How Affordable Care Act Subsidies Work

6:58 PM, Oct 25, 2013   |    comments
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Affordability.

That's supposed to be the driving point of President Obama's health care overhaul, the Affordable Care Act.

But will the 48 million Americans who don't have insurance really be able to afford a plan through the marketplace at healthcare.gov?

A big part of making health insurance affordable to the masses is a federal subsidy in the form of a tax credit.

Whether you qualify depends on income and family size.

The subsidy is available for people who make between 100 to 400 percent of the federal poverty level.

If you do qualify for a premium tax credit, you have two options:
-Apply the credit in advance, which means you'll immediately pay cheaper premiums
-Get the credit as a tax refund, which means you'll get a hefty lump sum back when you file taxes, but you'll pay the full cost of your insurance without the subsidy each month until that point

If you choose to get your subsidy in advance, it'll be based on an estimate of your income for the next year.

If that number is incorrect or varies each year, the subsidy will also be incorrect, meaning you'll have to pay back the excess, or get a tax refund back if you paid too much.

Take a middle-aged family of 4 who makes an annual income of $40,000 a year.

According to the Kaiser Family Foundation's federal subsidy calculator, the government would subsidize 84% of the premium, which means this family would pay about $163.75 a month for health insurance.

This calculator is just an estimate. You won't know exact costs or whether you qualify for a subsidy until you fill out a Marketplace application.

Another important note is that you will not be eligible for the subsidy if you're already offered coverage through an employer or another plan that doesn't cost more than 9.5% of your income.

Follow 13WMAZ's Anita Oh on Twitter @anita_oh.

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