One of the significant contributions of the Affordable Care Act was the introduction of Obamacare subsidies to health plans purchased through the Marketplace. The Marketplace is the federal government platform that offers health insurance. And these subsidies will reduce the costs of insurance premiums for ACA-complaint programs bought there. These improvements make Marketplace health plans more affordable and accessible for millions of Americans. You can see health coverage options and costs for Obamacare plans here.
What kind of subsidies or financial assistance are available?
The Affordable Care Act made it possible for low and moderate-income individuals who would otherwise be ineligible for insurance through their employer or a federal health insurance plan like Medicaid to get registered in Obamacare with less concern for prices. There are primarily two types of subsidies available under the Affordable Care Act or Obamacare. It includes premium tax credits and cost-sharing subsidies. Furthermore, your eligibility for these Obamacare subsidies will depend on your income.
i) Premium tax credits
One type of ACA plan subsidy is the premium tax credit. It allows individuals with incomes ranging from one to four times the Federal Poverty Level (or FPL) to qualify for tax credits on their monthly premiums. This reduces the amount they pay in their monthly premiums for Marketplace plans.
In 2020, if an individual earns between $12,760 and $51,041, or a family of four’s combined earnings is between $26,200 and $104,800, they are likely to be eligible for a premium tax credit subsidy, which will then lower the costs of their insurance premiums each month.
Nonetheless, premium tax credits do not apply to catastrophic insurance plans. Furthermore, catastrophic health plans have lower monthly premiums than traditional metal-tiered plans. These plans are only available to a limited number of people:
- People under the age of 30
- Those who have received a hardship exemption
- Those who qualify for a hardship exemption
Do you meet the requirements for a catastrophic plan? If you qualify for these plans, they will appear as one of your options when you shop on Marketplace. But if you are eligible for premium tax credits, you might not be able to use them with these plans.
Metal tiers on the Marketplace plans
Marketplace plans are categorized into four metals-level coverage: Platinum, bronze, silver, and gold. Bronze plans have the lowest monthly premiums, but enrollees must pay more out of pocket when they use their program. This percentage changes as you progress through the metal tiers. On the other hand, platinum plans have the highest monthly premiums but lower out-of-pocket expenses associated with medical care.
Your premium tax credit subsidies can be applied to any metal-level ACA plan. These plans can only be obtained through the Marketplace or verified health insurance agents, like Insurance Shopping. When you shop for the Marketplace plans, you’ll notice reduced amounts for insurance premiums based on Obamacare tax subsidies for which you are eligible.
ii) Cost-sharing reductions or subsidies
Cost-sharing reductions are only available to participants enrolled in silver-level plans. These cost-sharing reductions are the additional savings that lower the amount you need to pay for deductibles, copays, and coinsurance. It’s essential to know that only silver plans are eligible for these additional savings, which also reduces the out-of-pocket costs you’ll pay for your medical services before your health plan begins to cover 100 percent of your expenses.
Cost-sharing subsidies lower the family’s upfront costs when they use medical services. This means that you will get reductions on copayments, deductibles, and coinsurance. Silver-level plans can have the same value as gold or platinum plans due to these cost-sharing subsidies. Check your eligibility for Obamacare subsidies by entering your zip code here.
Eligibility criteria for Obamacare subsidies
Let’s take a look at the eligibility standards for premium tax credits and cost-sharing subsidies.
Who qualifies for premium tax credits?
For 2022, you may be eligible for premium tax subsidies if you meet the following requirements:
- Have a household income that is one to four times the FPL standard criteria—in 2022, that’s $12,880 to $51,520 for an individual or $26,500 to $106,000 for a family of four.
- Not having access to low-cost coverage through an employer (including a family member’s employer)
- Not qualified for coverage through Medicaid, Medicare, or the CHIP (Children Health Insurance Program)
- Have U.S. residency or proof of legal citizenship
- If married, must submit taxes jointly to be eligible.
Eligibility for cost-sharing reductions
For 2022, you may be eligible for cost-sharing reductions if you have already received premium tax credits and have a combined family income between 100 and 250 percent of the FPL. Cost-sharing sponsorships are only available to low-income Obamacare beneficiaries who meet the premium tax credit requirements and purchase a silver coverage plan.
Subsidies and taxes
These subsidies are calculated based on your projected annual income. What if your income turns out to be less than you estimated? Then your tax credit will be reconciled when you file your income tax returns with the IRS. If you anticipate that your annual income will be lower than the previous year, you might be required to repay some of the subsidies. If you overestimated your payment, you might be eligible for additional grants in the form of tax credits. Find out more about Obamacare subsidies and taxes by clicking here.