SAVE MONEY ON MARKETPLACE PLANS WITH SUBSIDIES
If you’re looking for ways to save money on your Marketplace insurance plan, you’re not alone. As the cost of living rises, it’s important to have adequate health coverage for you and your family without breaking the bank. But how?
We’ll walk you through the two types of financial aid that can help you save money on your monthly insurance costs:
- Premium tax credits
- Cost-sharing reductions
Four out of five people who have Marketplace plans qualify for monthly premiums of $10 or less through these subsidies. In this guide, you’ll learn more about what these options are, who qualifies for them, and how they can help you save.
Our goal is to help you make the most of your insurance plan while keeping more money in your pocket. So, let’s get started!
PREMIUM TAX CREDITS
What are premium tax credits?
A premium tax credit (also called a premium subsidy) is a way to reduce the cost of your monthly insurance premium. The amount of credit you get depends on your income and family size.
Here’s a tip: if you have any changes in your income or household, report them to the Marketplace as soon as possible to make sure you don’t miss out on savings or take more than you qualify for.
How do premium tax credits work?
Unlike other tax credits, you don’t have to wait until tax season to see the benefits. In fact, most people get their premium tax credit upfront to use throughout the year. This is called an advance premium tax credit. When you choose this option, the IRS will send money to your health plan each month to help lower the amount you have to pay for health insurance.
You can also choose to pay the full price for your health plan each month and claim the credit on your tax return. Most people don’t choose this option because it means they have to pay more out of their own pocket each month.
Who is eligible for premium tax credits?
Like we mentioned earlier, your eligibility for premium tax credits depends on your income and family size. There are a few other eligibility requirements you must meet too. You will not qualify for premium tax credits if you:
- Choose a health plan that is NOT offered through the Health Insurance Marketplace.
- Are eligible for health coverage through a government program (like Medicaid, Medicare, CHIP, or TRICARE).
- Have access to adequate and affordable health insurance through your employer.
- File a tax return with the “Married Filing Separately” tax status. There are some exceptions for domestic abuse and spousal abandonment.
- Are claimed as a dependent by another person on their taxes.
- Are not a U.S. citizen or lawful immigrant.
How much can a premium tax credit help me save?
The amount of money you get in premium tax credits depends on—you guessed it—your income and family size. The Marketplace also takes the cost of your benchmark plan into account. If that all sounds a bit confusing, don’t worry. You can calculate your estimated savings HERE.
BUT… if you’re interested in the numbers behind the scenes, keep reading to learn more about how the Marketplace calculates your credit.
THE NITTY-GRITTY DETAILS: HOW THE MARKETPLACE CALCULATES YOUR CREDIT
First, the Marketplace looks at the cost of your benchmark plan, which is the second-lowest premium plan in the Silver tier. You can learn more about the differences between Bronze, Silver, Gold, and Platinum plans HERE.
Next, the Marketplace looks at your income and family size to see how you compare to the federal poverty line (FPL). This is where things can get a bit complicated, but hang in there! Essentially, the lower your income, the more financial assistance you'll get in the form of premium tax credits.
| # in Household | FPL | 138% FPL | 150% FPL | 200% FPL | 250% FPL | 300% FPL | 400% FPL |
|---|---|---|---|---|---|---|---|
| 1 | $14,580 | $20,120 | $21,870 | $29,160 | $36,450 | $43,740 | $58,320 |
| 2 | $19,720 | $27,213 | $29,580 | $39,440 | $49,300 | $59,160 | $78,880 |
| 3 | $24,860 | $34,306 | $37,290 | $49,720 | $62,150 | $74,580 | $99,440 |
| 4 | $30,000 | $41,400 | $45,000 | $60,000 | $75,000 | $90,000 | $120,000 |
| 5 | $35,140 | $48,493 | $52,710 | $70,280 | $87,850 | $105,420 | $140,560 |
| 6 | $40,280 | $55,586 | $60,420 | $80,560 | $100,700 | $120,840 | $161,120 |
| 7 | $45,420 | $62,670 | $68,130 | $90,840 | $113,550 | $136,260 | $181,680 |
| 8 | $50,560 | $69,773 | $75,840 | $101,120 | $126,400 | $151,680 | $202,240 |
| For each additional person, add: | $5,140 | $7,093 | $7,710 | $10,280 | $12,850 | $15,420 | $20,560 |
Source: https://aspe.hhs.gov/poverty-guidelines (Does not include Alaska or Hawaii) 2023
Finally, the Marketplace determines how much of your annual income you should expect to pay toward your premium. In Utah (and many other states), if your income is in the 138% FPL column or less, you are eligible for Medicaid and cannot get a Marketplace plan. If you make more than 138% of the federal poverty level, your expected premium contribution looks like this:
| Annual Household Income (% of FPL) | Expected Premium Payment (% of Income) |
|---|---|
| Up to 150% FPL | 0% |
| 200% FPL | 2% |
| 250% FPL | 4% |
| 300% FPL | 6% |
| 400% FPL & Above | 8.5% |
Source: American Rescue Plan Act Public Law No: 117-2; Inflation Reduction Act Public Law No: 117-169
Now that we have all the pieces to calculate your premium credit, let’s put it together. Here’s the equation the Marketplace uses to determine your premium credit.
| Premium Tax Credit = Cost of Benchmark Plan – Expected Premium Payment |
|---|
For our example, let’s say you have a family of four making $60,000 per year and your benchmark plan costs $10,000 per year. Since $60,000 per year is 200% of the federal poverty level, your expected premium payment is 2% of your income ($1,200 per year).
| $10,000 - $1,200 = $8,800 |
|---|
Still with us? This means the IRS will give your health plan $8,800 to help cover the cost of your monthly premiums throughout the year. You can use this premium credit toward any plan available to you.
COST-SHARING REDUCTIONS
What are cost-sharing reductions?
Cost-sharing reductions (CSRs) are extra savings you can qualify for based on your income and family size. The catch is that you MUST choose a plan in the silver category to redeem these savings. It’s easy to see if you may qualify for a CSR. All you have to do is enter your info HERE. Then, check the “Next Steps” section to find out if you may be eligible for these extra savings.
How do cost-sharing reductions work?
Unlike premium tax credits, CSRs are NOT meant to help you pay premiums. Instead, they lower the cost of other health care expenses, like deductibles, copayments, and out-of-pocket maximums. For example, let’s say you are looking at a Silver plan that has a $30 copay for a doctor's visit. If you qualify for a CSR, you might only have to pay $20 or $15 for the same copay. Of course, these numbers will vary based on the plan you choose and the level of assistance you’re eligible for.
The good news is that you can combine premium tax credits and CSRs to maximize your savings!
Who is eligible for cost-sharing reductions?
CSRs are available to individuals and families who have household incomes up to 250% of the federal poverty level (see the chart above for dollar amounts). And don’t forget: you must choose a Silver plan to use these savings.
If you’re an American Indian or Alaskan Native, you may qualify for enhanced CSRs. Enhancements include a higher income limit (up to 300% of the federal poverty level) and the option to choose between Bronze, Silver, Gold, or Platinum plans. You may even be able to enroll in a zero cost-sharing plan, which means you won’t have to pay any out-of-pocket costs for your care.
How much can a cost-sharing reduction help me save?
As for how much you can save with CSRs, it's hard to say exactly. The amount of savings will depend on your income, family size, and the specific plan you choose. But when you're shopping for plans on the Marketplace, it will automatically show you your CSR savings so you can compare different plans and choose the one that's best for you. And remember, you can also combine premium tax credits and CSRs to get even more savings.
Filling out a Marketplace application will show you the exact plan prices and subsidies you are eligible for. If you need help, a licensed insurance agent can help you fill out your application, understand the subsidies available to you, and figure out which plan options are best for you and your family.