It can be tough for those with a relatively low or average income to afford health insurance, especially if their job does not give them health coverage. The Affordable Care Act (ACA) has been designed to reduce premiums and out-of-pocket costs for qualified individuals by providing sliding-scale subsidies.
This report outlines the monetary aid available under the Affordable Care Act for those buying plans on their own through health insurance Marketplaces (also known as exchanges).
Health Insurance Marketplace
Two kinds of financial help are available to people who have registered for the marketplace. The initial type of credit, known as the premium tax credit, assists with lowering the cost of the monthly insurance premium for enrollees. This form of aid strives to minimize the expenses incurred by those enrolled when they visit a doctor or need to stay in hospital. In order to qualify for either form of financial aid, people and families must sign up for a health insurance program provided through the Marketplace.
Enroll During Open Enrollment
Everyone has the ability to sign up for medical insurance on websites like HealthCare.com. You will need to register during the Open Enrollment Period, between November 1st and December 15th, every year in the majority of states. In certain locations such as California, Colorado and Washington, D.C., the registration period has been extended permanently, while other states commonly offer prolongations annually.
Enroll Because Your Current Plan Ended
If you involuntarily no longer have health insurance, like if you are no longer covered through a family plan or by a company, you have a two-month period to obtain new Affordable Care Act insurance.
It’s wise to shop around and compare prices when it comes to insurance in order to save money. Look into the following possibilities to see if you can find an economical coverage plan.
ACA Subsidies
If you decide to buy an ACA plan with all of the available features, make sure to determine if you are eligible to receive a subsidy from the Affordable Care Act (ACA), also known as a premium tax credit. Financial assistance from the Affordable Care Act (ACA) assists people in paying for their monthly health insurance payments, making medical coverage much more cost-effective.
In order to be eligible for Affordable Care Act subsidies, the least amount of money your household makes has to be at least one hundred dollars or 139% of the poverty line, depending on if your state participated in Medicaid expansion. Incomes cannot exceed 400 percent of the poverty level. This evaluation is calculated according to your supposed yearly wages, so it’s achievable to satisfy this requirement even if you are employed full-time for some of the year.
Take into account the complete income of everyone in the household when assessing the qualifications for subsidies. If you are still a dependent on your parents’ taxes, then your parents’ income would be taken into account when working out your eligibility for financial aid. If you are a single individual doing your own taxes, then only your own income will be taken into account.
If you are below the age of 26 and are still on your parents’ health plan but filing your own taxes, your salary will be combined with the amount of your parents’ income and together this amount will decide if your family is eligible for any subsidies. The subsidy payouts will be listed on each household’s tax return.
Medicaid
An alternate means of obtaining low cost medical care is Medicaid, a program administered by the government aimed at providing healthcare services to people of lower economic standings. Each state sets its own coverage guidelines. Medicaid provides coverage for necessary services such as medical appointments, testing, and reproductive healthcare.
The different states have various standards to decide Medicaid qualification criteria, but salary is always taken into account. States were offered the opportunity to increase the parameters for qualification for Medicaid under the ACA, but some states turned it down, causing a lack of coverage for people whose earnings are located beneath the poverty line.
Your eligibility is usually based on your income, much in the same way that subsidies from the Affordable Care Act (ACA) are decided.
Catastrophic Health Insurance
If you have found that all insurance plans have higher monthly premiums than you wish to pay or are able to pay, but you still desire coverage for medical emergencies, then catastrophic health insurance could be the solution for you. Catastrophic plans provide more extensive routine medical treatment than bronze plans, with an average three primary care visits per year.
This level of coverage additionally shields you from significant hospital costs. These arrangements abide by the ACA, thus guaranteeing pre-existing ailments and essential health advantages are encompassed.
Plans that are specifically for people under 30 years of age, as well as those who receive a waiver for economic suffering, have lower monthly payments than most health insurance policies. No matter what, catastrophic insurance will always require you to pay a large amount for uncovered medical expenses before the plan begins paying out.
It is significant to know that although there are catastrophic plans accessible through the health insurance exchange, government subsidies are not able to be put towards the charges of these policies. Therefore, they typically are not a viable choice for individuals who have eligibility for premium discounts.
The majority of those with catastrophic health insurance plans never have to pay the entire deductable amount, meaning they will have to cover all medical costs for the year by themselves. It might appear that only folks who are in good health would benefit most from utilizing catastrophic policies.
They may also be the most profitable option for those with chronic illnesses. If you are aware that you will reach your limit on the most you will need to pay out of pocket, the combination of premiums and the MOOP may still be more affordable than other plans. Examine the amounts associated with different plans and determine what is most appropriate for you.
In total, if you are usually in good health and don’t need to pay for pricey emergency treatments, catastrophic insurance will provide you with economic advantages (and a feeling of security) over the span of the year given that your regular premium is less than that of traditional plans.
Short-Term Plans for People 25 and Under
Under the provisions of the ACA, young individuals cannot be charged any amount lower than a third of what senior citizens must pay. Except for Massachusetts, New York and Vermont that have different laws, short-term plans usually offer a reasonable cost based on age.
It is important to recognize that short-term plans are not the same as those offered under the ACA, as they do not provide coverage for any pre-existing conditions, pregnancies, or many other medical requirements, including outpatient prescription drugs.
If you don’t have any health insurance coverage, consider getting short-term health insurance. It is possible to be covered by an insurance policy shortly after applying and paying the fee. Premiums for short-term plans tend to be low, with the disadvantage of having high deductibles when compared to catastrophic policies. However, they are not in accordance with the ACA, and the protection they offer is far from complete if someone has a major medical problem.
What Amount of Premium Tax Credit is available?
The premium tax credit decreases what an individual has to pay for the “benchmark” plan, which is the second-lowest cost silver plan available in their Marketplace. Every person must pay a certain amount, depending on their individual income level. For individuals earning up to 150% of the Federal Poverty Level in 2023, there will be no required contribution, but for those earning 400% of the Federal Poverty Level or more, they will need to pay 8.5% of their total household income.
The Inflation Reduction Act stipulated the limit for the amount, and it also extends the ARPA assistance until the end of 2025 on a temporary basis.
Prior to the ARPA, individuals needed to contribute a certain percentage of their income to be eligible; people with a yearly income slightly over what was considered the poverty level had to pay 2% of their income, whereas those whose income was almost at 400% of the Federal Poverty Level had to pay up to 10% of their yearly earnings. Furthermore, before ARPA, those with earnings greater than four times the Federal Poverty Level did not receive premium tax credits.
The tax credit is worked out by taking away the personal required payment from the cost of the basic plan. For example, if the annual expense for the standard plan is $6,000, individuals earning an income that is 150% of the Federal Poverty Level (FPL) will not have to contribute anything, leading to a tax credit of $6,000.
If the individual has an income that is equivalent to 250% of the federal poverty level, their contribution will be 4% of $33,975, which amounts to $1,359. As a result, their premium tax credit amounts to $4,641.
The premium tax credit can be used to pay for any plan offered in the Marketplace, excluding catastrophic coverage. The tax credit stays consistent, meaning one will have to cover the expense of any plan that is costlier than the benchmark plan. Alternatively, if a person selects a more affordable plan, like the least pricey silver plan or a bronze one, the tax credit will cover a larger percentage of that policy’s premium, possibly making it completely free for the buyer.
When the tax credit exceeds the price of a plan, the cost of the plan becomes zero and the remaining tax credit remains untouched.
How do people receive the premium tax credit?
Individuals must fill out an application for coverage under the Marketplace and must include data such as their age, residence, the number of people in their family, citizenship status, and a forecast of their annual income to be qualified for the premium tax credit.
Once the application has been completed, individuals will get a decision to learn the amount of the premium tax credit they are qualified for. The customer can choose to either receive the tax credit in advance or wait to claim it when they submit their tax return, or opt for a combination of both possibilities.
Consumers have the choice to use the advanced premium tax credit (APTC) which will result in 1/12 of the tax credit being sent straight to the marketplace plan insurer on a monthly basis, thus lessening the sum that the consumer has to pay out of pocket on a monthly basis.
Despite the fact that APTC eligibility is based on a projected income, the enrollee must check the APTC when their actual income is determined the next tax year.
For folks who acquire a pre-payment of the premium tax credit in 2023, the accounting will take place when filing the 2023 tax return in 2024. If the individual applied with an overestimate of their earnings, they can recover the unutilized premium tax credit as a refundable tax credit during filing of their returns.
The customer may have to refund all or some of the extra tax credits they received if they unduly miscalculated their income when applying. This would be discovered when they submit their taxes. The maximum amount of repayment one is required to make will vary based on how much they earn.
People can also decide to cover their full monthly premium costs and wait to get their tax credit when they submit their yearly tax return the next year, even though the majority of marketplace participants can’t manage to do that.
The premium tax credit is able to be claimed as a refund, regardless of the individual’s federal income tax obligation, by those meeting the requirements. Every person who obtains an Advance Premium Tax Credit in a fiscal year must turn in a tax return for that year if they want to remain eligible for economic assistance in the future.
Cost Sharing Reductions
Another way Marketplace enrollees can receive monetary help is through a reduction in their out-of-pocket expenses. Cost sharing reductions lessen the amount of money that enrolled individuals have to pay out-of-pocket for deductibles, copayments, and coinsurance when they get healthcare services that are covered.
Who is eligible for the cost sharing reduction?
Individuals who are entitled to a tax break and whose family earnings are equal to 100% up to 250% of poverty level may get reduced costs.
How are cost sharing reductions provided?
The premium tax credit can be used for any type of plan, whereas cost sharing reductions are only available through silver level plans. For individuals who qualify, cost sharing reductions can be applied to silver policies, making the deductible and other expenses associated with the plan more similar to those of a gold or platinum level plan.
People with incomes between 100 percent and 250 percent of the federal poverty level are still able to apply the premium tax credits to any type of plan, but they’ll only receive extra cost help if they choose a silver-level plan.