What are Health Insurance Subsidies?
There are various Health Insurance subsidies and assistance programs put in place by the Patient Protection and Affordable Care Act (PPACA) to make the cost of health insurance for individuals/families more attainable and affordable. The reduction of insurance costs for individuals and families are aimed at expanding the participation of individuals within the Health Insurance Exchange, and to comply with the individual mandate requirement.
The Patient Protection and Affordable Care Act (PPACA) include specific provisions aimed at lowering premiums and cost-sharing obligations for people with low and modest incomes. Lower income individuals within 133%-400% of the federal poverty level (FPL) are able to obtain health care through the Medicaid expansion provision (If your state has accepted participation in the program), and middle class individuals are able receive health insurance subsidies. The adequacy of these assistance programs will be a key determinant of how many individuals who gain coverage and whether or not lower income individuals will be able to use the health insurance they obtain.
This post aims to answer and describe various financial assistance and subsidies provided under PPACA/Affordable Care Act/Obamacare for individuals and families purchasing coverage on their own through the health insurance market place.
Where are Health Insurance Subsidies available?
The Patient Protection and Affordable Care Act provides the option to each state to expand Medicaid to all eligible individuals within the new income guidelines. These guidelines extend to individuals with income below 138% of poverty. Individuals with higher incomes up to 400% are eligible to receive tax credits to reduce premium costs. These credits and subsides goes into effect starting January 1, 2014
Who’s eligible for Health Subsidies?
- US Citizen and legal residents, and families with income between 100%-400% FPL
- Anyone who purchase health care through his or her state Health Insurance Market place.
- Individuals who are not eligible for public coverage
- Individuals who do not receive a health plan from their employer.
- People offered coverage through an employer are also not eligible for premium tax credits unless the employer plan does not have an actuarial value of at least 60% or unless the person’s share of the premium for employer-sponsored insurance exceeds 9.5% of income
How much subsidies will be provided to individuals?
The amount of the tax credit that a person can receive is based on the premium for the second lowest cost silver plan in the exchange and area where the person is eligible to purchase coverage. A silver plan is a plan that provides the essential Benefits and has an actuarial value of 70%. (In PPACA, a 70% actuarial value means that on average the plan pays 70% of the cost of covered benefits for a standard population of enrollees.) The amount of the tax credit varies with income such That the premium that the premium a person would have to pay for the second lowest cost silver plan would not exceed a specified percentage of their income (adjusted for family size), as follows:
How will the health subsidies work?
The tax credits will be refundable and advanceable. A refundable tax credit is a tax credit available to a person even if he or she has no tax liability. An advanceable tax credit will allow an individual to receive assistance at the time that they make there purchase insurance rather than paying their premium out of pocket and waiting to be reimbursed when filing their annual income tax return.
PPACA requires exchanges to provide information to prospective enrollees about their eligibility for premium tax credits. The Secretary of Treasury through regulation will likely establish the process through which people apply for premium tax credits.
How to get more information on Health Subsidies?
In general information will be available through state exchanges during the application process, and for individuals that are currently employed the Department of Labor DOL requires every employer to provide their employees notices regarding the Health Insurance Exchange, and the available subsidies.
Calculating health Subsidy
Click here to use our Tax Subsidy calculator to get an estimate of your eligible subsidy amount.
This information and document was created through a combination of data from the Kaiser foundation, and ihealthcareudpates.com.