Affordable Care Act 101: A Crash Course in Subsidies and Tax Credits
The Affordable Care Act, established in 2010, enacted new regulations for the healthcare industry and made affordable health insurance plans more accessible. The ACA reduces costs of coverage through federal subsidies as well as boosts coverage for many consumers just like you.
Subsidies are provided to moderate and low-income families who meet certain criteria and do not have access to coverage through an employer, Medicaid, or Medicare. These subsidies are delivered to qualified enrollees through two ways: premium tax credits and cost-share reductions.
Subsidy A: Premium Tax Credit
Qualifying consumers with an ACA Marketplace insurance plan can use a premium tax credit to reduce their monthly payments. This reduction can be applied to any of the metal levels (Bronze, Silver, Gold, and Platinum), but it cannot be applied toward the purchase of catastrophic health insurance coverage.
- Eligibility for a premium tax credit requires that consumers meet certain criteria:
- Have a household income of one to four times the Federal Poverty Level
- Does not have access to employer-based affordable coverage
- Is not eligible for coverage through Medicare, Medicaid, the Children’s Health Insurance Program, or other forms of public assistance
- Is a U.S. citizen or proof of legal residency
- Files joint taxes if married
Subsidy B: Cost-Share Reductions
The second form of ACA subsidies is cost-sharing reductions, which work by reducing an individual or family’s out-of-pocket costs for using healthcare services. These costs include deductibles, copayments, coinsurance, and more. A key difference between cost-share reductions and the tax credit is that the cost-share reductions may only be applied toward a silver level plan, which makes it the most popular metal level plan.
Eligibility for a cost-sharing subsidy requires that consumers:
Are eligible to receive a premium tax credit
Have household incomes from 100% to 250% of the FPL
The cost share reductions are only available to the lowest-income portion of ACA Marketplace enrollees who satisfy all other criteria for the premium tax credit.
If you would like to get more information about eligibility or benefits of the Affordable Care Act’s subsidies, please contact Osborne Insurance Services for information from qualified insurance specialists, or get a quote here.