In an effort to make insurance more affordable for Americans, the Affordable Care Act (ACA) includes insurance subsidies to help individuals pay their insurance costs. A subsidy is a benefit given by the government (usually in the form of a tax reduction or cash payment) to remove certain financial burdens. Federal subsidies for health insurance help bridge the gap between what you can pay for insurance and what health insurance actually costs.
Insurance Subsidies FAQ
The ACA requires most Americans to have insurance. In most cases, individuals who are not insured will incur a tax penalty. Therefore, even if you think you can’t afford insurance, having it is in the best interest of your health and your wallet.
Are there different types of insurance subsidies?
Yes. There are two kinds of insurance subsidies for individual health insurance plans:
- Cost-Sharing Reduction. This type of insurance subsidy reduces your out-of-pocket costs, including your copays, coinsurance, and deductible.
- Premium Tax Credit. This insurance subsidy will lower your monthly premium.
I am unfamiliar with some of these terms. What is a monthly premium, deductible, copay, and coinsurance?
Your monthly premium is the amount you pay monthly for your insurance plan.
Your deductible is the total amount that you must pay for your health care services and prescriptions before your insurance will contribute. This means that if your deductible is $800, you are responsible for the full amount of your health care services and prescriptions until that amount totals $800. In most cases, after your deductible is met, you and your insurance company will begin sharing the costs of your health care services through copays and coinsurance.
Your copay is a fixed amount that you pay for specific health care services. For instance, if you go to the doctor, and your copay is $30, you will be responsible for paying $30 at the time of your visit instead of the full amount of the doctor’s visit.
Your coinsurance is the percentage that you pay vs. the percentage that your insurance company pays for medical services.
Who is eligible for insurance subsidies?
The Premium Tax Credit is available to individuals making between 100%-400% of the Federal Poverty Level. Other factors that may affect your eligibility include your family size and income.
To qualify for Cost-Sharing Reductions, you must have an annual income that falls between 100%-250% of the Federal Poverty Level and currently be enrolled in a Silver-tiered health plan.
Look up this year’s federal poverty level to see if you meet the income qualifications for either insurance subsidy.
Although the ACA has made insurance more affordable for most Americans, finding affordable coverage that provides you with the benefits you need can be overwhelming. HealthMarkets Insurance Agency is here to help.
Ready to buy a plan? Need more clarification on insurance subsidies? Have questions about your deductible or copay? Speak with a licensed HealthMarkets representative 24/7.