The Affordable Care Act (ACA), often referred to as Obamacare, provides subsidies to help individuals and families with low to moderate incomes afford health insurance coverage through the Health Insurance Marketplace. These subsidies are designed to make health insurance more affordable by reducing the cost of monthly premiums and, in some cases, out-of-pocket expenses. Here’s how ACA subsidies work:

  1. Premium Tax Credits (PTCs):
    • Premium tax credits, also known as subsidies, are designed to lower the monthly premium costs for health insurance plans purchased through the Health Insurance Marketplace.
    • Eligibility is primarily based on your income and household size. You are eligible for premium tax credits if your income falls within a specific range, typically between 100% and 400% of the federal poverty level (FPL). The exact income thresholds can vary by year and by state, FPL amounts are below.
    • The premium tax credit is calculated on a sliding scale, with those with lower incomes receiving larger subsidies. The lower your income, the higher the subsidy, and the less you’ll pay for monthly premiums.
    • When you apply for coverage through the Marketplace, your subsidy amount is determined based on your income and other relevant information. The subsidy is applied directly to your chosen health insurance plan, reducing the amount you pay for premiums each month.
    • You may choose to use all of your subsidy, a portion, or none. Your PTC will be reconciled on your taxes. Reconciliation information is below.
    • You may be eligible for a PTC even if you have coverage through your employer. Additional information is at the bottom of this page.
  2. Cost-Sharing Reductions (CSRs):
    • Cost-sharing reductions are additional subsidies available to individuals and families with lower incomes, usually between 100% and 250% of the federal poverty level.
    • Cost-sharing reductions reduce the out-of-pocket expenses associated with your health insurance plan. This includes lowering deductibles, co-payments, and coinsurance.
    • To benefit from cost-sharing reductions, you must choose a Silver-level plan through the Marketplace. Silver plans are designed with cost-sharing features that reflect these reductions.
  3. Applying for Subsidies:
    • To apply for premium tax credits and cost-sharing reductions, you must fill out a Marketplace application during the annual Open Enrollment period or during a Special Enrollment Period if you qualify due to a life event.
    • When you provide information about your income, family size, and other relevant factors on the application, the Marketplace will determine your eligibility for subsidies.
    • The Marketplace will then display the health insurance plans available to you, along with the subsidies you qualify for, making it easier to compare plans and choose one that fits your budget and healthcare needs.
  4. Reconciliation on Tax Return:
    • Subsidies are initially estimated based on the information you provide when applying for coverage.
    • When you file your federal income tax return for the year, the IRS will reconcile your actual income with the estimated income used to determine your subsidy amount. If there is a difference, you may receive additional subsidies or be required to repay excess subsidies.

ACA subsidies play a critical role in making healthcare coverage more affordable for millions of Americans. If you believe you may be eligible for subsidies, it’s essential to explore your options through the Health Insurance Marketplace and provide accurate income information to determine the level of assistance you qualify for.

Minimum income to receive subsidy based on your MAGI

Persons in Family/Household2022 Coverage (2021 Poverty Levels)2023 Coverage (2022 Poverty Levels)2024 Coverage (2023 Poverty Levels)
For families/households with more than 8 persons, add $5,140 for each additional person.

Employer Coverage and Affordability Calculator

Job-based health plan is considered “affordable” if your share of the monthly premium in the lowest-cost plan offered by the employer is less than 9.12% of your household income.

  • The lowest-cost plan must also meet the minimum value standard.
  • If you’re the employee, affordability is based on only the premium you’d pay for self-only (individual) coverage.
  • For coverage starting January 1, 2023, if you’re offered job-based coverage through a household member’s job, affordability is based on the premium amount to cover everyone in the household.
  • Total household income includes incomes from everybody in the household who’s required to file a tax return.

If the premiums aren’t considered affordable for the employee and the household, they may qualify for savings in a Marketplace plan. But, if the premium is considered affordable for the employee, but not for other members of the household, then only the other household members may qualify for savings.