Unless you’ve been living under a rock for a number of years, you’ve most likely heard a bit of commotion about Obamacare. Some have lauded the legislation as the best thing since sliced bread. Others prefer to compare President Obama to Judas (rarely in a favorable light) when discussing the plan. There really is no middle ground when talking politics. Obamacare and the act of giving individuals a health insurance subsidy are no different. Yet, when one listens to these conversations or arguments discussing the topic, there is usually one thing missing – details. Or as some would like to call them: facts. While generalizations may work well when arguing, one may need details to actually understand and utilize the legislation to his or her advantage. One cannot receive a health insurance subsidy unless they understand how Obamacare works.
The Basics of a Health Insurance Subsidy
The Affordable Care Act (also known as Obamacare) was signed into law in early 2010 with the goal of promoting enrollment in health insurance. While controversial – the legislation is simply a government assistance program created to help offset the costs of health insurance. Health insurance subsidies were created to do just that. In order to get a health insurance subsidy, one’s income and level of need is taken into account. The program is structured to help reduce the costs of health insurance premium expenses, co-payments for medical services and annual out-of-pocket medical expenses. While many federal aid programs only attempt to help low-income households, the subsidy benefits also cover and can help most middle-class families. Provided in the form of tax credits, these subsidies are obtained through state or federal exchanges. One can get the tax credits during the health insurance application process. While far reaching, the Affordable Care Act does not cover everyone. If you are eligible for Medicare, Medicaid or the Children’s Health Insurance Program – you are not eligible for a health insurance subsidy. As well, individuals receiving health coverage provided by an employer are not eligible for the program if the coverage is above the minimum contribution level.
While somewhat confusing, the health insurance subsidy provided by the Affordable Care Act uses your income to determine caps on insurance premiums. The cap is based on a percentage of your yearly income from your modified adjusted gross income. Here is where things get a bit fuzzy, so pay attention. Using the annual cost of Obamacare’s Silver Plan as an estimate helps to create the exact value of all health insurance subsidies. Even if you decide to select a different plan, your tax credit is based upon this plan. So – let’s say your income level creates an income cap for premiums around $5,000, and the Silver Plan used as a benchmark for the program costs around $10,000. In this scenario, you would receive a tax credit of $5,000. If you decide to purchase a better plan, you would still get the same tax credit. If the premium on your plan is less than the tax credit, you will only receive a tax credit equal to the cost of the plan.
Health Insurance Subsidy, Co-Payment and the Poverty Level
As previously mentioned, an individual’s health insurance subsidy is correlated to the poverty level. Individuals who earn less than 250% of the Federal Poverty Level and purchase a Silver Plan will pay less in co-payments compared to the typical enrollee population. While a typical enrollee usually pays around 70% of medical costs with a Silver Plan, this percentage increases as one’s poverty level does. If your income is at or below 150% of the Federal Poverty Level, you will only pay 6% of covered medical expenses. Around 150% to 200% of the Federal Poverty Level, one only pays for 13% of medical expense covered by the program. One would pay 27% of medical expense covered by the program if he or she falls into the 200% to 250% range using the Federal Poverty Level as a guide.
Health Care Subsidy & Out-of-Pocket Maximums
Now, there is an annual limit on out-of-pocket costs one can incur for covered medical expenses from the Affordable Care Act. However, if you qualify for a health care subsidy due to the Federal Poverty Level then your out-of-pocket maximum is further capped. If you fall into the 100-200% of the Federal Poverty Level category, you are only required to pay around $2,250 maximum out-of-pocket costs. A family in this same poverty range is only required to pay around $4,500 maximum out-of-pocket costs. If your income falls around 200-250% category, you only have a $5,200 maximum annual out-of-pocket cost. This rises to $10,400 for a family in the same Federal Poverty Level range.
Obamacare, Health Insurance Subsidies and the Feds
While Obamacare is live and active in the United States, the fate of the program ultimately remains unclear. Not the most popular program created by any President, the legislation is vehemently opposed by “the right” and even has a fair share of detractors on “the left.” Obamacare may not be going anywhere too soon, but an individual who is eligible should take advantage of his or her health insurance subsidy while the program is still available. The issue with Obamacare and HealthCare.gov (the federal health insurance marketplace) revolves around the legality of a health insurance subsidy. These subsidies are currently being reviewed in court. The Supreme Court has taken over the case King v. Burwell after different federal appeals courts issued conflicting decisions. The Supreme Court is expected to come to a decision in the King v. Burwell case around late June or early July in 2015. This will be around a year after the two federal appeals courts came to clashing decisions. On July 22, 2014 – one court determined subsidies to be legal when purchased on the federal exchange. The other federal appeals court found subsidies to be illegal once provided by the federal health insurance exchange instead of set up by the state – on the exact same day.
Health Insurance Subsidy
No matter the court’s decision – the health insurance subsidy is still available to many individuals. If you qualify, make sure to educate yourself on the Affordable Care Act so that you can make an informed decision.