Do I Qualify for an ACA Subsidy?

Individuals may apply for federal subsidies to lower health insurance costs on plans available through the Marketplace. These subsidies take the form of 1) Cost-Sharing Reductions and 2) Advanced Premium Tax Credits.

People may qualify for subsidies if their household Modi­fied Adjusted Gross Income (MAGI) falls between 100 per­cent and 400 percent of the Federal Poverty Level.

Modified Adjusted Gross Income (MAGI)

Modified Adjusted Gross Income (MAGI) includes: wages, salaries, tips, net income from any self-employment or busi­ness, unemployment compensation, Social Security dis­ability payments, alimony, retirement income, investment income, pension income, rental income, and other taxable income (like prizes, awards, and gambling winnings).

MAGI does not include: workers’ compensation benefits (including TTD and settlements), Supplemental Security In­come, proceeds from loans, veterans’ disability payments, gifts, and child support.

Household income will be calculated using the informa­tion provided in the online application. Reconciliation of es­timated income to real income is made at the time that an individual files his or her federal tax return. If the income is underestimated, the individual may owe money back to the federal government.

Cost Sharing Reduction

Cost-Sharing Reductions lower out-of-pocket costs for appli­cants whose income falls between 100 percent and 250 per­cent of the FPL. The cost sharing reductions will only be available through modified versions of Silver plans that are offered on the Marketplace. These plans will have lower de­ductibles, copays, coinsurance, and out-of-pocket limits compared to regular Silver plans.

Note that premium tax credits (as explained below) may be applied to any plan. However, if someone wants to take advantage of the cost sharing reduction in addition to the premium tax credit, then he or she must choose a modified Silver plan. And, unlike premium tax credits, cost sharing reductions are not reconciled at the end of the year so no po­tential overpayment would need to be repaid if income was higher than expected.

Premium Tax Credits

Premium tax credits are available to U.S. citizens and law­fully present immigrants who purchase coverage in the Mar­ketplace and who have household income between 100 per­cent and 400 percent of the federal poverty level. Unlike the cost sharing reduction, this tax credit can be applied to the Platinum, Gold, Silver, or Bronze plans offered through the marketplace. (Note that a premium tax credit does not apply to the Catastrophic plan.)

Premium tax credits may be claimed at the end of the year via a refund on an individual’s federal tax return. Or, an in­dividual can apply for an advanced premium tax credit based on his or her estimated income for the upcoming year. If the person elects an advanced premium credit, the government will pay 1/12 of the credit directly to the insurance company each month and the insurer will bill the person for the rest of the premium.

In addition, to be eligible for the premium tax credits, in­dividuals must not be eligible for public coverage—includ­ing Medicaid, the Children’s Health Insurance Program, Medicare, or military coverage—and must not have access to health insurance through an employer. There is an excep­tion in cases when the employer plan is unaffordable because the employee’s share of the premium exceeds 9.5 percent of the employee’s income. There is also an exception in cases where the employer’s plan does not provide a minimum level of coverage or if the deductible is more than $6,350 for an individual.