On October 1, 2013, the health insurance marketplaces, also known as exchanges, created by the Patient Protection and Affordable Care Act (Obamacare) will go live for Open Enrollment. The exchanges will be a great way for individuals and small businesses to find a variety of health plans from a variety of health insurance companies at (hopefully) a competitive cost.
One of the things that helps people, especially young people, afford the premiums on the marketplaces is a tax subsidy for health insurance plans. Some people will be eligible for this assistance, but not everyone. Here is how you can have a rough idea if you are eligible for the tax credits. You must meet all of the following criteria.
No Employer Provided Health Insurance
Obamacare made it mandatory for employers with at least 50 employees to provide all full-time employees with the option of enrolling in their group medical plan. The plan must pay for at least 60% of allowed charges and no employee may pay more than 9.5% of their salary to purchase the plan. If an employer offers a plan that fails those two standards, there is a fine they must pay.
The definition of a full-time employee is important in figuring out if you are eligible for a subsidy for health insurance through the exchange. A full-time employee is defined as someone who average 30 hours per week or more. There are some calculations that your employer will do to determine hours worked, but in general, 30 hours is a full-time employee.
So, all this to say, that if you are offered coverage at work that meets the two standards above, then you are NOT eligible for a tax subsidy. If you are not offered coverage, then you still may be eligible for the subsidy.
Subsidies are only available to households that earn less than 4 times the federal poverty level. In addition, the amount of the subsidy depends on the household income. Folks that make less can get a larger subsidy for health insurance in the marketplaces.
Medicaid and Medicare Eligibility
If someone is eligible for Medicaid and Medicare, two government programs that help pay the cost of medical expenses, then that person is not eligible for a subsidy. A tricky aspect of this rule is that while Obamacare expanded Medicaid coverage, not every state expanded Medicare coverage. So your eligibility for Medicaid depends on where you live. You could be eligible in one place, but not eligible in another place.
Medicaid is administered by the states, so check with your local Medicaid office for more information.
How are Subsidies Applied?
For the most part the subsidy for health insurance bought on the exchanges is in the form of tax credits in the following year. For example, you pay your premium in 2014 and the tax credit is applied on your 2015 tax form. However, if this arrangement causes a hardship, there are ways to reduce the actual premium.
How to Apply for the Subsidy for Health Insurance
The subsidy for health insurance on the exchanges is designed to be a quick and easy process. Someone can apply right on the marketplace’s website and find out if they are eligible. In fact, here is a nifty calculator from Kaiser to help determine if you fit the eligibility requirements.
Find the Best Option for You and Your Family
The marketplaces and the subsidy for health insurance purchased through the marketplaces are designed to make affordable health insurance more available. However, that does not mean that the exchanges are your best option. Take a look around to see how you can find the best coverage at a price you can handle.