Low and middle-income families are constantly worried about how they will cover the cost of health insurance. The Affordable Care Act (ACA) — also commonly known as Obamacare, offers subsidies to qualifying families to help make health insurance more affordable. Here’s everything you need to know about ACA subsidies.
Understanding ACA tax credit subsidies
One of the advantages of ACA is that it includes advanced premium tax credits to support individuals or families living with net incomes between 100% and 400% of the Federal Poverty Level (FPL) acquire health insurance in the federal or state Marketplace. In general, people who are eligible for ACA advance tax credits are also shielded from rising premiums because ACA subsidies usually increase (or decrease) in proportion to the premiums. This allows to maintain health insurance affordable.
According to the Centers for Medicare & Medicaid (CMS) in 2020, 87% of the 10.7 million people who purchased health insurance on the Marketplace received ACA premium subsidies.
In response to the social and economic challenges of the COVID pandemic, the Biden Administration stimulus bill passed into law in 2021. The American Rescue Plan Act (ARPA) temporarily extended these tax credits to individuals with incomes above 400% of the FPL and offered a more generous subsidy for the ones below 400%. Although, ARPA was set to expire on December 31, 2022, with the passage of the Inflation Reduction Act of 2022, the ACA tax credits expanded by ARPA will continue through December 31, 2025.
Do you qualify for Obamacare premium tax credit and related subsidies?
You qualify if…
You are an American citizen or legally present non-citizen living in the United States who does not have access to an affordable health insurance (like an employer-sponsored group health plan, Medicare, or Medicaid).
You don’t qualify if…
You are married and filing taxes separately (except in particular cases like spousal abuse or abandonment) or refuse to file income tax.
You have access to affordable employer-sponsored insurance but want to purchase family insurance because you can’t afford the cost-share for family coverage under the employer group health plan.
You are incarcerated.
Learning if your income qualifies for Obamacare premium tax credit and subsidies
If your net income is above 400% of the FPL…
You won’t pay premiums higher than 8.5% of your household income for a benchmark Silver plan. This 8.5% of household income also applies regardless you are purchasing family coverage. It is important to understand that, if your income is relatively high, the standard premium for a Silver plan in your area may be less than 8.5% of your household income.
If your income is below 150% FPL…
You may be eligible for a zero-premium benchmark Silver plan, even if you choose individual or family coverage.
If you earn 500% of the FPL…
You may benefit of some cost-sharing reductions of Marketplace plans accessible to people with lower incomes, if you do not have access to other affordable health insurance.
If your income is below 138% of the FPL…
(and your state has expanded Medicaid coverage)
If your income falls below the FPL, you may not qualify for subsidies, but you are more likely to qualify for Medicaid. Medicaid is the national healthcare program for low-income individuals and families.
How ACA subsides work?
First of all, you need to know there are two kinds of ACA subsidies: Advance Premium Credits and Cost-Sharing Reductions.
Advanced Premium Credits is the most common kind of subsidy and can help pay ACA health insurance premiums purchased on the Marketplace through the year. Now, if you qualify based on your projected income for the current year, you have two options:
Take the tax credit throughout the year to be paid directly to your health insurer to offset the premium of your coverage.
Pay the premium monthly fee in full and you will receive your tax credit when you file your income tax return.
Finally, keep in mind that tax-credit subsidies apply to ACA plans you can purchase on the Marketplace.
How to apply for Obamacare subsidies?
If you want to know if you and your family are eligible for ACA subsidies and you want to apply; or you have any questions about Obamacare, you can talk to one of our agents here.
Remember enrollment period is currently open, which runs from November 1st through December 15th, for coverage beginning on January 1st of the following year.
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