Understanding Affordable Care Act subsidies for health insurance

What are ACA subsidies?

ACA subsidies are a form of financial help designed to make health insurance more affordable for individuals and families who purchase their own health insurance. You may qualify for subsidies if you do not have access to affordable health insurance coverage through your employer and are not eligible for Medicare or Medicaid. A health subsidy can help lower the cost of your insurance plan by reducing or eliminating your monthly premium and other out-of-pocket expenses for care. An estimated 9 out of 10 people nationwide qualify for an ACA health subsidy.¹

Health insurance subsidy eligibility depends on several factors, such as your income, your household size (including yourself, your spouse or domestic partner, and any dependents you claim on your taxes), and the cost of healthcare in your area. The ACA offers two types of health insurance subsidies for qualified individuals and families — Advanced Premium Tax Credits and Cost-Sharing Reductions.

Health Insurance Marketplace 

Understanding advanced premium tax credits

A premium is the fixed amount you pay your insurer each month to maintain health coverage. Advanced Premium Tax Credits (APTCs) are designed to reduce the cost of health insurance premiums, making it easier for more people to afford their monthly plan payment. 

When you apply for a Marketplace health insurance plan, you will find out if you qualify for a premium tax credit, including the estimated tax credit you may receive. The credit is paid directly to your insurer to reduce or eliminate the amount you pay for your monthly plan premium.

The APTC health subsidy is available for qualified individuals and families who purchase a Bronze, Silver, Gold, or Platinum insurance plan through the Marketplace. These health plan “metal” levels are how the ACA categorizes health insurance plans. All metal levels cover the same essential health benefits but differ in how you and your insurer share the overall cost of care.

Metal tiers help you compare plans by coverage level and cost so you can find a plan that fits your budget and health needs. When choosing a health insurance plan, check for availability, as not every metal level is available in all areas. Wellpoint offers ACA plans at the Bronze, Silver, and Gold levels.

Who is eligible for an advanced premium tax credit?

Eligibility for an APTC depends on several factors, including your household income and family size. Generally, your income must fall between 100% and 400% of the federal poverty level (FPL) to qualify. You must be a U.S. citizen, U.S. national, or a lawfully present non-citizen. 

If you have access to affordable employer-sponsored coverage, or qualify for a government program like Medicare, Medicaid, or the Children’s Health Insurance Program (CHIP), you would not be eligible to receive APTCs.

Understanding cost-sharing reductions

Cost-Sharing Reductions (CSRs) are another form of financial help under the ACA. For those who qualify, CSRs can lower out-of-pocket costs for healthcare services for individuals and families by:

• Lowering your deductible, the amount you must pay before your insurer begins to pay for covered medical care.
  
  
• Reducing copays and coinsurance. Copays are the fixed amounts you pay for services like doctor visits and prescriptions. Coinsurance is the percentage of healthcare costs you pay once you meet your deductible.
  
  
• Lowering your out-of-pocket maximum, the most you will pay for covered services in a plan year. Once you reach this limit, your plan covers 100% of eligible, in-network costs for care.

You can only qualify for CSRs if you enroll in a Silver plan through the Marketplace. CSRs are not available if you enroll in a Bronze, Gold, or Platinum plan. However, if you enroll in a Silver plan, you may qualify for both an APTC and CSRs, allowing you to maximize your healthcare savings.

Who is eligible for cost-sharing reductions?

CSR eligibility depends on your household income and family size. To qualify, your income must fall between 100% and 250% of the federal poverty level (FPL). When you apply for coverage, you will be asked to provide information about your income and family size, which will allow the Marketplace to determine your eligibility for both premium tax credits and cost-sharing reductions.

How much can cost-sharing reductions save you?

The amount you save with CSRs depends on your income level and the specific Silver plan you choose. Generally, the lower your household income, the more CSRs can help you save on out-of-pocket costs for care.

Remember that CSRs can help lower the maximum out-of-pocket (MOOP) amount that you will pay. If you qualify for CSRs and your income falls between 100% and 200% of the FPL, you may have considerably reduced out-of-pocket costs compared to those with higher incomes.

If your income is between 201% and 250% of the FPL, you may have a moderately lower MOOP limit — higher than those in the 100% – 200% FPL range, but still lower than the standard limit for Silver plans.