Premiums for health insurance on the public marketplaces can run surprisingly high, and they tend to get higher each year. To ease the pain, the federal government offers financial assistance to some people shopping for insurance on the public exchange.
This is true whether you shop on the federal marketplace — HealthCare.gov — or on a state exchange, if you live somewhere that has one. You might have heard these subsidies called advance premium tax credits, premium assistance or “Obamacare” subsidies, as they were implemented under the Affordable Care Act. If you qualify, the government will send advance payment directly to your insurance provider, lowering your monthly costs. So how do you know whether you qualify, and how much the subsidy can help you?
If your employer offers health coverage
If you receive insurance through an employer with 50 or more workers, even if you’re responsible for the cost of the entire premium, you cannot get premium assistance. This is because large employers must offer plans comparable to marketplace plans in terms of cost and coverage, says Joe Ellis, senior vice president at CBIZ Benefits & Insurance Services.
If your employer meets those requirements, you can’t get subsidies on the exchange. And watch out if your employer offers money to buy your own plan instead because that’s not legal for a large employer. “In fact, there is a severe penalty for any large employer who makes an offer to help pay for coverage on the exchanges,” Ellis says.
If you work for a business with fewer than 50 employees, your employer is not required to offer coverage. You can still shop on the exchange for health care and receive subsidies in this case. However, if your small employer does offer health insurance that is comparable to the exchange, you won’t be eligible for subsidies.
How to qualify for premium assistance
To know whether you or your family qualify for tax subsidies, you have to estimate your total income for the upcoming year. If your total income is between 100% and 400% of the poverty threshold, you’re eligible for premium assistance. Any more than that, and you’re on the hook for full-cost premiums, unless you go without insurance and pay a penalty when you file your income taxes. If your income is lower than the current poverty rate for your family’s size, you can’t receive premium assistance because you may qualify for Medicaid, and you have to apply for that first.
If you make more money than you estimated, you’ll have to pay back some of the assistance you received. If you make less, you may get an extra subsidy. You’ll find out when you file your taxes.
Premium assistance income levels
Wondering whether you qualify for premium tax credits? You probably don’t have to do the math yourself. Here are the qualifying income ranges for families of up to eight people in 2016, except for people living in Hawaii or Alaska. If you live in one of those states, check here.
|Family Size||Minimum Income: 100% of Poverty Level||Maximum Income: 400% of Poverty Level|
If you have more than eight people in your family, add $4,140 for each additional person to $40,890 to find your poverty line. Multiply that by four (400% of the poverty threshold) to see the maximum your family can make in 2016 to qualify for premium tax credits under the Affordable Care Act.
Now that you know whether your family qualifies for assistance this year, you can understand your options and shop smarter for health insurance.
This post has been updated. It was originally published Nov. 13, 2013.
Image via iStock.