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How do Subsidies work

Frequently Asked Questions

Can I get insurance for my kids only under Obamacare?

Am I eligible for Obamacare?

Do I have to apply for a plan before I apply for a subsidy?

What happens if I have a lapse in coverage in 2014?

Will I pay more for health insurance if I'm unhealthy?

Can I still see my doctor next year?

Will I be able to change plans after 2014?

Do I need to be on the same plan as my spouse?

Why does my household income matter under the Affordable Care Act?

Will health insurance cost more in 2014?

How do Obamacare subsidies work?

1. People who live in the U.S.
2. Are U.S. citizens, U.S. nationals, or lawfully present in the U.S.
3. Are not currently incarcerated

may qualify for premium tax credits to help them pay for their health insurance.

If you meet these requirements, and you’re total household income is between 100 and 400% of the Federal Poverty Level (or FPL), you will likely be eligible to receive a premium tax credit to reduce the cost of your health insurance.
These “premium credits” or subsidies will be set on a sliding scale so that your contributions to the monthly premiums will be limited to a defined percentage of your income. It’s complicated…
If you meet residency requirements for subsidies, then you’re total household income has to be between 100% and 400% of the Federal Poverty Level (or FPL). If it is, you may qualify for a “premium tax credit”, or subsidy, to limit what you pay for your health insurance.
These subsidies are set on a sliding scale so that what you spend each month is limited to a defined percentage of your income, to the second least expensive silver-level plan available in your area.

Confused? Here is an example

If you wanted to buy the second least expensive silver plan available in your area, and your monthly income is 133% of FPL, you would be earning about $1,273 per month in 2013.

At that income level you could spend no more than 3% of your income – about $38 per month – to buy that second least expensive plan. The government subsidy pays the rest of your monthly premium.
As your income increases, so does your share of the cost for the monthly premium.

So, if your income rises to 400% of FPL – about $3,832 per month in 2013 – you could spend no more than 9.5% of your monthly income – about $364 – for that same plan; the second least expensive silver plan.

So if the second least expensive silver plan available in your area costs $300 a month, and you earn 400% of FPL, there is no subsidy for you.

But, if the second least expensive silver plan available in your area costs $500 a month, the government would pay the difference between the $500 plan and your $364 cap.
In that scenario you would pay $364 per month for your health insurance plan, and the value of your subsidy would be $136; $500 minus your $364 cap.

Now, if there also happened to be a bronze plan available for $400 a month, you could enroll in that plan and get the same $136 subsidy. In that case, your plan would cost you $264 per month.

Or, if you wanted a Gold plan that cost $600 per month, you would – once again – apply your $136 per month subsidy and pay $464 per month for your insurance policy.