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Small Business Employee Benefits and HR Blog

What are the Federal Subsidies for Health Insurance?

November 28, 2014
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Under the Affordable Care Act (ACA), low- and middle-income Americans buying health insurance in the Marketplaces may discover they are eligible for a federal subsidy. This article provides an overview of federal subsidies for health insurance.federal_subsidies

What are the Federal Subsidies?

The federal subsides (also called "premium tax credits") lower the cost of health insurance for those who are eligible. They are a form of government financial assistance for low- and middle-income families and significantly lower the cost of health insurance for many individuals and families.

Am I Eligible to Receive Federal Subsidies for Health Insurance?

If you meet certain income requirements, and do not have access to affordable health insurance through an employer or another government program, then you most likely qualify to receive federal subsidies for health insurance.

Eligibility is based on a standard called the "federal poverty level" (FPL). Your federal subsidy caps the cost of health insurance between 2% and 9.5% of your annual household income, depending on how much money you make relative to the FPL.

Individuals and families who earn up to 400% of FPL may be eligible. This translates to an individual earning up to $46,680 in 2014 and a family of four earning up to $95,400 in 2014.

Premium_Tax_Credit_Chart_2014

How Much are the Federal Subsidies for Health Insurance?

The subsidies cap the cost of your health insurance at 2% - 9.5% of your household income, if your household income is up to 400% above the federal poverty line (FPL).

For example, if you are single and make $25,000/year in 2014 (218% FPL), the most you will pay for a Silver health insurance plan is $258/month (6.92% of your income).

There are several online calculators available, such as this one.

How Do I Access the Federal Subsidies?

To receive a federal subsidy, you must purchase health insurance through your state's Marketplace. 

Each state has a website where you can view and compare policies, enroll in a plan, and receive the federal subsidy for your health insurance. A licensed health insurance broker is a great resource for help selecting a health plan. Look up your state marketplace here.

How Can My Employer Help?

Your employer can help you with the cost of your individual health insurance plan, and allow you to be eligible for the federal subsidies, by setting up a plan to reimburse you for your premium expenses.

This type of plan is called a defined contribution plan, premium reimbursement program, or a Healthcare Reimbursement Plan.

See this example of how employers can help.

Questions about the federal subsidies? Leave a comment below.


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