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I earn just $22,000 a year. How can I afford the out-of-pocket costs of health insurance?

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Q.  I’ll turn 26 soon, and will lose access to coverage under my parents’ health plan. I understand that I am expected to buy insurance, and that I will receive a tax credit from the government to help me cover premiums. But the cheapest Bronze plans all seem to come with deductibles in excess of $7,000, and out-of-pocket maximums that are well over $8,000. Where am I supposed to come up with that sort of money? I earn just $22,000 a year.

A. It’s true that deductibles and out-of-pocket maximums on Bronze plans are quite high. In 2021, the maximum out-of-pocket (OOP) allowed on any plan is $8,550 for a single person. And Bronze plans tend to have out-of-pocket limits at or nearly at this limit.

But there’s another subsidy – in addition to the premium tax credit subsidy – that you should know about (and premium tax credits are larger than usual in 2021 and 2022, thanks to the American Rescue Plan). It’s called the cost-sharing subsidy, or cost-sharing reduction. As long as your income (ACA-specific modified adjusted gross income) doesn’t exceed 250% of the poverty level, you’re eligible for cost-sharing subsidies. These subsidies are automatically included in your plan if your income makes you eligible, as long as you buy a Silver plan. Unlike premium subsidies (which can be used on any Bronze, Silver, Gold, or Platinum plan) cost-sharing subsidies are only available on Silver plans.

Cost-sharing subsidies do two things. They reduce the copays, deductibles, and coinsurance so that you pay less each time you use your coverage. And they also reduce the maximum out-of-pocket on your plan, so that you pay less overall if you end up needing a lot of medical care throughout the year.

For 2021 coverage, HHS capped maximum out-of-pocket on Silver plans as follows (for a single individual):
If you earn … Your Silver plan OOP costs are capped at:
$12,760 – $25,520 $2,850
$25,521 – $31,900 $6,800

These numbers are adjusted annually by HHS, in the Notice of Benefit and Payment Parameters applicable to the following year’s plan designs (here are the 2021 rules).

If you earn $22,000 per year, you’re under 200% of the poverty level, which means your out-of-pocket maximum will be capped at no more than $2,850 in 2021, as long as you select a Silver plan in the exchange when your coverage under your parents’ plan expires. In addition, your plan will have an actuarial value of 87%, which is better than a Gold plan and nearly as good as a Platinum plan – but for the price of a Silver plan.

The increased actuarial value means your plan will provide you with better coverage right from the start, for things like your deductible and copays, even if you don’t end up having medical expenses that are substantial enough to hit the out-of-pocket maximum during the year.

If you buy a Bronze plan instead, you’ll pay less in premiums (and you might find that you pay nothing at all in premiums), but you’ll be on the hook for the full out-of-pocket exposure that comes with Bronze plans. As long as you buy a Silver plan, your cost-sharing subsidies will be incorporated in the plan based on your income.


Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about the Affordable Care Act for healthinsurance.org. Her state health exchange updates are regularly cited by media who cover health reform and by other health insurance experts.

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