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- People who meet income requirements may qualify for financial assistance when purchasing a plan through the Marketplace
- You can save by using a premium tax credit and/or cost-sharing reductions. Both of these are sometimes referred to as Obamacare subsidies
With the passage of the Affordable Care Act (ACA) — which is also known as Obamacare — many people who faced high costs for health insurance became eligible for certain programs. That financial assistance is provided through premium tax credits and other cost-sharing reductions for people getting insurance through the Marketplace.
After finding out how much your total estimated costs will be when using these subsidies, you can compare all of your options to find a plan that works for your household.
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Premium Tax Credits
When you take advantage of the premium tax credit, you have the option to apply that credit can go directly towards your monthly premium. Taking an advance payment of the premium tax credit can lower your monthly bill. Many people appreciate this aspect of the Affordable Care Act since it keeps their costs to a minimum and helps them maintain a more practical budget.
Alternatively, you can claim your credit when you file for taxes. If it’s determined that any amount is owed to you, you should receive this credit much like you receive your tax refunds.
When people talk about the Obamacare subsidy, they may also be referring to cost-sharing reductions. These are only available to people who purchase a Silver plan through the Marketplace, and you can find out whether you’re eligible to receive additional financial assistance when you apply for your plan.
Cost-sharing reductions work to lower your out-of-pocket costs. They can potentially reduce your copayments, coinsurance, and deductibles. This can actually result in significant savings, especially when considering that your deductible could be thousands of dollars lower after these reductions go into effect.
When you’ve hit your deductible, your insurance will cover 100 percent of the cost of your services for the remainder of the calendar year.
People who anticipate receiving a moderate amount of health care services in a given year may want to consider signing up for a Silver plan and seeing if they can receive cost-sharing reductions.
Who is eligible?
You can use an online tool at healthcare.gov to see if you may be eligible for any type of subsidy. It will be dependent on your household size and income. Your household income should fall between 100 and 400 percent of the federal poverty line. The credits are given on a sliding scale, so the lower your income the greater your credits.
When you apply for your plan through the Marketplace, you’ll automatically be notified if you qualify for either the premium tax credits or the cost-sharing reductions.
You can choose any type of Marketplace plan (Bronze, Silver, Gold, or Platinum) and still be eligible for premium tax credits. As previously stated, only people who sign up for Silver plans have the potential to receive cost-sharing reductions.
Besides income, there are several other conditions that you must meet to qualify for premium tax credits. You can only receive the credits if:
- You do not file a tax return as a married couple filing separately.
- You are not claimed as a dependent by another person.
- You are not eligible for Medicare, Medicaid, or TRICARE.
- You were not able to receive affordable coverage from your employer.
How do you determine your household income?
You have to gather information from everyone who files taxes together. Usually, this includes a married couple and any children who they claim as dependents. Adult relatives who are claimed as dependents are also included in a household when it comes to determining overall household income.
Then, you’ll calculate your modified adjusted gross income. This includes your adjusted gross income plus any:
- Tax-exempt interest
- Nontaxable Social Security benefits
- Excluded foreign income
This modified adjusted gross income is not included on your tax returns as a specific item, so make sure you take the time to calculate it on your own.
What if you received premium tax credits but actually had a higher income than you thought?
It can be hard to estimate your income for the year, especially if you work for yourself or experience any changes to your employment status. In some cases, people make more than they had expected to, and this can affect the amount of tax credit that they were actually eligible for.
You can use Form 8962 when filing your taxes to reconcile your tax credit. When filling out this form, you’ll be able to determine whether you took too many credits. If this is the case, any tax refund owed to you will automatically be reduced by the correct amount.
The Affordable Care Act can make insurance much more affordable for many Americans. People who cannot receive Medicare, Medicaid, Tricare, or affordable insurance through their employers may be able to receive financial assistance if their income falls in a certain range. This assistance is often called the Obamacare subsidy, and it can result in lower monthly premiums and/or lower out-of-pocket costs.
It’s always a wise idea to compare the different plans available to you before finalizing your insurance policy. Enter your zip code below and disover free quotes today to ensure you have the most affordable, reliable coverage!
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