Am I Eligible For A Health Insurance Subsidy?

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Margaret Huntley 17-09-2021

What You Need to Know About Health Insurance Subsidies?

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The Affordable Care Act, also known as Obamacare, requires all Americans to have some form of health insurance coverage. Some people are covered through their employer, and others qualify for federal programs like Medicare or Medicaid. All others are required to purchase their own health insurance plan or pay a penalty.

Individual health insurance can be quite costly, and you might be worried that you will not be able to afford a good plan. But there are effective ways to save money on your health insurance.

The first method is to inquire at multiple insurance companies about their rates and plans to ensure that you are getting the most bang for your buck. The second is to apply for subsidies to help cover the cost of health insurance.

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What are Health Insurance Subsidies?

Subsidies are quite simple to understand. A subsidy is financial assistance. A health insurance subsidy comes from the federal government to help cover the cost of individual health insurance.

Subsidies are not loans, therefore you do not need to pay them back.

You will be required to report subsidies on your taxes, using a 1095 form. It will come with all the necessary information on how to file it properly.

Types of Health Insurance Subsidies

There are two types of subsidies:

  • Advanced Premium Tax Credit: This subsidy helps pay for your monthly insurance premiums.
  • Cost Sharing Reduction: This subsidy helps pay for out-of-pocket costs like co-pays and deductibles.

It is possible to qualify for one or both of these subsidies.

How to Qualify for Health Insurance Subsidies?

Unfortunately, health insurance subsidies are not offered to everyone. Your eligibility is determined based on three factors:

  • Income
  • Family size
  • Cost of health insurance where you live

The main qualifying factor is income. If you make the equivalent of or less than four times the amount of the Federal Poverty Limit, then you will qualify for subsidies.

The Federal Poverty Limit is a yearly income, below which an individual is impoverished. The amount is subject to change from year to year based on the economy and inflation.

Both types of health insurance subsidies use the same qualifying factors, but they have different requirements:

  • The Advanced Premium Tax Credit will be granted to those who earn up to four times the federal poverty limit.
  • The Cost Sharing Reduction will be granted to those who earn up to two and a half times the federal poverty limit.

Due to the nature of their requirements, you will either have just the Advanced Premium Tax Credit, or you will have both the Advanced Premium Tax Credit and the Cost Sharing Reduction.

As for the other qualifying factors, the number of people in your household will alter what the Federal Poverty Level is for your family. As well, the higher the price of health insurance plans in your area, the more likely you are to qualify for subsidies.

All three of these qualifying factors will also determine the amount of financial assistance you receive.

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Importance of Health Insurance Subsidies

Health insurance subsidies allow more Americans to access affordable health care. With appropriate financial assistance from the government, you will be able to receive coverage for all healthcare covered under the Affordable Care Act:

  • Hospitalization
  • Outpatient Procedures/Ambulatory Care
  • Preventative Care (such as check-ups and immunizations)
  • Prescription Medication
  • Mental Health and Addiction Counselling
  • Laboratory Services
  • Emergency Services
  • Pediatric Care
  • Maternity and New-born Care

All of these, and possibly more depending on the health insurance plan that you decide on, become more accessible through government funded health insurance subsidies.

Margaret HuntleyMargaret Huntley is a creative writing and philosophy student at Western University. She has been working as a freelance writer for over two years and has written about everything from insurance, to poker, to health and wellness for international businesses.