What are subsidies?
Individual subsidies were included in the Affordable Care Act (ACA) to help ensure that coverage and care would be affordable. Subsidies are only available if you shop in the Marketplace/exchange in your state. Off-exchange, there are no subsidies available. There are two types of ACA subsidies:
- Premium tax credits, also known as premium subsidies are provided based on a Marketplace enrollee's household income relative to the cost of the benchmark (second-lowest-cost) Silver plan. Premium subsides can be applied to any metal-level plan. As of early 2024, 93% of Marketplace enrollees were receiving premium subsidies, and the average after-subsidy premium was about $106/month.1 Under ACA rules, premium subsidies were only available if household income didn't exceed 400% of the federal poverty level. But under the American Rescue Plan and Inflation Reduction Act, the income cap for premium subsidy eligibility has been eliminated through the end of 2025. Instead, subsidies are available if the cost of the benchmark plan would be more than a given percentage of the household's income; this ranges from 0% to 8.5%, depending on income. Without additional federal legislation, the 400% income limit for premium subsidy eligibility will return in 2026.
- Cost-sharing reductions, also known as cost-sharing subsidies help eligible families reduce their out-of-pocket costs for healthcare. Cost-sharing subsidies are available to enrollees with household income up to 250% of the federal poverty level. Cost-sharing subsidies are only available on Silver plans, and are automatically incorporated into all available Silver plans if an enrollee is eligible for these subsidies. As of early 2024, half of all Marketplace enrollees were receiving cost-sharing subsidies.1
Footnotes
- "Effectuated Enrollment: Early 2024 Snapshot and Full Year 2023 Average" CMS.gov, July 2, 2024 ⤶ ⤶
