Health insurance can often impose a heavy financial burden, particularly for those with modest or lower incomes. In response to this challenge, the Affordable Care Act (ACA) has introduced a system of sliding-scale subsidies aimed at making health insurance more accessible and affordable for eligible individuals.
This brief offers an insightful overview of the financial support provided by the ACA for individuals seeking coverage through health insurance Marketplaces, commonly referred to as exchanges.
Subsidies in the Health Insurance Marketplace
The ACA offers two primary forms of financial assistance for individuals enrolling in health insurance through the Marketplace. The first, known as the premium tax credit, serves to reduce monthly premium payments for insurance coverage. The second, called cost-sharing reduction (CSR), assists in lowering deductibles and other out-of-pocket expenses incurred when accessing medical services or undergoing hospital stays. To qualify for either of these financial aids, individuals and families must enroll in a health insurance plan available through a Marketplace.
Premium Tax Credit
Premium tax credits can be applied to Marketplace plans categorized into four “metal” levels of coverage: bronze, silver, gold, and platinum. Bronze plans typically feature lower premiums but come with higher deductibles and other cost-sharing responsibilities, necessitating greater out-of-pocket expenses when availing covered healthcare services. In contrast, platinum plans have higher premiums but substantially lower out-of-pocket costs.
Additionally, Marketplace offers catastrophic health plans characterized by even lower premiums but heightened cost-sharing compared to bronze plans. Catastrophic plans are generally exclusive to individuals under the age of 30, and premium tax credits cannot be utilized to offset their costs.
Eligibility for the Premium Tax Credit
To qualify for the premium tax credit, effective for coverage commencing in 2024, Marketplace enrollees must satisfy specific criteria, including:
Maintaining a household income at least equivalent to the Federal Poverty Level (FPL), which, for the 2024 benefit year, will be determined based on the 2023 poverty guidelines.
Lacking access to affordable coverage through an employer, including coverage through a family member’s employer.
Ineligibility for coverage through programs such as Medicare, Medicaid, and the Children’s Health Insurance Program (CHIP).
Possessing U.S. citizenship or providing evidence of legal residency. It’s worth noting that lawfully present immigrants with household incomes below 100 percent of the FPL may also be eligible for tax subsidies through the Marketplace if they meet all other eligibility criteria.
These subsidies under the ACA play a crucial role in making healthcare coverage more attainable and affordable for those who might otherwise struggle to secure insurance in the open market.
