is dedicated to making sure you are in the best plan to suit your needs, taking into consideration any ACA Subsidies and cost savings you may be eligible for. To find out more, please contact us at (623) 889-7600 or fill out the form below!