ObamaCare Subsidies on Your State’s Health Insurance Marketplace
ObamaCare subsidies can save you money on your premium and out-of-pocket expenses. ObamaCare subsidies are only available through the marketplace, let’s take a look at what subsidies are, how they work, and how you can apply for free or low-cost health insurance today.
Get the details on all of ObamaCare’s subsidy types below or see our sections on:
ObamaCare Cost Assistance Subsidy Facts
There are three types of cost assistance: Premium Tax Credits to lower your premiums, Cost Sharing Reduction subsidies for lower out-of-pocket costs, and Medicaid and CHIP. Let’s take a quick look at some cost assistance subsidy facts before we get to the details.
• Cost assistance subsidies are only available through your state’s health insurance marketplace and are only available during open enrollment (unless you qualify for a special enrollment period). The exceptions are Medicaid and CHIP, which can be obtained at any time of year, and Medicare, which has it’s own enrollment period.
• Although subsidies are only offered on marketplace plans, many Health Insurance Brokers outside the marketplace can help you enroll in a marketplace plan.
• Subsidies are based on income. In most states, anyone making less than 400% of the Federal Poverty Level (FPL) can get some type of subsidy on Marketplace plans.
• The Federal Poverty Level adjusts for inflation each year allowing an increasing number of Americans to qualify for more cost assistance.
• Those making under 400% of the FPL have access to tax credits, those making under 250% FPL are eligible for cost sharing reduction subsidies on silver plans, and those making under 138% (in states that expanded Medicaid) are eligible for Medicaid.
• The type of income used to determine subsidies is household Modified Adjusted Gross Income, or MAGI, which is a figure based on income after most deductions have been taken.
• If you qualify for cost assistance, a marketplace plan can’t cost you more than 9.5% of your income after tax credits are applied. The less you make, the lower the cap.
• The amount of cost assistance you can get is based on the second-lowest-cost Silver plans in your state’s Marketplace.
• Cost sharing reduction subsidies are only Available On Silver Plans.
• Tax credits can be applied in advance (partially or in full) to lower your premiums, or they can be adjusted on your federal income taxes.
• If your income changes, report it so that the marketplace can adjust your subsidies. You may qualify for bigger subsidies if your income decreases, and you will save yourself from having to repay advanced tax credits if your income increases.
• In order to adjust tax credits at the end of the year, you’ll need to file a Premium Tax Credit Form 8962 along with your 1040 Income Tax Returns. Your assistance amounts can change with even a slight change in income. This means that many will qualify for greater refunds due to Tax Credits, while some will repay a portion of their Advanced Tax Credit Payments.
• Aside from taking cost assistance immediately, you can also use an HSA (Health Savings Account) or other medical savings accounts to lower MAGI and spend tax-free dollars on care.
• If you don’t qualify for subsidies, you may want to see your options outside of the marketplace too; in some states, some plans aren’t offered on the marketplace.
• You may qualify for both cost assistance and an exemption from the tax if, after subsidies, the cheapest marketplace plans cost more than 8% of your income.
• Cost assistance is also available for small businesses with less than 25 full-time equivalent employees. Learn more about ObamaCare and Small Business.
ObamaCare Rebates and Refunds: While not a subsidy exactly, the ACA also includes provisions that help lower your premiums. If your insurer spends too much on overhead and not enough on care, they owe a rebate. In 2011-2013 alone, $1.9 million in rebates had been returned to customers. Rebates can be given as a check or applied to lower premiums moving forward. Learn more about the 80/20 rule and rate review provisions, which are saving people money on their premiums (often without them even knowing it).
Quick Subsidy Tips and Tricks
When projecting your income, keep these ObamaCareFacts.com pro tips and tricks in mind.
- When you report income to the Marketplace, you are reporting projected Modified Adjusted Gross Income (MAGI). This is expected income after most tax deductions.
- MAGI income amounts will place your household income somewhere on the Federal Poverty Level (FPL) Guidelines. Your place on the guidelines helps to determine your assistance amounts. This matters because most people can find extra deductions to claim, report high or low based on the fact they may make or lose extra income, and more.
- In states that didn’t expand Medicaid, you’ll get maximum assistance at 100% of the Federal Poverty Level. In states that did expand, you’ll need to report over 139% of the Federal Poverty Level. If you want a private plan with assistance, and not Medicaid, don’t report under these amounts.
- If you do want Medicaid, know if your state expanded. In states that did, anything under 138% FPL qualifies for Medicaid. In states that didn’t, eligibility can be based on more than just income, and income limits can be below 50% FPL.
- CHIP is generally extended to all low-income children. If you are a parent and your state didn’t expand Medicaid, you may have options under CHIP.
- If you claim less than 100% of the Federal Poverty Level, and your state didn’t expand Medicaid, you may not have coverage options. If you are on the cusp, you may want to consider reporting high and figuring out how to claim some extra income.
- If you want Cost Reduction Subsides, you must project between 100% – 250% of the Federal Poverty Level.
- If you report over 400%, you won’t get cost assistance.
- Cost assistance levels off between 300% – 400% FPL, so wherever you report in that range, your cost assistance will not change.
- Cost assistance levels off between 100% – 133% FPL as well.
- You don’t have to pay back Cost Sharing Reduction subsidies or Medicaid.
- You do have to pay back tax credits, but only up to the repayment limits (see below).
- If you don’t know how much you’ll make (because you are self-employed or seasonal variations for example), then you should consider taking only part of the tax credit up front to avoid repayment.
- The above being said, if you want the best value, report low, understand that you are reporting MAGI income after deductions, get a “Silver plan,” and be prepared to pay back excess tax credits on your income taxes using form 8962.
- Do adjust your information during the year to ensure you get the right cost assistance, but consider simply paying back excess credits if you know this will result in you losing cost assistance.
- Consider that an HSA can lower MAGI. If you are self-employed and make a profit, you can deduct 100% of premiums to lower MAGI too.
What is a Subsidy?
A healthcare subsidy (cost assistance) lowers the amount you spend on your monthly premium (via advanced premium tax credits) or reduces your out-of-pocket costs for things like copays, coinsurance, deductibles, and out-of-pocket maximums (cost sharing reduction). Subsidies are “subsidized” by the federal government and are paid for through taxes.
Who is Eligible For Subsidies Under ObamaCare?
Subsidy eligibility is based on income for all legal residents in the US. However, anyone who has access to affordable, employer-based health insurance, who is eligible for Medicare, or who falls in the “Medicaid gap” will not be able to get subsidies. Other restrictions apply.
During open enrollment, Americans making under 400% of the federal poverty level (FPL) can get a type of subsidy called advanced premium tax credits. Tax credits lower premium costs. Those making less than 250% FPL can get cost sharing reduction subsidies to lower out-of-pocket costs. Those making less than 138% FPL (in some states) may be eligible for Medicaid (which subsidizes both premiums and cost sharing). Subsidies are only available through your State’s health insurance marketplace.
Do I Qualify For ObamaCare’s Cost Assistance Subsidies?
Any legal resident under 65 making between 100%-400% of the Federal Poverty Level qualifies for cost assistance as long as they don’t have access to affordable employer coverage. Subsidies are only offered on Health Insurance Marketplace plans.
The best way to see if you qualify for subsidies is to simply find your state’s marketplace or the Federal Marketplace–HealthCare.Gov–and fill out an application. Applying doesn’t lock you in to buying health insurance, but it will give you an idea of your options.
You can use the ehealthinsurance.com subsidy calculator to see if you qualify for cost assistance on the marketplace and to learn about your health care options both inside and Outside Of The Marketplace at the same time. Alternatively, you can use our Subsidy Calculator to learn more.
REMEMBER: While qualified health insurance agents, brokers, and providers can help you see if you qualify for cost assistance subsidies and can help you sign up for a Marketplace plan, subsidies are only available for plans offered on your state’s marketplace. Keep reading to learn more about how cost assistance works with the Affordable Care Act.
Marketplace Subsidies and Open Enrollment
Marketplace subsidies must be obtained during Open Enrollment or, in the case of a qualifying life event, during a Special Enrollment Period.
You can apply for cost assistance before open enrollment, but you won’t be able to enroll in a plan with those subsidies until each year’s annual open enrollment period. If you would like to apply now, find your State using the link below or keep reading to get a better understanding of how subsidies work.
Click here to find your state health insurance marketplace (also known as an exchange).
The ObamaCare “Subsidy Cliff”
If your income is close to 400% of the Federal Poverty Level, it’s important to keep deductions and income in mind. Those who go over the “subsidy cliff” will be responsible for paying back tax credits. Learn more about paying back advanced tax credits (not cost reductions, subsidies, or Medicaid) below.
On that note, other important cut offs are:
- Less than 100% FPL — If your income is below this, you can’t get Marketplace cost assistance and could fall in the “Medicaid gap” if your state didn’t expand coverage to at least 100% FPL.
- Less than 138% FPL — If your state expanded Medicaid, then you are covered under Medicaid. In states that didn’t expand, subsidy amounts level off between 100% – 133% FPL.
- 100% – 150% FPL — This is the amount that qualifies you for maximum out-of-pocket assistance if your state didn’t expand Medicaid.
- 138% – 150% — You qualify for maximum assistance if your state did expand Medicaid.
- 250% FPL — This is the cut-off for out-of-pocket assistance. If you adjust your income over this mid-year, you lose your cost sharing reduction subsidies moving forward (but won’t owe them back).
- 300% FPL — At this amount subsidies level off. You’ll get the same amount of tax credits anywhere between 300% – 400% FPL.
- 400% FPL or more — You can’t get cost assistance; watch out for the “Subsidy Cliff“.
Keep reading to get in-depth information on everything ACA subsidy related.
What if I Don’t Qualify For Subsides?
If you don’t qualify for subsidies through the marketplace due to your income, then you’ll want to shop around outside the marketplace in addition to looking at Marketplace plans.
Not all of the plans offered in your region are offered on the marketplace, and not all insurers participate in the marketplace. Some will find their best option on the marketplace (even without subsidies), while some will find their best option outside the marketplace. We strongly suggest finding a trusted broker or agent to help you with the process of shopping outside the marketplace. There is no need to make a choice until you are ready. However, regardless of how you shop, you’ll need to obtain coverage during open enrollment in the individual market.
Can I get Subsidies If I Qualify For Medicaid?
If you qualify for Medicaid, or if your State didn’t expand Medicaid and you make less than 100% of the Federal Poverty Level, you will not qualify for subsidies on the health insurance marketplace. This affordability gap is sometimes called the “Medicaid Gap.”
ObamaCare Subsidies Fix For Insurance Purchased Outside of the Marketplace
Due to technical issues with their state’s website, some people in some states who bought insurance outside of the marketplace, despite qualifying for subsidies, could have retroactively signed up for a marketplace plan and received federal subsidies. The marketplace closed on March 31st, 2014, and the change had to be made before that deadline. Contact your insurance company for further details.
What if I Can’t Afford Health Insurance?
If you can’t “afford” health insurance, you may be exempt from the individual mandate (the requirement to buy insurance or pay a fee) and may be eligible for free or low-cost insurance through ObamaCare’s subsidies. Many Americans will be exempt from the requirement to buy health insurance but will still be able to get a free or very low-cost plan on the marketplace.
FACT: During open enrollment for 2014, the top reason why some people did not even look for coverage was the perception that they could not afford insurance. Applying for a marketplace account is the easiest way to find out if you qualify for assistance.
Can I Get Subsidies If I Qualify For Employer Coverage?
If you have access to affordable employer coverage that meets the minimum requirements, you can’t get cost assistance subsidies.
Can I Purchase Insurance On the Exchange if I Have Insurance Through Work?
You can purchase insurance on the exchange, but you (and your family) will not qualify for tax breaks, credits, or help on up-front costs unless either your employer offers substandard insurance (it must offer the same benefits as the basic Bronze plan sold through ObamaCare’s exchanges / marketplaces) or your insurance costs more than 9.5% of your income.
If your employer-based insurance doesn’t meet the above criteria, you should be eligible for subsidies. However, you’ll need your employer to fill out an employer coverage tool form before you can get covered.
The 9.5% cap is for the employee-only income, meaning the total cost of a plan offered by an employer to the employee can be more than 9.5% of family income. There is no rule that says your spouse, dependents, or you have to take the insurance your employer offers. The rule only states that they cannot receive cost assistance subsidies. If an employer-based plan is unaffordable, you may qualify for an exemption from the fee. Watch the following video on employee health insurance:
How Will Subsidies Affect My Cost?
As a rule of thumb, the less you make, the lower your premium will be (due to advanced premium tax credits) and the lower your out-of-pocket costs will be. The cost of your plan is based on what plan you choose, family size, location, age, and smoking status. Subsidies are then applied to the cost of your plan. When you use the marketplace, your subsidies will be calculated automatically and you’ll be able to compare plans and see your final price.
As you can see from the image below, ObamaCare’s subsidies can drastically lower the amount of your premium hat you are responsible for paying. However, as we’ll discuss below, if you gain or lose income during the year, you will be responsible for the difference on your year-end tax returns.
Above is the basic rule for cost assistance; below is how the above chart is actually calculated on your Premium Tax Credit form for your Tax Returns. The numbers on the left show a percentage of the Federal Poverty Level; the numbers on the right represent the maximum percentage of household income your premium can cost after tax credits.
Subsidies and Types of Marketplace Plans
Under the ACA, there are four types of plans. They’re referred to as “metal plans” since their quality corresponds to the value of their metal types. In other words, a “Gold” health insurance plan is better than a “Bronze” plan.
When purchasing a plan through the marketplace with cost assistance subsidies, you will be purchasing one of the above plans. The important thing to realize is that higher-cost plans mean less out-of-pocket costs to you and a wider network of doctors and hospitals to choose from.
Ideally, you’ll be looking for a plan with a high actuarial value (low out-of-pocket costs) and a low premium. Don’t make the mistake of buying a free or low-cost Bronze plan when you and your family could get a Sliver plan that covers a larger percentage of out-of-pocket expenses and saves you money in the long run. Check out some of our tips on buying health insurance.
The Federal Poverty Guidelines Help to Determine Subsidies
Subsidy calculations allow people earning up to 400 percent of the federal poverty guidelines to receive help with paying for their insurance. The following table explains the 2014-2015 poverty guidelines.
Federal Poverty Guidelines Used to Calculate Premiums, Cost-Assistance, and Taxes in 2014 – 2015:
|Federal Poverty Guidelines 2014|
|Persons in Household||2014 Federal Poverty Level for Continental U.S.||Medicaid Eligibility (138% of FPL)||Premium subsidy threshold (400% of FPL)|
If your income is less than the amount in the above table, you may qualify for coverage under Medicaid. However, your state must participate in Medicaid expansion in 2014. If it is not participating and you do not qualify for Medicaid under your state’s Medicaid rules, you must pay the entire cost of a plan bought through the marketplace.
ObamaCare provides three different kinds of subsidies. Medicaid / CHIP for those making less than 138% of the Federal poverty level (FPL), help with out-of-pocket costs for those making up to 250% of the FPL, and advanced premium tax credits for those making up to 400% of the FPL.
|Types of Cost Assistance: Health Insurance Financing||Individual Annual Income||Family of Four Annual Income|
|Medicaid health coverage (if your state
decides to offer it)
|Up to $16,105||Up to $32,913|
|Help to pay your premium (if you buy in
your state’s online marketplace)
|Between $11,670-$46,680||Between $23,850-$95,400|
|Subsidies for out-of-pocket costs (if you
buy in your state’s online marketplace)
|Up to $29,175||Up to $59,625|
ObamaCare and Advanced Premium Tax Credits
If you qualify for Advance Premium Tax Credits, you can use them immediately to lower your monthly premium expense. You pick how much in advance tax credits will apply each month towards your premium payment (up to a maximum amount). If you choose an amount that is less than your total Advance Premium Tax Credit, you get the difference back as a tax refund when you file your income taxes. However, if the total of your advance premium payments is greater than the amount of your credit, you must pay it back when you file your taxes.
Eligibility for Tax Credits
In general, you may be eligible for credits if you:
- buy health insurance through the Marketplace;
- are ineligible for coverage through an employer or government plan;
- are within certain income limits;
- file a joint return, if married; and
- cannot be claimed as a dependent by another person.
If you are eligible for the credit, you can choose to:
- Get It Now: have some or all of the estimated credit paid in advance directly to your insurance company to lower what you pay out-of-pocket for your monthly premiums during 2014; or
- Get It Later: wait to get all of the credit when you file your 2014 tax return in 2015.
If you need to adjust tax credits, that is done at tax time. There is an income-based limit to the amount of tax credits you must pay back.
Learn more from the IRS on Tax Credits.
|Income % of federal poverty level||Premium Cap as a Share of Income||Income $ (family of 4)||Max Annual Out-of-Pocket Premium||Premium Savings||Additional Cost-Sharing Subsidy|
|133%||3% of income||$31,900||$992||$10,345||$5,040|
|150%||4% of income||$33,075||$1,323||$9,918||$5,040|
|200%||6.3% of income||$44,100||$2,778||$8,366||$4,000|
|250%||8.05% of income||$55,125||$4,438||$6,597||$1,930|
|300%||9.5% of income||$66,150||$6,284||$4,628||$1,480|
|350%||9.5% of income||$77,175||$7,332||$3,512||$1,480|
|400%||9.5% of income||$88,200||$8,379||$2,395||$1,480|
|In 2016, the FPL is projected to equal about $11,800 for a single person and about $24,000 for family of four. Use the Kaiser ObamaCare Cost Calculator or this updated Cost Calculator from Covered California for more information. DHHS and CBO estimate the average annual premium cost in 2014 to be $11,328 for family of 4 without the reform. Source: Wikipedia|
ObamaCare and Out-of-Pocket Subsidies (Cost Sharing Reduction)
In order to receive out-of-pocket assistance (AKA cost sharing reduction subsidies), you must buy a Silver plan from the state exchange and have an individual or family income no greater than 250 percent of the Federal Poverty Level. This means that families in the lowest income group pay no more than 6 percent of their share of out-of-pocket expenses, while those at the upper level of the group pay up to 27 percent of out-of-pocket expenses. Combining Advance Premium Tax Credits with Out-of-Pocket subsidies creates an average subsidy of about $5,000 for families and individuals. However, low-income families and families with several children get larger subsidies than most.
Income Level Actuarial Value (the amount of costs a Silver plan will cover due to cost sharing reduction subsidies for % of the Federal Poverty Level).
100-150% FPL = 94% Actuarial Value
150-200% FPL = 87% Actuarial Value
200-250% FPL = 73% Actuarial Value
More than 250% FPL = 70% Actuarial Value
Sometimes these Actuarial Value levels are called Cost Sharing Reduction or CSR levels. When looking at summary of benefits and coverage, look for CSR Level 73, 87, or 94 to see what your plan will cover.
ObamaCare and Medicaid
For the least wealthy Americans, ObamaCare makes getting Medicaid easier. However, the same Supreme Court ruling that found the ObamaCare mandate legal also exempted states from expanding Medicaid and allowed expansion to be voluntary. This means that many of the states that oppose Medicaid expansion have not implemented it. In these states, the people most affected are likely not to be able afford health insurance from the state exchanges.
In states that have expanded Medicaid, coverage may differ from Silver plan coverage but still provides most benefits such as free preventive care. Learn more about Medicaid Expansion.
Subsidies are only available when you purchase a policy from your state health care insurance exchange. For those with questions, call the exchange and speak with a navigator. They are specially trained personnel who will be able to answer questions about subsidies, coverage, deductibles, and more.
The following video will give you a simple explanation of what ObamaCare Subsidies are and how they work:
Verify Cost Assistance Each Year
If you have cost assistance from last year, make sure to verify your income on your state’s marketplace and shop around for plans to ensure you are getting the best value you can.If you have a marketplace plan from last year, you’ll need to verify your cost assistance. You also may want to shop around for other marketplace options to ensure you get the best deal.
What Subsidies Do I Have to Pay Back?
You don’t have to pay back Cost Sharing Reduction Subsidies or Medicaid, but you could end up owing Advanced Premium Tax Credits up to the limit for your income level. See details of the Tax Credit form used to pay back Tax Credits.
Line 28. Repayment Limitation. This is limited to certain amounts to ensure that you can’t owe more than you can afford if you received too much in Advanced Premium Tax Credits.
|Income % of FPL||Filing Status:
|Less than 200% FPL||$300||$600|
|At least 200% FPL
but less than 300%
|At least 300% FPL
but less than 400%
|If your year end income exceeds 400% FPL, you will have to return the total amount of Advanced Premium Tax Credits you received.|
Apply For ObamaCare Subsidies Now
Remember that subsidies are only available through the ObamaCare’s health insurance marketplace. Make sure to check out your State’s Health Insurance Marketplace today. You can apply at any time to see if you qualify for cost-assistance, but you have to enroll in a plan during each year’s annual open enrollment.
Do I Qualify For Subsidies From ObamaCare?