Comparing health plans comes down to many factors: deductibles, copayments, wellness incentives, and more. But one of the most significant points of comparison for consumers choosing coverage comes down to the premium. This ‘sticker price’ signifies the amount an individual is responsible for paying out-of-pocket each month.
In effort to help cushion some of the costs of health insurance premiums, co pays and deductibles, the Affordable Care Act (ACA) has established both premium credits and subsidies for middle-to lower income consumers that would originally not be able to afford certain levels of coverage. Here’s what you should know about both tax credits and subsidies and how they differ.
Health Care Reform Tax Credits
Most of the focus regarding the upcoming health exchanges has been on tax credits, which are meant to reduce the monthly premium for individuals and families with incomes making up to 100 percent ($23,550 for a family of four) to 400 percent of the federal poverty level ($94,200 for a family of four in 2013). These tax credits will be immediately available to eligible enrollees and payments of the tax credits may go directly to insurers to cover a share of the monthly health insurance premiums charged to individuals.
This tax credit can be used to buy any of the four tiers of ‘metallic plans’ offered through the state marketplace; including bronze, silver, gold and platinum. In general, bronze level plans require the most overall cost-sharing (deductibles, co pays) while platinum plans require the least.
Another type of financial assistance for online marketplace customers are federal cost-sharing subsidies. The cost-sharing subsidies essentially increase an insurance company’s portion of covered benefits, resulting in reduced out-of-pocket spending for lower-income consumers.
For individuals and families earning 250 percent or less of the federal poverty level ($58,875 for a family of four in 2013), subsidies can reduce deductibles, copayments, coinsurance and the total out-of-pocket spending caps on a plan. These reductions are automatically applied as long as consumers qualify based on income and they purchase a silver-level plan. That’s right, unlike the tax credit option, in order to receive a cost-sharing subsidy; an individual must purchase a silver plan, also known as the benchmark plan by the law. Silver plans are one of the four tiers of plans sold through the exchanges, each with a different level of cost-sharing.
Warning: Subsidies will only be available for in-network providers, which could leave some consumers with high costs for visiting out-of-network providers.
To see if you may be eligible for a tax subsidy, try the GoHealth health reform subsidy calculator and see an estimated tax credit as well as the premium you can expect to pay in 2014.