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Health Term Explanation: Subsidies
What Is A Health Insurance Subsidy?
August 22, 2024 | 6 min read
When you buy health insurance, the monthly cost for your plan is called a premium. On the Health Insurance Marketplace, monthly premiums vary according to your location, age, family size and plan level, but the average cost for 2024 marketplace plans was nearly $500 per month. For older people and families, premiums are likely even higher. The good news is that there are ways to lower your premiums and other costs through health insurance subsidies.
A health insurance subsidy is a type of financial assistance. It can help lower the cost of your monthly health insurance premium and may also help with other costs, such as your deductible, coinsurance or copays, and out-of-pocket maximums.
How Health Insurance Subsidies Work
Subsidies are available only for Health Insurance Marketplace plans. They help make health coverage more affordable for anyone who does not have job-based coverage and needs to get insurance from the marketplace.
To get a health insurance subsidy, your household income must be below a certain level. When you shop for health insurance plans, you will have the option to see if you qualify for savings. If you select this option and are eligible, you should see an estimated subsidy amount.
These subsidies can be used to lower your healthcare costs. Your ability to get a subsidy depends on:
- Your annual household income
- Where you live
- The size of your family
Available Health Insurance Subsidies
There are two types of health insurance subsidies. One can be used to help lower the cost of your monthly premium. The other subsidy helps lower out-of-pocket expenses, such as deductibles, copays and coinsurance.
1. The Premium Tax Credit (PTC)
This subsidy is a tax credit to help with the costs of healthcare premiums for plans purchased on the Health Insurance Marketplace. It can be paid to you as a lump sum credit when you file your taxes, or you can choose to apply some or all of it toward your monthly health insurance premiums. When you use the tax credit to pay your monthly premium, you are using the credit in advance. This subsidy is then referred to as an advance premium tax credit (APTC).
Pro Tips
If you choose to apply your tax credit toward your monthly health insurance premiums, you may use some of it or the whole amount. But note that the amount of the credit is based on your estimated income. If you estimate too low, the amount of your credit may be higher than it should be. At tax time, if you used more credit than you were owed, you may have to repay the difference with your tax return.
If some of your allowed APTC remains when you file your taxes, you’ll get what’s left as a refundable credit with your tax return.
Learn about how to reconcile your advance premium tax credit using IRS Form 8962.
2. Cost-Sharing Reduction (CSR)
This subsidy is only available for plans in the "silver" category. It is based on your income. If you are eligible and enroll in a silver plan, you will automatically have the version of the plan with reduced cost-sharing charges, which means lower:
- Deductible
- Copayments
- Coinsurance
- Out-of-pocket maximum
Pro Tip
Unlike the APTC, cost-sharing reductions are not credits, so they do not have to be repaid or “reconciled” when you file your taxes.
How to Qualify for Health Insurance Subsidies
If you enroll in a plan from the Health Insurance Marketplace, you may be eligible for both subsidies.
To qualify for a premium tax credit, you must:
- Have an annual household income that is at least equal to the federal poverty level (FPL), which, for 2024, will be based on 2023 guidelines. (See chart below.)
- Have U.S. citizenship or proof of legal residency. (Lawfully present immigrants whose household income is below 100% FPL can also be eligible for tax subsidies through the Health Insurance Marketplace if they meet all other eligibility requirements.)
- Be ineligible for coverage through government programs such as:
- Medicare
- Medicaid
- The Children’s Health Insurance Program (CHIP)
- TRICARE
- Not have job-based insurance – unless your job-based insurance does not provide sufficient coverage
- File taxes jointly, if you are married
If you meet all of the above and have household income from 100% to 250% of FPL, you may also be eligible for cost-sharing reductions if you choose a plan in the “silver” category.
Federal Poverty Guidelines for 2024 Coverage Year
Persons in family/household | 100% FPL | 138% FPL | 150% FPL | 200% FPL | 250% FPL | 300% FPL | 400% FPL |
|---|---|---|---|---|---|---|---|
1 | $14,580 | $20,120 | $21,870 | $29,160 | $36,450 | $43,740 | $58,320 |
2 | $19,720 | $27,214 | $29,580 | $39,440 | $49,300 | $59,160 | $78,880 |
3 | $24,860 | $34,307 | $37,290 | $49,720 | $62,150 | $74,580 | $99,440 |
4 | $30,000 | $41,400 | $45,000 | $60,000 | $75,000 | $90,000 | $120,000 |
5 | $35,140 | $48,493 | $52,710 | $70,280 | $87,850 | $105,420 | $140,560 |
6 | $40,280 | $55,586 | $60,420 | $80,560 | $100,700 | $120,840 | $161,120 |
7 | $45,420 | $62,680 | $68,130 | $90,840 | $113,550 | $136,260 | $181,680 |
8 | $50,560 | $69,773 | $75,840 | $101,120 | $126,400 | $151,680 | $202,240 |
Source: KFF
Shop Ambetter Health plans or call our helpful team members at 844-933-0380 (TTY: 711) from 8 a.m. to 9 p.m. ET to see if you qualify for subsidies to lower your costs.
Frequently Asked Questions About Health Insurance Subsidies
No. But you have to be careful with the APTC. Its amount is partly based on your estimated income. If you estimate your income incorrectly, there’s a chance you may receive a larger credit than you are due. If you use more than you should have received, you may have to repay some of it when you file your federal income tax return.
Unlike the APTC, cost-sharing reductions are not credits, so they do not have to be reconciled when you file your taxes.
Subsidies are not considered income and are not taxed.
If you received a premium tax credit, you must complete Form 8962 when you file your taxes. The IRS uses this to compare your estimated income to your actual income at the end of the year. If your estimated income was not correct, you may have to repay some of your credit or you may get some back when you file your federal income tax return.
Cost-sharing reductions do not require that you file any additional tax forms.
Health insurance subsidies were intended to be available for a limited time. However, the time for their availability has been extended through 2025. As that expiration date nears, it’s possible that the dates will be extended again.
Health insurance subsidies are meant for those who need help with health insurance costs and don’t have job-based coverage.
To qualify for a subsidy, you must:
- Meet eligibility and income criteria
- Enroll for a health insurance plan in the Health Insurance Marketplace
Shop Ambetter Health plans or call us at 844-933-0380 (TTY: 711) from 8 a.m. to 9 p.m. ET to see if you qualify for subsidies to lower your costs.
You can use the premium tax credit subsidy for any of the four “metal levels” of marketplace plans – bronze, silver, gold and platinum. The “metal levels” relate to plan costs, where bronze plans have lower premiums but higher out-of-pocket costs while platinum plans have the highest premiums but low out-of-pocket costs.
Under certain circumstances, some people, usually under the age of 30, may qualify for the marketplace’s catastrophic health plans. These plans have very high deductibles. But the monthly premiums are very low, so premium tax credits can’t be used with catastrophic plans.
Pro Tip: If you qualify for a premium tax credit, chances are good that plans in the bronze and silver categories may be a better value than a catastrophic plan, so be sure to compare.
If you also qualify for a cost-sharing reduction, you will have to select a “silver” plan to use this subsidy.
Shop Ambetter Health plans or call us at 844-933-0380 (TTY: 711) from 8 a.m. to 9 p.m. ET to see if you qualify for subsidies to lower your costs.
The $6,400 health subsidy is a scam that has spread on social media. There is no $6,400 subsidy. The information is false, and those who complete the form to request it are at risk of becoming victims of identity theft and financial fraud.
Shop Ambetter Health Plans
Find a health insurance plan with the right out-of-pocket max to meet your needs.
Or call our helpful team:
844-933-0380 (TTY: 711)
8 a.m. to 9 p.m. ET
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Understand your health insurance copay.
Out-of-Pocket Maximums
Understanding how the out-of-pocket maximum works can help you select the right plan for you and your family.
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