Obamacare Premium Subsidies
- Many Americans qualify for 2022 Obamacare premium subsidies based on their expected 2022 income level. Learn the premium subsidy income limits and subsidy amounts for this year and find out how to save on your Marketplace health insurance plan.
Many families and individuals enrolled in an Obamacare health insurance plan are eligible for a premium subsidy and other discounts designed to help keep costs at a minimum.
In this article, we’ll provide detailed information about Obamacare premium subsidies and other discounts including how much you can save, eligibility rules and more.
What Is an Obamacare Premium Subsidy?
“Obamacare” refers to health insurance plans purchased on a state or federal Health Insurance Marketplace, or “exchange.”
These plans are designed primarily for those who lack affordable health insurance through an employer, and the goal of these plans is to provide affordable health insurance for low- and middle-class people.
Obamacare plans and the marketplaces on which they are sold were created by the 2010 passing of the Affordable Care Act (ACA).
The federal government makes subsidies available to most enrollees in an effort to keep coverage affordable.
- In 2020, the average monthly premium for an Obamacare plan was $576.
- After subsidies were accounted for, the average enrollee paid just $84 per month for their plan.
- Millions of people can even get the full amount of their premium covered by a subsidy and pay nothing for their ACA health insurance plan membership.
There are also cost-sharing reductions (CSR) that lower the amount you have to pay for deductibles, copayments and coinsurance. Cost-sharing reductions come with their own set of rules and eligibility guidelines, which we’ll discuss later in this guide.
Who Is Eligible for a Premium Subsidy?
Eligibility for premium subsidies is based on income levels. If your household income is between 100% and 400% of the federal poverty level, you may qualify for an Obamacare premium subsidy. (Legislation enacted in response to the COVID-19 pandemic temporarily expanded eligibility for subsidies, which we’ll detail later.)
You aren’t eligible for a premium subsidy if any of the following situations applies to you.
- You will not be eligible for an Obamacare subsidy if your employer offers a health insurance plan that is considered affordable and provides at least a minimum standard of coverage. You may still enroll in an Obamacare plan; you just won’t be able to receive a subsidy and will have to pay the full amount of the premium.
- You will not be eligible for a premium subsidy if you are eligible for Medicaid or CHIP (Children’s Health Insurance Program). Medicaid and CHIP have their own discounts and eligibility rules, which we will also detail later in this guide.
- If you are eligible to receive premium-free Medicare Part A, you will not be eligible for an Obamacare premium subsidy.
Of course, you must first be eligible for an Obamacare plan before being able to qualify for a subsidy. To enroll in an Obamacare plan, you must live in the U.S. and be a U.S. citizen or U.S. national (lawfully present) and not be incarcerated.
What Is the Income Limit for Obamacare Subsidies in 2021 and 2022?
In 2021, the eligible income range for an Obamacare premium subsidy was between $12,760 and $51,040 for an individual (which represents 100% to 400% of the federal poverty level). For family plans, household income limits are measured in relation to the number of people in the household.
However, individuals and families earning more than the allotted amounts may still be eligible for a subsidy in 2022 thanks to recent legislation (see the next section).
Any plan that becomes effective in 2022 will use your projected income in 2022 along with the 2021 federal poverty levels to determine subsidy eligibility. The table below shows the minimum and maximum income levels needed in 2022 to qualify for an Obamacare premium subsidy.
|Household Size||Minimum Income (100% of Federal Poverty Level)||Maximum Income (400% of Federal Poverty Level)|
|For each additional person, add:||$4,540||$18,160|
How Did COVID-19 Affect Eligibility for Premium Subsidies?
As previously mentioned, the COVID-19 pandemic ushered in legislation that expands income eligibility for a premium subsidy beyond the standard 400% of the federal poverty level. In 2021 and 2022, an 8.5% rule is in effect. That is, if the cost of a benchmark plan is more than 8.5% of your income, you may still qualify for a premium subsidy.
A benchmark plan is the second-least expensive Silver plan available in your area. (Obamacare plans are divided into four tiers based on cost and benefits – Platinum, Gold, Silver and Bronze). The dollar amount of a benchmark plan may change over time as plan prices fluctuate each year, and the benchmark will differ by location as plan prices vary by city and state. But the benchmark used is always the second-least expensive Silver plan for each area.
- For example, a person making $55,000 per year normally would not qualify for a premium subsidy because their income is greater than 400% of the federal poverty level.
- However, if the second-least expensive Silver plan available in their area (that person’s “benchmark” plan) costs at least $4,675 per year ($389.58 per month), that person would be eligible for a premium subsidy in 2022 because their benchmark plan is equal to at least 8.5% of their income.
It’s important to note that premium subsidies (whether obtained through the federal poverty level or via the 8.5% rule) can be applied to any Marketplace plan (Platinum, Gold, Silver or Bronze).
In other words, while the benchmark for eligibility uses the cost of a Silver plan, you do not have to enroll in a Silver plan in order to receive the subsidy.
How Much Will My Obamacare Premium Subsidy Be?
The size of your premium subsidy is based on how your current household income compares with the previous year’s federal poverty level and the cost of the benchmark plan in your area.
First, you’ll need to determine how much the federal government expects you to contribute to your plan. The table below shows the expected contribution for the benchmark plan for each income level.
|Up to 150% of federal poverty level||0%|
|150% to 200% of federal poverty level||0% to 2% of your income|
|200% to 250% of federal poverty level||2% to 4% of your income|
|250% to 300% of federal poverty level||4% to 6% of your income|
|300% to 400% of federal poverty level||6% to 8.5% of your income|
Next, you’ll need to determine the cost of the benchmark plan in your area. You can use the federal Marketplace or your state’s health insurance exchange to find the second-least expensive Silver plan where you live.
Then, subtract the amount you are expected to contribute from the cost of the benchmark plan. That total will equal the amount of your premium subsidy, which can then be applied to any plan.
It’s important to note that the subsidy amount is based on the benchmark plan. However, that subsidy amount will remain the same regardless of which plan it is used for.
- For example, let’s say your income is $28,980, or 225% of the federal poverty level. Your expected contribution will be approximately 3% of your income, or $869.40 per year ($72.45 per month).
- If the cost of the benchmark plan in your area is $350 per month, your subsidy amount will be $277.55 per month ($350 minus $72.45; or the cost of your benchmark minus the amount of your expected contribution).
- The federal government will reimburse you $277.55 per month for your health insurance. You may use that reimbursement for any Platinum, Gold, Silver or Bronze plan for which you are eligible.
- If you decide to enroll in the benchmark plan, you will pay $72.45 out of pocket each month for your plan ($350 minus $277.45; or the cost of the plan minus your subsidy).
- If you decide to enroll in a more expensive plan that costs $400 per month, you will pay $122.45 per month ($400 minus $277.55).
- If you decide to enroll in a less expensive plan that costs $300 per month, your actual cost will be $22.45 ($300 minus 277.45).
Again, your reimbursement rate is calculated using the benchmark plan, but the reimbursement rate applies to each plan in the same way.
How Do Cost Sharing Reductions Work?
Cost sharing reductions allow you to pay less money out-of-pocket toward any deductibles, copayments and coinsurance required by your Obamacare plan and can even lower your annual out-of-pocket limit.
While premium subsidies can be used for any plan, a cost sharing reduction may only be used with Silver level plans. Cost sharing reductions are built into the monthly premiums for Silver plans, which is why the cost of some Silver plans can look out of balance when compared to some Gold or Bronze level plans.
If your income is between 100% and 250% of the federal poverty level, you may be eligible for a plan with cost sharing reductions.
The less money you make, the more assistance you may qualify for. For example, a family or individual making 150% of the federal poverty level will receive greater cost sharing reductions than someone with an income of 200% of the federal poverty level.
The chart below shows the income equivalents of 100% and 250% of the federal poverty level, or the minimum and maximum needed to qualify for cost sharing reductions.
|Household Size||Minimum Income (100% of Federal Poverty Level)||Maximum Income (250% of Federal Poverty Level)|
|For each additional person, add:||$4,540||$11,350|
There is no extra step needed on your behalf to enroll in cost sharing reductions.
- If you are eligible for cost sharing reductions, the plans that include them will appear as available options when you shop for coverage on the exchange.
- If you do not qualify for cost sharing reductions, the plans that include them will not appear when you shop for coverage.
How Do Premium Subsidies Work for Medicaid and CHIP?
While subsidies for marketplace health insurance plans are calculated using the previous year’s federal poverty level, Medicaid subsidies are based on the current year’s federal poverty level.
States can elect their own thresholds, but in most states, you’ll be eligible for Medicaid benefits if your income does not exceed 138% of the federal poverty level. The table below shows the maximum income limit to qualify for Medicaid in most states.
|Household Size||Income Limit to Qualify for Expanded Medicaid Eligibility (138% of Federal Poverty Level)|
|For each additional person, add:||$4,540|
There are 12 states that do not have expanded Medicaid eligibility, meaning you cannot qualify for Medicaid based on your income alone. These states are:
- North Carolina
- South Carolina
- South Dakota
Because these 12 states do not offer Medicaid based on income alone, a coverage gap exists for some people in those states. That is, if your income is less than 100% of the federal poverty level, you may not qualify for an Obamacare subsidy and you may not automatically qualify for Medicaid.
When the Affordable Care Act was enacted, it was done so under the expectation that anyone making less than the federal poverty level would be eligible for Medicaid. But the Supreme Court later ruled that states could not be forced to expand their Medicaid eligibility, and a dozen states have declined to do so.
The income eligibility limits for CHIP are higher than those of Medicaid. Children in households with an income of 200% of the federal poverty level are eligible for CHIP in most states, and in some states the limit reaches 300% of the federal poverty level. CHIP eligibility is also based off the age of the child. You can review the state-by-state breakdown for CHIP income limits.
You are not eligible for an Obamacare premium subsidy if you are enrolled in Medicaid or CHIP. That’s because these health insurance programs are separate from Obamacare and any premiums paid for Medicaid or CHIP coverage are still less than what you would pay for an Obamacare plan with premium subsidies.