Four out of five people with Marketplace plans qualify for monthly premiums of $10 or less through these subsidies.
What are Premium Tax Credits?
A premium tax credit, also called a premium subsidy, is a way to reduce the cost of your monthly insurance premium. The amount of credit you receive depends on your income and family size.
Unlike other tax credits, you don’t have to wait until tax season to see the benefits. In fact, most people get their premium tax credit upfront to use throughout the year. This is called an advance premium tax credit. When you choose this option, the IRS will send money to your health plan each month to help lower the amount you must pay for health insurance.
You can also choose to pay the full price for your health plan each month and claim the credit on your tax return. Most people don’t choose this option because it means they have to pay more out of their own pocket each month.
Who is Eligible for Premium Tax Credits?
Your eligibility for premium tax credits depends on your income and family size. There are a few other eligibility requirements you must meet too. You will not qualify for premium tax credits if you choose a health plan that is not offered through the Health Insurance Marketplace, if you are eligible for health coverage through a government program (like Medicaid, Medicare, CHIP, or TRICARE), if you have access to adequate and affordable health insurance through your employer, if you file a tax return with the “Married Filing Separately” tax status (there are some exceptions for domestic abuse and spousal abandonment), if you are claimed as a dependent by another person on their taxes, or if you are not a U.S. citizen or lawful immigrant.
How Much Can a Premium Tax Credit Help Me Save?
The amount of money you receive in premium tax credits depends on your income and family size. The Marketplace also takes the cost of your benchmark plan into account. Essentially, the lower your income, the more financial assistance you’ll get in the form of premium tax credits.
The Marketplace calculates your credit by looking at the cost of your benchmark plan, which is the second-lowest premium plan in the Silver tier. Next, the Marketplace looks at your income and family size to see how you compare to the federal poverty line (FPL).
The Marketplace then determines how much of your annual income you should expect to pay toward your premium. In Utah (and many other states), if your income is in the 138% FPL column or less, you are eligible for Medicaid and cannot get a Marketplace plan.
If you’re interested in calculating your estimated savings, you can do so on the Health Insurance Marketplace website.
What are cost-sharing reductions?
Cost-sharing reductions lower the amount you have to pay for deductibles, copayments, and coinsurance when you get medical care. Like premium tax credits, the amount of savings you get depends on your income and family size. The catch is that you MUST choose a plan in the silver category to redeem these savings.
How do cost-sharing reductions work?
Unlike premium tax credits, cost-sharing reductions are not paid out directly to your health plan. Instead, they’re applied to your health plan when you receive medical care. For example, if you have a $1,000 deductible and qualify for cost-sharing reductions, you may only have to pay $500 before your health plan starts paying for your medical expenses.
To be eligible for cost-sharing reductions, you must:
Choose a health plan offered through the Health Insurance Marketplace.
Have a household income between 100% and 250% of the federal poverty level.
Not be eligible for Medicaid, Medicare, CHIP, or TRICARE.
Not have access to affordable and adequate health insurance through your employer.
How much can cost-sharing reductions help me save?
Like premium tax credits, the amount of money you save with cost-sharing reductions depends on your income and family size. However, unlike premium tax credits, there is no maximum income limit for cost-sharing reductions.
In addition to reducing your out-of-pocket costs, cost-sharing reductions can also lower your annual out-of-pocket maximum. This is the most you will have to pay for covered services in a year.
To see if you qualify for premium tax credits or cost-sharing reductions, you’ll need to complete a Marketplace application. You can apply online, by phone, or with the help of an enrollment assistant.
When you apply, you’ll need to provide some basic information about yourself, your household, and your income. This includes things like your Social Security number, tax information, and employer information.
Once you’ve completed your application, the Marketplace will let you know if you qualify for financial assistance. They’ll also tell you how much you can expect to save on your monthly premiums and out-of-pocket costs.
If you’re looking for ways to save money on your health insurance plan, premium tax credits and cost-sharing reductions are two options worth exploring. By completing a Marketplace application, you can find out if you qualify for financial assistance and how much you can expect to save.
Remember, the cost of health care can be expensive, but there are resources available to help make it more affordable. Don’t be afraid to ask for help and explore your options.