One of the central goals of the Affordable Care Act Protecting Patients and - also known as the ACA or "Obamacare." - is to make coverage more affordable health care for millions of Americans who previously could not get or could not pay, health insurance
ACA accomplishes this, in part by providing tax subsidies to individuals and low income families.
These are the people who make too much money to qualify for Medicaid, but still find most unaffordable health insurance plans.
There are two distinct types of tax subsidies available to eligible Americans under the ACA
- premium tax credit
- sharing subsidy costs
But first, what is a subsidy?
a healthcare subsidy lowers the amount you spend on your monthly premium or reduces your pocket-off costs for things like copays, coinsurance and deductibles.
subsidies are "subsidized" by the federal government and are paid by taxes.
tax credit on premiums
tax credit on premiums is a credit that lowers the monthly premium for a health insurance plan offered by the health insurance market the federal government or any of the insurance exchanges run by the state.
the amount of the tax credit depends on variables such as annual income and household size (how many people in the family).
In general, the tax credit on premiums is available to taxpayers who earn between 100% and 400% of the federal poverty level for a household size.
How do you know if you qualify for a tax credit on premiums?
the best way is to apply an insurance plan through the online market.
After entering your financial and household information, the system will see how your financial situation corresponds to the plans available in your area.
If you qualify for the tax credit on premiums, you can claim the credit in advance to reduce your monthly premium or claim on your next tax return to receive as a refund (or reduce the amount of taxes due).
Keep in mind your eligibility for the tax credit on premiums depends on the cost of health insurance plans in your area.
If the premiums are relatively cheap where you live, you are less likely to receive a tax credit that someone who earns the same amount in a market of more expensive health insurance.
more precisely, the market uses the cost of the second cheapest money "" plan to make its calculations.
sharing subsidy costs
sharing subsidy costs for low-income households, those earning between 100% and 250% of the federal poverty level.
While the tax credits reduce the monthly premium for health insurance, cost-sharing subsidies reduce the costs of a health plan out of pocket.
These include things like co-pays for doctor visits and deductibles.
sharing subsidy costs are paid directly by the government to the insurance provider, not as a tax refund.
households may be eligible for premium tax credits and grants cost sharing.
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