In the interests of promoting enrollment in health insurance, the Affordable Care Act (otherwise known as Obamacare) legislated a government assistance program to offset the costs of health insurance. These health insurance subsidies will be granted on the basis of income and, depending on the level of need, will reduce:
Unlike many federal aid programs, the subsidy benefits shall extend beyond low-income individuals and families to those in the moderate-income range. The subsidies shall be provided in the form of tax credits. The tax credits are obtained through state exchanges or federal exchanges during the health insurance application process. To be eligible for a subsidy, a person cannot be eligible for coverage in Medicaid, Medicaid, or the Children’s Health Insurance Program (CHIP). Individuals who enroll in employer-provided health coverage that receives the minimum contribution level from the employer are also ineligible for a subsidy.
The health insurance subsidies cap insurance premiums as a percentage of income. However, "income" in this content refers to your Modified Adjusted Gross Income (MAGI). MAGI is determined by IRS rules pertaining to your taxable wages and other income minus applicable adjustments.
The below chart illustrates the sliding scale of caps where the cost of health insurance increases according to income level.
|Modified Annual Adjusted Gross||Premium After Government Subsidy|
|Up to 133% FPL||2% of income|
|133% to 150% FPL||Sliding scale from 3% of income to 4% of income|
|150% FPL to 200% FPL||Sliding scale from 4% of income to 6.3% of income|
|200% FPL to 250% FPL||Sliding scale from 6.33% of income to 8.05% of income|
|250% FPL to 300% FPL||Sliding scale from 8.05% of income to 9.5% of income|
|300% FPL to 400% FPL||9.5% of income|
|Above 400% FPL||No government subsidy|
The value of the subsidy that intends to enforce the premium cap works as follows. The annual cost of the benchmark Silver Plan is used as the estimated cost of health insurance coverage even if you choose a different plan. If the plan costs $10,000 annually and your income cap for premiums equals $4,000 then the subsidy is a tax credit worth $6,000 (i.e. $10,000 minus $4,000).
Subsidies, as mentioned earlier, are tied to the Federal Poverty Level. The 2014 Federal Poverty Levels have not been determined as of this date but the below chart estimates them using projections based on prior years.
|Federal Poverty Level||Individual||Family|
For people earning less than 250% the Federal Poverty Level, co-payments for covered health care services will be reduced.
While the Affordable Care Act places a maximum annual limit on out-of-pocket cost for covered healthcare expenses, there are income-based subsidies to further reduce these costs. The maximum out-of-pocket amount is reduced as follows: