What are ACA plan subsidies?

There are two types of subsidies to help low- and moderate-income people afford health insurance in the ACA marketplace:

  • One subsidy helps reduce premiums.
  • The other subsidy helps reduce out-of-pocket expenses, such as deductibles and copayments.

You can only get these subsidies if you buy health insurance policies sold through the insurance marketplace. You can find links to your state's ACA marketplace at Healthcare.gov. Some states run their own marketplaces, while the federal government runs many others. Healthcare.gov will transport you to the correct marketplace.  

Private insurance companies offer marketplace policies, but they must meet ACA standards. These plans:

  • Can’t reject you 
  • Can’t charge more because of pre-existing health conditions
  • Must cover 10 essential health benefits, including hospitalizations, outpatient care, mental health and prescription drugs
  • Must have out-of-pocket spending limits for individual and family plans 

You usually have several health plan options for marketplace plans. ACA plans come in four tiers:

  • Bronze plans tend to have the lowest premiums but the highest deductibles and out-of-pocket costs.
  • Silver plans usually have slightly higher premiums but lower deductibles than Bronze plans.
  • Gold and Platinum plans generally have the highest premiums but the lowest out-of-pocket costs.

Find out more about ACA plan metal tiers.

Eligibility for both types of subsidies is based on your income. The premium subsidy is technically a tax credit that you receive in advance to help you pay your premiums. The subsidy goes directly to the insurance company and you pay the difference. 

If your income ends up being higher than expected by the end of the year, you may need to pay back some of the subsidy when you file your income tax return the following spring. If your income ends up being lower than expected when you applied for the policy, you may get back some money as a refund.

 

Who is eligible for ACA premium subsidies?

Your income must be between 100% and 400% of the federal poverty level to qualify for an ACA plan premium subsidy.  

The 2023 subsidies are based on your 2023 income compared to 2022 federal poverty figures. The limits are higher than many people expect. 

You can qualify for a premium subsidy in 2023 if your adjusted gross income for the year is:

  • Between $13,590 and $54,360 if you’re single
  • $18,310 and $73,240 for a couple
  • $27,750 to $111,000 for a family of four 

Also, you may qualify for Medicaid coverage if your income is below 100% of the federal poverty level, depending on your state’s income rules.

You need to estimate your income for the year when you buy a marketplace policy to figure out the subsidy’s size. The subsidy calculation is complicated, but it’s designed so that people pay no more than 2% to 10% of their income in premiums for a Silver-level plan on the ACA marketplace. The lower your income, the larger your subsidy. The government pays the subsidy, and you pay the remainder of the cost.

The Kaiser Family Foundation has a calculator that can help estimate your subsidy. The ACA marketplace websites have calculators to show exactly how much you'd have to pay for the policies available in your area after the subsidy.

 

How much do you save with ACA premium subsidies? 

ACA premium subsidies can save you hundreds of dollars each month, depending on your salary. 

As an example, a family of four living in Minneapolis (Hennepin County) with an annual income of $55,000 is eligible for a premium tax credit of $953 a month. With that subsidy, a silver plan will cost about $50 a month, compared to $1,004 a month without the subsidy.

The subsidy calculation is based on the price of the second-lowest-cost Silver plan in your area, but you can use the subsidy to buy any plan on the marketplace. The size of the subsidy remains the same, even though the premiums for other plans are different. 

If you buy a Bronze plan, for example, your premiums will be even less or covered entirely. The family mention above could get a bronze plan for no monthly cost at all.

The subsidy calculation can be tricky because it's based on your income for the full coverage year before knowing what you’ll make. Your 2023 subsidy is based on what you think you'll earn in 2023. 

Karen Pollitz, a senior fellow at the Kaiser Family Foundation, says gauging your next year’s income can be difficult. 

"When they apply, people should make the best estimate they can justify and then if circumstances change during the year, they can and should return to the marketplace to adjust their premium subsidy -- claiming more if income has dropped or rolling back subsidies if income has increased,” Pollitz says. 

 

Who is eligible for ACA cost-sharing subsidies?

If your income is below 250% of the federal poverty level, you can qualify for a cost-sharing subsidy in addition to the premium subsidy. For 2023, the income cut-off is:

  • $33,975 for singles 
  • $45,775 for a couple 
  • $69,375 for a family of four

This subsidy helps you pay out-of-pocket expenses, such as deductibles, coinsurance and copayments. 

 

How much do you save with ACA cost-sharing subsidies? 

Cost-sharing subsidies are another way to save money on your ACA plan. 

The ACA's out-of-pocket maximum in 2023 for a family of four is $18,900 (which includes deductibles and copayments, but not premiums). If we look at the sample family earning $55,000 again, they would receive a cost-sharing subsidy that would reduce their annual out-of-pocket spending limit down to $6,000 for a Silver policy. 

Insurers can figure out different ways to reduce the policy's deductibles and copayments to reach this out-of-pocket maximum. For example, the deductible may be reduced from a few thousand dollars down to a few hundred dollars.

You can only receive the cost-sharing subsidy if you buy a Silver policy. So if your income is below 250% of the federal poverty level, compare the cost and coverage of a Silver policy to a Bronze policy. The bronze policy may have lower premiums but may have higher out-of-pocket costs because it is not eligible for the subsidy.

 

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Preferred-provider Organization (PPOs)

  • Pay higher premiums with a lower deductible
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Preferred-provider organization (PPOs) plans are the most common type of employer-based health plan. PPOs have higher premiums than HMOs and HDHPs, but those added costs offer you flexibility. A PPO allows you to get care anywhere and without primary care provider referrals. You may have to pay more to get out-of-network care, but a PPO will pick up a portion of the costs.
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Health maintenance organization (HMO)

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Health maintenance organization (HMO) plans have lower premiums than PPOs. However, HMOs have more restrictions. HMOs don't allow you to get care outside of your provider network. If you get out-of-network care, you'll likely have to pay for all of it. HMOs also require you to get primary care provider referrals to see specialists.
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High-deductible health plans (HDHPs)

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High-deductible health plans (HDHPs) have become more common as employers look to reduce their health costs. HDHPs have lower premiums than PPOs and HMOs, but much higher deductibles. A deductible is what you have to pay for health care services before your health plan chips in money. Once you reach your deductible, the health plan pays a portion and you pay your share, which is called coinsurance.
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The Affordable Care Act created insurance exchanges that allow people to compare plans. The health law also requires insurers to accept everyone and not charge them exorbitant rates. People who make below 400% of the federal poverty level qualify for subsidies to help pay for an ACA plan.
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These plans have lower monthly premiums and higher out-of-pocket costs
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Silver plans provide a good balance of monthly premiums with out-of-pocket costs. Coinsurance is 70% with a silver plan, meaning you will pay 30% of the costs after your deductible is met, up to the out-of-pocket limit. Silver plans are a good choice for people who are in generally good health but don't want high out-of-pocket costs if something goes wrong.

Bronze plans are a popular choice with those who value low monthly premiums and are willing to pay more when they need care. Coinsurance is set at 60%, meaning you will pay 40% if you do need care, up to the out-of-pocket limit. Bronze plans are good for those who don't expect to need many services outside of preventative care throughout the year.

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The Affordable Care Act created insurance exchanges that allow people to compare plans. The health law also requires insurers to accept everyone and not charge them exorbitant rates. People who make below 400% of the federal poverty level qualify for subsidies to help pay for an ACA plan.
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These plans have higher monthly premiums with lower out-of-pocket costs
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ACA platinum plans have the highest monthly premiums, but the lowest out-of-pocket costs. You'll pay more monthly in return for lower deductibles, copays and coinsurance amounts. Coinsurance with platinum plans is 90%, which means you pay 10% after the deductible, up to your out-of-pocket limit. Platinum plans are good for those who anticipate a lot of medical needs throughout the year.

Gold plans cost a little less than platinum plans, and come with higher out-of-pocket costs. The coinsurance amount on a gold plan is 80%, which means you pay 20% after the deductible, up to your out-of-pocket limit. A gold plan is a good idea if you think you'll need a lot of care throughout the year, but don't want to pay platinum premiums.

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How to find plans with health insurance subsidies

The best way to get a plan that’s eligible for subsidies is to go to the ACA insurance marketplace. 

You'll enter your income information and see all of the plans available in your area. You also can compare premiums as well as your actual cost after the subsidies are applied.

You can only shop for policies on the state marketplace at certain times. In most states, you can buy coverage or switch to a different policy during open enrollment every year, which runs from Nov. 1 to Dec. 15 for coverage to begin on Jan. 1. (Some states that run their own marketplaces have extended deadlines.)

You can also shop for policies on the state marketplace at other times if you qualify for a special enrollment period. You may become eligible for a special enrollment period if you:

  • Lose your job (and lose your employer's health insurance)
  • Move
  • Get married
  • Get divorced
  • Have a baby
  • Adopt a child 
  • Experience other eligible life changes

You generally have 60 days after the eligible event to get coverage on the marketplace. See Special Enrollment Periods for more information.

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