Healthcare Subsidies 101:
Your Guide to Saving on Monthly Insurance Premiums
If you’re searching for ways to save on your monthly health insurance expenses, healthcare subsidies are definitely worth a look. This week, the TRN team is breaking down the basics for ACA Marketplace shoppers.
What comes after spooky season? Open enrollment season, of course! And while we’ll admit that open enrollment season doesn’t necessarily have the same ring, a little preparation might have your 2024 health insurance costs falling like leaves.
What is a Healthcare Subsidy?
A healthcare subsidy is a financial assistance that’s available to help pay for your monthly insurance premium. Suppose you qualify and get approved for a subsidy. In that case, you’ll receive it in the form of a monthly tax credit that’s automatically applied to your insurance premium amount, meaning you’ll only have to pay the remaining amount each month.
Gotta love a process that’s 99% handled for you.
Who are ACA Healthcare Subsidies For?
Employers often offer health insurance coverage as an incentive to their employees and may cover some or all of the cost so workers don’t have to pay as much out of pocket. But for the self-employed, unemployed, and others who don’t have access to employer-supported healthcare, purchasing a policy from a health insurance carrier can come with a much steeper price tag.
As part of the Affordable Care Act, the federal government offers healthcare subsidies to assist those who don’t have access to employer-sponsored healthcare and instead use the ACA Marketplace to secure coverage. (There are other types of subsidized, income-based healthcare programs like Medicaid and CHIP, but for this article, we’re talking about Marketplace subsidies specifically).
Qualifying for a subsidy is a pretty straightforward process that’s rolled into the annual ACA Marketplace healthcare application, so you’ll only need a few pieces of information to complete this step.
Healthcare Subsidy Fast Facts
If you’re using or planning to use a subsidy to offset the cost of your health insurance, you’re not alone. According to the Congressional Budget Office (CBO), federal healthcare insurance subsidies are estimated to total $1.8 trillion in 2023. By 2033, federal healthcare subsidies are projected to reach $3.3 trillion.
About 91% of the 51.7 million people enrolled in Marketplace plans receive some form of healthcare subsidy.
In most states, the open enrollment period for 2024 health insurance coverage will run from November 1 through January 15. During open enrollment, you can determine if you qualify for a subsidy as part of your Marketplace health insurance application.
What to Know Before You Apply for a Subsidy
Aside from standard identifiers like your social security number and contact information, there are some specific details you’ll need to know as you apply for Marketplace coverage and tax credits.
The Size of Your Household
For federal application purposes, your “household” includes yourself, your spouse, and anyone you claim as a dependent on your taxes. Keep in mind that there are a few accompanying rules of thumb:
You can include your spouse and other tax dependents as members of your household even if they don’t need health coverage through the Marketplace.
If someone is living with you, but you don’t plan to claim them as a dependent for the tax year, don’t include them in your household when applying for Marketplace coverage and subsidies.
Your Estimated Household Income
Based on the information you include in your Marketplace application, you’ll determine if you qualify for a tax credit to defray your monthly premium cost. The amount of the credit will be based on your household size and your projected income for the plan year.
Projecting Your Household Income
While you may want to use last year’s income as a starting point, you will be making an educated guess on what your adjusted gross income will be for the upcoming plan year. This is especially important to keep in mind if you think you will bring in more income than you did in the previous year.
If you underestimate your income for the year and make more than you estimated in your application, you may need to repay some or all of that subsidy at tax time, depending on the amount of income overage.
That’s why we recommend considering whether you expect major income changes over the next year. The good news is that if your income changes substantially over the year—whether it’s an increase or a decrease—you can go back into your Marketplace account later in the year to update your application as needed.
Mastering the Hunt for Health Insurance
If you’re unsure how to estimate your income, we recommend consulting a licensed health insurance agent for advice.
One of the things we love about consulting a licensed and reputable insurance agent is that you can get a confidential and cost-free analysis of the health insurance options that are right for you. The healthcare industry is one of the most complicated systems out there, but the shopping process doesn’t have to be.
For help securing the right amount of protection for yourself and your family, learn more about our one-of-a-kind matchmaking system: one licensed, trusted agent hand-picked just for you.