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Frequently Asked QuestionsTax Credits/Subsidies
1. What is a cost-sharing subsidy?
In an effort to provide financial assistance to individuals and families who cannot afford to pay the cost of health insurance, the government offers premium tax credits and cost-sharing subsidies.
If you qualify, cost-sharing subsidies can reduce your out-of-pocket expenses, including the amount you pay before your health insurance plan begins to pay (known as a deductible), or the set amount you pay when you see a doctor or visit a hospital (known as a copay).
2. Who is eligible for a tax credit or subsidy?
Plans purchased through the Health Insurance Marketplace could be eligible for a cost-sharing subsidy or premium tax credit to help offset the cost. The federal poverty level, which considers household size and income, is used to determine eligibility for financial assistance. If your income falls within the following ranges, you'll generally qualify for a premium tax credit. The lower your income is within these ranges, the bigger your credit could be.
Premium tax credits will be available if your household income is between 100 and 400 percent of the federal poverty level.
Like premium tax credits, cost-sharing subsidies are designed to help people pay for health care and are based on a percentage of household income. These subsidies are available to individuals and families with incomes between 100 and 250 percent of the federal poverty level. A household income less than 100 percent of the federal poverty level is likely eligible for Medical Assistance, also called Medicaid.
View an Independence Blue Cross blog post about the difference between subsidies and tax credits, as well as a complete income chart.
You can also use our free, subsidy calculator tool to see if you may be eligible for a premium tax credit or cost-sharing subsidy.
3. How do I apply for a premium tax credit?
When you purchase health insurance on the Health Insurance Marketplace, you may be able to get a premium tax credit or cost-sharing subsidy that lowers the amount you pay for health care.
You can only apply for the premium tax credit through a state or federal Health Insurance Marketplace. If you get your health insurance somewhere else, you can’t get the premium tax credit.
4. What if I can’t afford monthly premiums?
You may be eligible for tax credits and/or subsidies from the federal government. Many single people and working families will get money from the government to help pay their health care costs. This includes many people who the government does not help now. Beginning in 2014, these credits and subsidies will be available to U.S. citizens and legal immigrants who purchase coverage in the new health insurance Marketplace and who have income up to 400 percent of the federal poverty level (FPL).
To be eligible for the premium tax credits and/or subsidies, individuals must not be eligible for public coverage — including Medicaid, CHIP, Medicare, or military coverage — and must not have access to health insurance through an employer. (There is an exception in cases where the employer plan does not cover at least 60 percent of covered benefits on average, or the employee share of the premium exceeds 9.5 percent of the employee's income.)
5. What if I can’t afford my out-of-pocket costs?
You may be eligible for additional tax credits and/or subsides. People with incomes up to 250 percent of the FPL are also eligible for reduced cost-sharing (for example, coverage with deductibles and copayments) paid for by the federal government. Both the premium and cost-sharing reductions will vary by income and are structured so the amount that eligible people have to pay will not exceed a specified percentage of their income.
7. What is a tax credit?
In an effort to provide financial assistance to individuals and families who cannot afford to pay the cost of health insurance, the government will be providing premium tax credits and cost-sharing subsidies.
A premium tax credit is aimed at helping eligible individuals and families with low or moderate income afford health insurance purchased through the Health Insurance Marketplace beginning in 2014. Premium tax credits help pay for a portion of the monthly cost of your insurance premiums.
If eligible, you can choose to apply the premium tax credits now to lower your out-of-pocket cost for monthly premiums, or you can receive it later in the form of a refund when you file your yearly tax return.
8. I am currently enrolled in a health insurance plan; can I still apply for a premium tax credit?
If your current health care coverage is obtained through an employer, and the employer coverage satisfies the employer shared responsibility requirements, you are not eligible for a premium tax credit.
If you lose coverage obtained through your employer before the 2015 Open Enrollment Period (November 15, 2014 through February 15, 2015), and you qualify for a premium tax credit, then you may be able to apply for or make changes to a plan during Special Enrollment Period.
- A cost-sharing subsidy could lower your monthly out-of-pocket costs for deductibles, coinsurance, and copays if all the following apply: you purchase health coverage through the Health Insurance Marketplace, your income is below a certain level, and you choose a health plan from the Silver plan category.
- To be eligible for a cost-sharing subsidy, you must not be eligible for public coverage, including Medicare, Medicaid, CHIP, or military coverage, and you must not have access to health coverage through an employer. Eligible individuals with incomes up to 250 percent of the Federal Poverty Level (FPL) could receive a subsidy for their monthly premium as well as when they receive care. You may also qualify for cost-sharing subsidies if you are a member of a federally recognized tribe. As defined by healthcare.gov, a federally recognized tribe is any Indian or Alaska Native tribe, band, nation, pueblo, village or community that the Department of the Interior acknowledges to exist as an Indian tribe.
The enrollment process will include checking whether you are eligible. Find out if you may be eligible for a cost-sharing subsidy with our free, subsidy calculator. Final eligibility determinations and the actual amount of your tax credit/subsidy will be determined by the federal government.
10. How does a subsidy calculator work?
A subsidy calculator evaluates your state of residence, age, annual income, your family size, access to employer coverage, and the number of adults/minors enrolling in coverage.
The Independence Blue Cross subsidy calculator is designed to estimate federal premium assistance that may be available toward the cost of health insurance purchased directly by an individual (rather than through an employer). It also provides the FPL percentage so you can find out if you may be eligible for a cost-sharing subsidy.
Also, using the information you provide and the rates from the Health Insurance Marketplace, the subsidy calculator takes into account federal subsidies based on income, Medicaid eligibility, and other factors that affect premiums under the ACA. This is only an estimate and not a guarantee. Actual results will vary. The numbers provided are for illustrative purposes only and cannot be relied upon.
Find out if you are eligible for financial help with our free, subsidy calculator tool.
- You can get the premium tax credit in advance. The government will send the money directly to your health insurance company on your behalf and your health insurer will credit that money toward your premium, decreasing how much you'll pay each month.
- You can get your premium tax credit as a tax refund when you file your taxes. This could mean a big tax refund, but you'll pay more each month since you’ll be paying both your share of the premium and the share that would be have been covered by the tax credit.