How do I get a health insurance subsidy?

The Affordable Care Act (ACA) provides government subsidies to make health insurance affordable for people who buy their own health insurance through the exchange/marketplace. This coverage is also called Obamacare.The law includes premium tax credits (premium subsidies) that offset some or all of the monthly premiums.There are also cost-sharing reductions (CSR) that reduce the out-of-pocket costs that some enrollees have to pay when they need medical care.

Premium tax credits and CSR are both federal benefits, so they're available nationwide. Some states also offer additional premium subsidies and/or cost-sharing subsidies, on top of the federal subsidies.

How Subsidies Work

If you're eligible for a premium tax credit you can opt to have it paid to your insurer each month on your behalf.That means you won't have to claim it all at once on your tax return at the end of the year (you'll still have to reconcile the amount on your tax return). The government pays part of your monthly insurance premium and you pay the rest.

Subsidies can only be used to buy Obamacare health insurance sold on the ACA's health insurance exchanges—also called the Marketplace. They cannot be used to help pay for health insurance through your job or a health plan purchased outside the marketplace.

Temporary Subsidy Enhancements

From 2014 through 2020, under the terms of the ACA, there was an income cap of 400% of the poverty level to qualify for the premium tax credit.During the COVID-19 pandemic, the American Rescue Plan changed the rules. And the Inflation Reduction Act has extended this through 2025. So for now, there is no specific income limit on premium subsidy eligibility. But for that to continue after 2025, Congress would have to take additional action.

So for at least five years (2021 through 2025), the enhanced ACA subsidies ensure that nobody who buys a plan in the marketplace/exchange pays more than 8.5% of their household income in premiums for a benchmark plan.

Who Qualifies for Subsidies?

Depending on where you live and how old you are, you may qualify for a premium subsidy even if your income is well above 400% of the poverty level. (This will be true through at least 2025, and Congress might decide to further extend that provision.)However, if the cost of the benchmark plan would already be no more than 8.5% of your income without a subsidy, you would not be eligible for a subsidy.

Even before the American Rescue Plan eliminated the "subsidy cliff," 400% of the poverty level for a family of four amounted to $104,800 in 2021. So subsidy eligibility already extended well into the middle-class and upper-middle class, depending on where the family was located.

Obamacare subsidies are not available to undocumented immigrants. However, most legally-residing immigrants can apply.(Note that subsidies are not available if you're eligible for employer-sponsored health coverage that's considered adequate, or if you're eligible for Medicaid or premium-free Medicare Part A.)

With the subsidy enhancements created by the American Rescue Plan, the Centers for Medicare and Medicaid Services (CMS) reports that:

• Eighty percent of marketplace enrollees have access to at least one plan that costs $10 or less in monthly premiums after the tax credits are applied.

• More than half of enrollees have access to a silver plan that costs $10 or less in monthly premiums.

Subsidies have made self-purchased health insurance much more affordable, but few people purchase their own coverage. Most people get health insurance from their employer or from the government (Medicare, Medicaid, CHIP).

If your income is between 100% and 250% of the federal poverty level (and you're not eligible for Medicaid), you may get more help to pay your deductible, copays, and coinsurance when you use your health insurance.This is known as a cost-sharing reduction (CSR) subsidy.CSR benefits are part of the ACA. For eligible applicants, CSR is built into Silver-level plans in the exchange/marketplace.

The federal government used to reimburse insurers for the cost of providing this benefit, but that ended in late 2017, under the Trump administration. Since then, insurers in most states have added the cost of CSR to premiums of on-exchange Silver-level plans. This results in higher Silver premiums, which in turn results in larger premium subsidies. But nothing has changed about the CSR benefits themselves, or eligibility for these benefits.

How to Apply

If you’re a legal U.S. resident, you can apply for a health insurance subsidy and enroll in a health plan on the health insurance exchange run by your state or by the federal government.If you're eligible for CSR, all of the available Silver-level plans will have the CSR benefits incorporated into them. This means the deductibles, copays, and out-of-pocket maximums on these plans will be lower than they would otherwise be.

You can find your state’s health insurance exchange using the HealthCare.gov tool.

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