Despite ObamaCare, formally known as the Affordable Care Act, having been around for several years now there is still considerable uncertainty around the various tax credits and subsidies on premiums, deductibles, co-payments, and coinsurance. The value of these credits and subsidies are generally dependent on your modified adjusted gross income (MAGI) and family size and can significantly impact and alleviate your insurance costs in the year ahead. Two of the main assistance and subsidy programs are discussed below.
Premium Assistance Subsidies
The subsidy to lower monthly premium obligations is available for households whose income is 400 percent below the federal poverty level. The subsidy was created to ensure households do not spend more than a certain percent of their income on their mandatory health insurance coverage obligation. The table below shows the maximum (400%) income level to qualify for the premium assistance subsidy. The subsidy amount is based on a sliding scale (the lower your income, the more you get) and you’ll the see the actual amount/savings you are eligible for when you purchase your health plan via the marketplace.
|# Persons in Household||2015 - 100% FPL income threshold||2015 - 400% FPL income threshold||2016 - 100% FPL income threshold||2016 - 400% FPL income threshold|
|9+||add $4,160 for each additional person.||add $16,640 for each additional person.||add $4,160 for each additional person||add $16,640 for each additional person|
The premium assistance subsidies will be paid in the form of tax credits that can be deducted from what is owed in federal taxes, depending on how much is spent on health insurance. Your current year subsidy is based on the prior years income level. A monthly option to claim this subsidy is also in the works.
Out-of-Pocket Costs Assistance
Out-of-pocket costs are expenses for medical care that aren’t reimbursed by insurance and include deductibles, coinsurance, and co-payments. The government provided cost-sharing assistance program will limit out-of-pocket-costs based on income and family size. Health insurance companies offering coverage through the Marketplace must lower the amount you pay out of pocket for essential health benefits if your household income is generally between 100% to 250% of the federal poverty level.
When you apply for coverage in the Marketplace, you’ll learn if you’re eligible for these savings on out-of-pocket costs. Of the more than 11 million people who had in-force ObamaCare coverage, almost 85 percent were receiving some form of premium or out-of-pocket subsidies.
According to the official affordable care site, plans in the Marketplace are separated into 4 different categories: Bronze, Silver, Gold, and Platinum. These categories are based on how much of your medical costs you pay and how much the plan pays when you get medical care. They are not based on plan quality. If you qualify for out-of-pocket savings, you must choose a Silver plan to get the savings. In some cases, having a Silver plan will be like getting the cost-saving benefits of a Gold or Platinum plan for a Silver price. You can choose any category of plan, but you’ll get the out-of-pocket savings only if you enroll in a Silver plan.
Because the subsidies and cost sharing assistance programs are based on income it is important to double check you expected income. If the amount of your expected income you report isn’t accurate, you may not get the right amount of savings. If you wind up making more money than you predicted on your application, you could have to pay back some or all of the savings you’ve received. You would do this on your next tax return.
I will discuss other assistance programs and marketplace plans in upcoming posts and encourage you to subscribe (free) via Email or RSS to get the latest articles.