Q: How does the government calculate the ACA’s premium subsidies?
A: Your subsidy is tied to your income. Under the Affordable Care Act, the percent of your income that you are expected to lay out for healthcare varies depending on how much you earn. For example, if an individual earns 250 percent of the federal poverty level (FPL) (currently $29,425 for a single person, $60,625 for a family of four) he would be expected to spend 8.18 percent of his income to purchase the second-lowest-cost silver plan in the exchange in 2016. His subsidy would make up the rest.
By contrast, if he earned only 150 percent of the FPL ($17,655 for an individual, $36,375 for a family of four) he would be expected to lay out only 4.07 percent of his income for coverage; his subsidy would cover the remainder of his premium, as long as he selected the second-lowest-cost silver plan.
Enrollees can select any bronze, silver, gold, or platinum plan in the exchange. The dollar amount of their subsidy won’t change – it will be applied to the total cost of whichever plan they choose. So enrollees can save even more by selecting a bronze plan, or they can obtain better benefits with a gold or platinum plan, paying the additional premium themselves.