out-of-pocket-costs Get a free health insurance quote

Shop now for
2016 coverage.

Coverage gap?

Inexpensive plans, for up to a year.

Shop Short Term plans

Qualifying event?

You can still shop for ACA plans.

Shop Obamacare plans

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

  • By
  • healthinsurance.org contributor
  • April 10, 2016

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 $5,000 or $6,000, and out-of-pocket maximums that are nearly $7,000. 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 2016, the maximum out-of-pocket (OOP) allowed on any plan is $6,850 (increasing to $7,150 in 2017). 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. It’s called the cost-sharing subsidy, or cost-sharing reduction. As long as your income doesn’t exceed 250 percent 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 2016 coverage, HHS has capped maximum out-of-pocket on silver plans as follows:

If You Earn                 Your Silver Plan OOP Costs Are Capped At:

$11,770 – $23,540                                $2,250

$23,540 – $29,425                                $5,450

*****************************************************************************

For 2017 coverage, HHS has capped maximum out-of-pocket on silver plans as follows:

If You Earn                 Your Silver Plan OOP Costs Are Capped At:

$11,880 – $23,760                                $2,350

$23,760 – $29,700                                $5,700

*****************************************************************************

These numbers are adjusted annually by HHS, in the Notice of Benefit and Payment Parameters that’s published in February/March, applicable to the following year’s plan designs.

If you earn $22,000 per year, you’re under 200 percent of the poverty level, which means your out-of-pocket maximum will be capped at $2,250 in 2016, and $2,350 in 2017. But that’s dependent upon you selecting a silver plan in the exchange when your coverage under your parents’ plan expires. If you buy a bronze plan instead, you’ll pay less 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.

Comments