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Small Business Employee Benefits and HR Blog

ACA Tip: How to Save Money on Individual Health Insurance

August 15, 2014
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The Affordable Care Act (ACA) was signed into law in 2010, and represents one of the biggest changes to health insurance for both employers and employees.The ACA introduced new changes that greatly benefit individuals and individual health insurance by making it more affordable and accessible than ever.

This article contains information on how the ACA can save you and your family money, while getting you access to better health insurance coverage.

Tip: This article is an excerpt from our new eBook “Affordable Care Act 101.” Download the free guide here.

Save Money With Premium Tax Credits

As part of the ACA, the federal government provides discounts for health insurance to eligible individuals and families. The discounts, called premium tax credits, help many people buy more affordable individual or family health insurance coverage through the new state Health Insurance Marketplaces.

The health insurance tax credits are "advanced-payable" meaning they can be applied toward your premium when you purchase health insurance coverage.

Who Is Eligible for Premium Tax Credits?

You are eligible for a premium tax credit if you meet certain income requirements and do not have access to affordable health insurance through an employer or government program such as Medicaid or Medicare.

The tax credits are available to households with income up to 400% of the federal poverty line (FPL). As the following chart shows, this means households earning up to $46,680 for an individual in 2014, or $95,400 for a family of four, qualify.Eligibility for premium tax credits

Source: Affordable Care Act 101

How Much Are the Premium Tax Credits?

The premium tax credits act as a cap on how much you pay for health insurance. The insurance premium is capped on a sliding scale between 2% -9.6% of income, depending on your income. For example, as the chart above shows, if you make $23,340 a year (200% FPL), the maximum amount you will pay for health insurance is 6.34% of your income which is $1,480/year ($123/month).how much are premium tax credits

Source: Affordable Care Act 101

How Do I Access the Premium Tax Credits?

The premium tax credits are only available when you purchase individual or family health insurance available on your state’s Health Insurance Marketplace.

Save Money by Selecting the Right Category of Plan

In the past, it was hard to understand the coverage levels of plans. That’s no longer the case. As of 2014, individual health insurance plans are categorized in four standardized levels of coverage, called “metallic tiers of coverage.” These categories help you better compare plans “apples to apples.”metallic_tiers

Source: Affordable Care Act 101

In order to save money, it is important to select the right metallic tier for your health and financial needs. If you are unsure of what plan to select, it is always a good idea to talk to an insurance broker to help you with your selection.

If you anticipate using a lot of medical services, it is more ideal to select a platinum or gold plan. Although the premiums higher, you will pay less out-of-pocket when it comes time to receive medical care. If you do not anticipate having a lot of healthcare needs, selecting a silver or bronze plan is more ideal to save money. Although there will be higher out-of-pocket costs when you do need medical services, you will pay a significantly lower premium.

Do you have any questions about saving money on individual health insurance? Leave a comment below.

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