How Does Health Insurance Subsidy Work?

The ACA or Affordable Care Act speaks about government subsidies that will help people to shell out their health insurance expenses. The premium tax credit is among those health insurance subsidies. Through this subsidy, one can pay for their health insurance premiums every month. There has been a lot of debate in Congress for the past few years. However, premium subsidies are still available in every state’s health insurance marketplace.

The subsidies have become larger and extensively available owing to the American Rescue Plan. With that being said, the premium subsidy can be a bit complicated. If you want to receive financial help and use the aid correctly, you need to have a proper understanding of how the subsidy works. Go through the following details.

How Do You Apply?

You can apply for the premium tax credit via the health insurance exchange in your state. If you avail your health insurance from anywhere other than the health insurance exchange, you won’t be liable to receive the premium tax credit. If you don’t want to apply for a health insurance plan through the exchange in your state, you can hire a licensed health insurance broker. They need to have a certificate from the exchange or an enrolment navigator or assistor.

A health insurance broker can help you get enrolled in a health insurance plan. They can also carry out the financial eligibility verification process and determine if you have the eligibility for a subsidy. In case your state has HealthCare.gov as its exchange, you can take help from an exchange-certified broker who will help you choose a health insurance plan. If you are sure about the type of health insurance plan you need and need someone to help you go through the enrolment process, you can ask the enrolment counselors and navigators to help you out.

What’s the Eligibility for the Subsidy?

As per the rule before 2021, if a household earned in the range of 100% and 400% of the federal poverty level, they could be considered eligible for the premium tax credit health insurance subsidy. The FPL or federal poverty level depends on the size and income of a family and it changes every year. However, the rules for 2021 and 2022 have been changed by the American Rescue Plan. The ARP ensures that families with an income above 400% of the poverty level will not have to shell out above 8.5% of their earnings for the benchmark plan.

In case the benchmark plan costs above 8.5% of the earnings, an individual can avail of a subsidy irrespective of how high the earnings are. To make up for the discrepancies, the subsidies are available in both 2021 and 2022. However, if a family’s income is over 400% of the property level, it can shell out the full cost of the benchmark plan and the cost will not exceed 8.5% of their earnings. A family can’t avail of the premium subsidies if the household earnings are below the federal poverty level. The exception is when someone is a recent immigrant.

How Much Money Will You Receive?

Your premium subsidy amount will be calculated by the health insurance exchange. But in case you want to go deep and find out how the calculation happens, you need to know two basic things – one, the expected amount of money you will contribute for your health insurance, and two, how much your benchmark health plan costs. The subsidy amount you are entitled to receive is the difference between the expected amount of your contribution and the benchmark plan cost in your state.

Can You Save Money by Buying a Cheaper Health Plan?

If your health plan costs more compared to the benchmark plan, you will have to pay the difference between the two, aside from your expected contribution. If your plan is cheaper compared to the benchmark plan, you will shell out less as the subsidy amount will make up for a larger portion of the premium every month. Now, if the plan is even cheaper than the subsidy amount, you won’t be required to pay anything for your health insurance plan.

Thanks to the American Rescue Plan, more people have now attained eligibility for premium-free plans at the bronze, silver, and gold levels. To check out your eligibility, check out the Federal Government website.