A Comprehensive Overview on ACA Subsidies

ACA-compliant health insurance plans

Affordable Care Act subsidies also referred to as Obamacare subsidies, are government subsidies designed for low or middle-income individuals or families. A subsidy system was created by the ACA to help low and middle-income individuals and families purchase health insurance through the health insurance marketplaces or exchanges. Therefore, while purchasing ACA-compliant health insurance plans, people need to know where their income stands in terms of the Federal Poverty Line. It is important, because depending on their income, they may qualify for ACA subsidies. All the Americans who qualify for subsidies can avail health insurance at a reduced price or no price at all.

What are ACA Subsidies?

ACA subsidies were made available to people who make between 100% and 400% of the Federal Poverty Line. These ACA subsidies are used to pay health insurance premiums for people, who would otherwise not be able to afford health insurance. People entitled to ACA subsidies are also protected from rising premium prices because with the increase in the premium price, even the subsidies are also increased. This is done to ensure that health insurance remains affordable for lower and mid-income individuals and families. People can also take these subsidies in advance, and if they use more advance payments than what they are given per month, then they will need to repay the difference amount. However, if they use less, then they get the difference as a refundable credit when they file their taxes.

Types of ACA Subsidies 

There are two types of ACA subsidies available to marketplace enrollees, who qualify for these subsidies under the Affordable Care Act.

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Advance Premium Credits

The most common type is called Advanced Premium Credits, and it works to reduce enrollees’ monthly health insurance premiums. Individuals and families can qualify for this subsidy at the beginning of the year, and it helps them pay for health insurance premiums throughout the year.

Cost Reduction Sharing

The Cost-sharing subsidy is designed to reduce enrollees’ out-of-pocket costs when they visit a doctor or require a hospital stay. Cost-sharing subsidies, unlike the premium tax credit that can be applied toward any metal level of coverage, can only be applied towards a silver plan. These subsidies are still available for enrollees of marketplace plan, the federal government will no longer reimburse the insurers for these subsidies. However, insurers are required by law to provide reduced cost-sharing for lower-income enrollees.

Qualifying for Obamacare subsidies

To receive the Affordable Care Act subsidies for coverage starting in 2020, enrollees of a marketplace plan should meet the following eligibility criteria:

  • Enrollees must be a U.S. citizen or legal resident, and currently living in the United States.
  • People should not be currently in prison.
  • People’s eligibility for the subsidies depends on the health insurance plans cost in their area.
  • People’s income should not be more than 400% of the federal poverty line.
  • Enrollees of marketplace plans should have a household income from one to four times the Federal Poverty Level, in 2020 the subsidy range in the continental U.S. is from $21,490 for an individual, and $25,750 for a family of four at 100% FPL to $49,960 for an individual and $103,000 for a family of four at 400% FPL.
  • Individuals should not have access to affordable coverage through an employer including the employer of their family members.
  • Individuals should not eligible for health insurance plans like Medicare, Medicaid, or the Children’s Health Insurance Program, or any other forms of public assistance.
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Applying for ACA Subsidies

Individuals looking to apply for ACA subsidies can apply through the government-run health insurance marketplace of their state. They can also apply through qualifying licensed agents or private online marketplaces associated with the government marketplace. An Individual’s eligibility for a subsidy is finally determined by the government, but actually, the subsidy comes through the government-run exchange.

How ACA Subsidies Work?

ACA subsidies work on a sliding scale, limiting an individual’s contribution toward their premiums to a fixed percentage of their annual income. Generally, the subsidies are available to enrollees earning 400%, or lower, of the federal poverty level. Individuals whose income is below the federal poverty level, usually do not qualify for ACA subsidies but may qualify for Medicaid. The value of the subsidy amount partly depends on the cost of the benchmark ACA plan of the enrollee’s area. If the cost of the benchmark plan is more than a certain percentage of their estimated annual income, then they get a subsidy of the difference amount. Individuals can use that subsidy amount while buying a qualified ACA health insurance plan.

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