Understanding ACA Health Insurance Subsidies

How Do Health Insurance Subsidies Work?

When planning for monthly expenses, it is important for every household budget to include health insurance costs. An ACA health subsidy can help lower your costs, making it easier to add the expense into your monthly finances. Learn more about how ACA subsidies work below.

What Are The Different Types Of ACA Subsidies?

There are two types of health insurance subsidies available:

1. An Advanced Premium Tax Credit (APTC) helps lower the monthly premium payment for health coverage. The ACA premium tax credit is based on your estimated income and household size (including yourself, your spouse, and anyone you will claim as a tax dependent – even if they do not need coverage). It also considers the cost of health coverage in your state. 

If you qualify, you can choose to apply your ACA tax credit subsidy to your monthly insurance payment as an advance premium tax credit (APTC). This means you will not have to pay the full amount of your monthly payment. 

If, at the end of the year you’ve used more premium tax credits than what you’re due based on your final income, you’ll have to pay back the remainder when you file your federal tax return. If you’ve taken less than you qualify for, you’ll get the difference back when you file your tax return.

2. Cost-Sharing Reductions (CSRs) are extra savings that reduce out-of-pocket costs for care by lowering your deductible, coinsurance or copays, and out-of-pocket maximum. If your income qualifies you for cost sharing reductions, you must enroll in a Silver plan to get the extra savings CSRs offer. to get the extra savings CSRs offer.

Keep in mind, you may be eligible for both the APTC and CSRs, which can help you save on your annual health plan costs.

How To Qualify For An ACA Subsidy

Your eligibility for a health coverage subsidy depends primarily on how much money you earn compared to federal poverty level (FPL) guidelines, as well as the number of people in your household and the cost of health coverage in your state. 

If your household income is between 100% and 250% of the FPL, you could be eligible for both the APTC and CSRs.

If your household income is more than 250% of the FPL, you could be eligible for the APTC, and pay no more than 8.5% of your expected annual income toward premiums.

Learn More About Insurance Subsidies Under The Affordable Care Act

The ACA Health Insurance Marketplace offers approved health insurance plans in four metal plan categories: Bronze, Silver, Gold, and Platinum. The categories differ by what percentage you pay for the cost of care.

If eligible, the APTC (subsidy) can be applied to any plan from the four metal categories. However, CSRs are only available if you select a Silver plan.

The estimates in the table below are based on an average population. Your costs will vary.