First, let’s clear up some important terminology you’ll need to understand in this area.
- ACA stands for the Affordable Care Act, signed into law in 2010. According to the government, the purpose of this law was to make health insurance available to more Americans, including those with preexisting conditions.
- The ACA is nicknamed “Obamacare.”
- Actually, its official full name is The Patient Protection and Affordable Care Act.
- Getting insurance under the ACA is also referred to as getting it from the Marketplace.
At its very simplest level, the cost of a person’s health insurance depends on their taxable income. The federal government provides subsidies for those with household incomes between 100 percent and 400 percent of the federal poverty level. This subsidy is officially referred to as a “premium tax credit.”
You can apply to the Marketplace for health insurance and, based on your medical needs and preferences, choose the best plan. Then, find out what your subsidy will be from the ACA.
Who Qualifies for This Health Insurance Subsidy?
Currently, an individual will qualify for a subsidy if their income is between $13,590 at the low end (the federal poverty level) and $54,360 at the top end. For a person at the lower end of this scale, their subsidy could reduce their health insurance premium cost to zero.
Naturally, these numbers scale up for couples and families with dependents. The greater the number of dependents, the higher the income can go and the family will still qualify for a subsidy.
Please note that these figures often change every year and that they are set by the federal government.
It’s also possible in some lower income situations, the government may additionally pay an individual’s deductibles and copays. This is referred to as “cost sharing.” Cost sharing can also reduce a person’s out-of-pocket costs. Their maximum out-of-pocket cost figure would be lower. And once they reach this level of expense, their health insurance would cover all further costs.
A person making less than the minimum income still has health insurance options. They might need to apply for insurance through their state rather than through the ACA. That’s one of the choices we help people with all the time.
What Else Affects the Amount of the Subsidy?
There are literally more than a thousand pages of laws involved in implementing the Affordable Care Act. Many other provisions have been enacted since 2010. Navigating all the laws applicable to any individual’s situation is challenging, to say the least!
The primary number that influences the amount of a person’s subsidy of their premium costs is the taxable income for the household for the current year only, not for any prior year. This figure includes both a person’s or the household’s earned income and unearned income.
- Earned income: This consists of wages, salaries, tips, and any other form of taxable compensation one receives as an employee. If a person is self-employed, it consists of their net earnings.
- Unearned income: This is all the income a person gets from sources other than the pay they get from their job or self-employment. It could include disability payments, Social Security, gambling or lottery winnings, retirement account distributions, and unemployment benefits. In other words, they didn’t work for it, but they received this income.
Add these two together and you get a person’s or household’s taxable income. The figure used to calculate the subsidy is the estimated total taxable income for the current year.
If the estimate provided when obtaining insurance under the ACA is too low, the individual may owe some of their subsidy back to the government when they file their taxes. If their estimate was too high, they may get a credit applied to their taxes at the end of the year.
Assets do not come into play when calculating the subsidy. And it’s the household income that matters, even if an individual is applying for health insurance coverage.
Adding dependents increases the amount of the subsidy.
We talk to people every day who have complicated financial, medical, or familial situations. We’re able to help them achieve the maximum benefits under the many, many laws affecting their costs and coverages. We can help you get the best coverage as well as explaining what your premiums will be and which medical costs will be covered. If you need help getting your best deal, just give us a call at (314) 544-5400 to see how MBhealth, a leading Missouri insurance broker, can help you.