Understanding ACA (Obamacare) Subsidies and Eligibility (2024)

Middle and low-income families often worry about how they will afford health insurance. The Affordable Care Act, also known as ACA or Obamacare, provides subsidies to qualifying individuals and families to help make coverage more affordable. The premium tax credit, in particular, lowers the premium cost for many Americans who purchase “Silver” plans on the federal or state Marketplaces. Obamacare subsidies were expanded for coverage from 2021 through 2022 with the passage of the American Recovery Plan Act (ARPA), and extended from 2023 through 2025 with the passage of the 2022 Inflation Reduction Act (IRA).

Anyone who is curious about their Obamacare subsidy eligibility need to know the following facts:

• Your eligibility for subsidies is based on your income in the year in which you are covered by your health plan – not on your income as reported on last year’s tax return. This means that you must estimate your income when applying for subsidies.
• If you earn more than expected during the year, you may be required to pay back some or all the subsidy dollars that were applied on your behalf to your monthly health insurance premiums.
• If you earn less than expected during the year, you may be due additional subsidy assistance, which may be applied when you file your taxes for the year.

What are ACA tax credit subsidies?

The ACA includes advanced premium tax credits to help individuals and families with net incomes between 100 percent and 400 percent of the Federal Poverty Level (FPL) purchase health insurance in the federal or state Marketplace. In general, people who are eligible for ACA advance tax credits are also shielded from rising premiums because ACA subsidies usually increase (or decrease) in proportion to the premiums. This helps keep health insurance affordable.

In 2023, 14.3 million people who purchased health insurance on the Marketplace received ACA premium subsidies, the Centers for Medicare & Medicaid (CMS) reported.

In response to the economic and social challenges of the COVID pandemic, the Biden Administration stimulus bill passed into law in 2021. The American Rescue Plan Act (ARPA) temporarily extended these tax credits to individuals with incomes above 400 percent of the FPL and made the subsidy more generous for those below 400 percent. For 2021 and 2022, ARPA also expanded the ACA requirement that a health plan premium not be more than 8.5% of an individual’s income to those with incomes above 400 percent of the FPL, essentially eliminating the 400 percent of FPL cap.

With the passage of the ARPA in 2021, the uninsured rate dropped dramatically as enrollment in the federal and state Marketplaces continued to climb. U.S. Department of Health & Human Services (HHS) reported that ARPA subsidies provided additional help with premiums for nearly 90 percent of the 14.5 million consumers that signed up for health coverage on the Health Insurance Marketplaces during the 2022 Open Enrollment Period.

ARPA was set to expire on December 31, 2022. However, with the passage of the Inflation Reduction Act of 2022, the ACA tax credits expanded by ARPA continue through December 31, 2025.

Who qualifies for ACA (Obamacare) subsidies?

To qualify for Obamacare premium tax credit, you must be an American citizen or legally present non-citizen living in the United States who does not have access to other affordable health insurance (for example, an employer-sponsored group health plan, Medicare, or Medicaid). In 2023, a job-based health plan is considered “affordable” if your share of the monthly premium in the lowest-cost plan offered by the employer is less than9.12% of your household income. The lowest-cost plan must also meet the minimum value standard.

You do not qualify for premium tax credit if any of the following circ*mstances is true:

• You are married and filing taxes separately (except in cases of spousal abuse or abandonment) or refuse to file income tax;
• You are incarcerated;
• You have access to affordable employer-sponsored insurance but want to purchase family insurance because you can’t afford the cost-share for family coverage under the employer group health plan.

Income thresholds and requirements for subsidy eligibility

Almost everyone who is eligible for Obamacare premium tax credits will experience reduced premiums if they choose a benchmark Silver plan on the federal or state exchange. According to the Kaiser Family Foundation, the average monthly advanced tax credit in 2023 was $527.

• If your income is above 400 percent of the FPL, you won’t pay premiums higher than 8.5 percent of your household income for a benchmark Silver plan. The 8.5 percent of household income applies even if you are purchasing family coverage. Keep in mind, if your income is relatively high, the standard premium for a Silver plan in your area may be less than 8.5 percent of your household income.
• If your income is below 150 percent FPL, you may be eligible for a zero-premium benchmark Silver plan, regardless of whether you choose individual or family coverage.
• Individuals who earn 500% of the FPL and do not have access to other affordable health insurance, may take advantage of certain cost-sharing reductions of Marketplace plans available to people with lower incomes.
• If your income is below 138% of the federal poverty level (FPL) and your state has expanded Medicaid coverage, you may qualify for Medicaid based on your income. If your income falls below the FPL, you may not qualify for subsidies, but you are more likely to qualify for Medicaid. Medicaid is the national healthcare program for low-income individuals and families.

According to the Federal Register, the 2023 FPL for an individual is $14,580. The FPL varies based on the number of members in your household. Alaska and Hawaii have different poverty levels. The Obamacare household income chart changes annually as poverty rates are adjusted every year for inflation.

For 2023, the federal poverty guidelines are as follows:

How ACA (Obamacare) subsidies work

There are two kinds of ACA subsidies: Advance Premium Credits and Cost-Sharing Reductions.

The more common kind, Advanced Premium Credits, can help pay ACA health insurance premiums purchased on the Marketplace through the year. If you qualify based on your projected income for the current year, you can either:

1. Take the tax credit throughout the year to be paid directly to your health insurer to offset the premium of your coverage, or
2. Pay the premium in full each month and receive your tax credit when you file your income tax return.

If you take the advance tax credit each month (option #1 above) and you underestimate your actual household income, you will owe some of this advanced money back at the end of the year. On the other hand, if you overestimate your income, you will receive an adjusted tax credit refund when you file your income tax return. To avoid this issue, report changes to your income by updating your Marketplace application online or by contacting the Marketplace call center.

It’s important to know tax-credit subsidies apply to ACA plans you can purchase on the Marketplace. They are not available to ACA-compliant plans offered outside the Marketplace, catastrophic coverage plans, short-term health insurance, standalone prescription drug plans, or insurance supplements for such care as dental, vision, and critical illness. These alternative insurance plans may cost less, but provide fewer benefits than Marketplace plans offer, generally.

How to Apply for ACA Subsidies

You can apply for Obamacare subsidies through the government-run health insurance Marketplace in your state or through qualifying licensed agents, and private online Marketplaces that cooperate with the government marketplace. A good source for meeting all your insurance coverage needs is eHealth. We offer you online tools to help you determine if you are eligible for Obamacare subsidies and identify Marketplace plans available where you live. We also have licensed agents to help you find insurance plans that meet your needs and budget. With 24/7 support and a wide selection of plans available, you can rest assured eHealth is here to help you find and maintain the most suitable, affordable coverage for you and your family.

When applying for Affordable Care Act (ACA) subsidies, it’s essential to have the necessary documents and information ready to ensure a smooth application process. Here are the key items you’ll need:

1. Personal Information:
   • Full legal names and birthdates of all household members applying for coverage.
   • Social Security numbers or document numbers for legal immigrants.
2. Household Information:
   • List of everyone in your household who needs coverage, even if they don’t need insurance.
   • Information about whether each person is offered health insurance through their job.
3. Income Information:
   • Estimated household income for the year you’re applying. This includes income from jobs, self-employment, unemployment, Social Security, pensions, rental income, and other sources.
   • Tax return information, including your most recent federal tax return (if available). This will help ensure your income estimates are accurate.
4. Health Coverage Information:
   • Details about any health coverage you or your household members currently have or are eligible for through an employer, Medicare, Medicaid, CHIP, or other sources.
   • Information about any job-related health insurance available to you (even if you’re not using it).
5. Immigration and Citizenship Status:
   • Information about your immigration and citizenship status, if applicable. You may need documents like a Green Card, Certificate of Naturalization, or other immigration-related documents.
6. Any Current Health Insurance Marketplace Account:
   • If you’re reapplying or making changes to an existing Marketplace account, you may need your login information.

Remember that you’ll need to provide accurate and up-to-date information. If you’re not sure about any details, it’s a good idea to gather relevant documents and have your financial information prepared in advance. Inaccurate or incomplete information may affect your eligibility for ACA subsidies.

Keep in mind the government makes the final determination on your eligibility for a subsidy. While you can shop through eHealth to select a plan, the subsidy comes through the government-run marketplace. Don’t delay, compare plans and understand your individual and family health insurance options with eHealth today.

Reporting changes and renewing subsidies

Reporting changes in income or household size is crucial when you have Affordable Care Act (ACA) subsidies. Here’s why it’s important:

1. Accuracy of Subsidy Amount: Your ACA subsidies are based on your estimated income and household size at the time of application. If these circ*mstances change, it’s essential to report it to the Health Insurance Marketplace. This ensures that your subsidy amount is adjusted according to your current situation, preventing over- or underpayment.

2. Avoiding Reconciliation Issues: If you don’t report changes and your subsidies end up being too high, you might owe money back during tax season. On the other hand, if your subsidies are too low, you could miss out on available financial assistance.

3. Preventing Gaps in Coverage: Reporting changes promptly helps you avoid gaps in health insurance coverage or unexpected bills. For instance, if your income decreases significantly, you might become eligible for Medicaid, which can provide more comprehensive coverage.

Renewing Subsidies:

The ACA subsidies are not a one-time benefit. To continue receiving financial assistance, you need to renew your coverage each year. The process usually involves the following steps:

1. Open Enrollment Period: The Health Insurance Marketplace typically holds an Open Enrollment Period once a year. During this time, you can review your current plan, update your information, and choose a new plan if needed.

2. Review and Update Information: Carefully review the information on your account, including your income, household size, and contact details. Ensure that everything is accurate and up to date.

3. Compare Plans: Even if you’re happy with your current plan, it’s a good idea to compare it to other available options. Plans and prices can change from year to year.

4. Renew Subsidies: When you renew your coverage, the Marketplace will determine your subsidy eligibility based on the most recent information. This step ensures that you continue to receive financial assistance to make your health insurance affordable.

5. Pay Premiums: Be sure to pay your monthly premiums to maintain coverage. Missing premium payments could lead to a lapse in insurance.

Managing Subsidies:

To avoid issues with subsidies, consider these tips:

1. Report Changes Promptly: If your income or household size changes during the year, report it to the Marketplace as soon as possible.

2. Keep Records: Maintain a record of your communications with the Marketplace, including reference numbers, dates, and the names of representatives you spoke to.

3. Seek Assistance: If you’re uncertain about the renewal process or managing your subsidies, don’t hesitate to seek help from a certified enrollment assister or insurance agent.

4. Stay Informed: Be aware of key dates and deadlines related to Open Enrollment and subsidy renewals.

Managing your ACA subsidies and renewing them annually is essential for maintaining affordable health insurance coverage that aligns with your current circ*mstances. Keeping your information up to date and understanding the process can help you avoid unexpected financial surprises.

Impact of ACA subsidies on healthcare access

The impact of Affordable Care Act (ACA) subsidies on healthcare access has been significant, making it more accessible for many Americans. Here are some of the positive effects and real-life examples of individuals and families benefiting from these subsidies:

1. Increased Enrollment: ACA subsidies have led to a substantial increase in the number of people with health insurance. Many previously uninsured or underinsured individuals and families have been able to afford coverage, leading to a more extensive and diverse pool of insured individuals.

2. Financial Relief: Subsidies provide financial relief to lower and middle-income families who may otherwise struggle to pay for health insurance. This relief is crucial for those who were previously unable to budget for healthcare coverage.

3. Preventative Care: With subsidies, people have better access to preventative care services, such as vaccinations, screenings, and wellness check-ups. For example, a family of three with a moderate income might receive subsidies that significantly reduce the cost of pediatric vaccinations for their child.

4. Timely Medical Care: Having health insurance through subsidies allows individuals to seek timely medical care when needed. This can be life-saving, as illustrated by cases where early detection of health issues, thanks to accessible healthcare, has resulted in better outcomes.

5. Improved Quality of Life: Subsidized healthcare has improved the overall quality of life for many beneficiaries. When healthcare services are readily available and affordable, individuals can better manage chronic conditions, maintain their health, and lead more fulfilling lives.

6. Peace of Mind: Healthcare expenses can be a significant source of stress for families. Subsidies provide peace of mind, knowing that they won’t face crippling medical bills if they require medical attention.

Possible Examples of How ACA Subsidies Can Help:

• Sarah, a single mother working as a teacher’s aide, was previously uninsured because her income was not sufficient to afford private health insurance. Thanks to ACA subsidies, she was able to enroll in a health plan with affordable premiums. Sarah now has access to healthcare services for herself and her child, ensuring their well-being.
• John and Maria, a middle-income couple, found themselves struggling to manage healthcare costs for their elderly parents, who lived with them. ACA subsidies allowed them to include their parents in their health insurance coverage at an affordable rate. This enabled regular medical check-ups and improved the parents’ overall health and well-being.
• Carlos, a recent college graduate starting his career, initially went without health insurance due to the high costs. However, when he learned about ACA subsidies, he was pleasantly surprised to find that he could access affordable coverage. Carlos now has peace of mind, knowing he can manage his healthcare expenses without breaking the bank.

ACA subsidies have made a substantial difference in the lives of millions of Americans. They have not only increased healthcare access but have also played a vital role in reducing health disparities and improving the overall health and well-being of individuals and families across the United States.