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We’re a family of four with an income of $47,000 a year. What kinds of subsidies are available to help us purchase insurance through the exchanges?

Q. We’re a family of four with an income of $47,000 a year. What kinds of subsidies are available to help us purchase health insurance through the exchanges?

A. There are two types of subsidies for people who buy their own insurance in the state’s marketplaces (a.k.a. health insurance exchanges). Based on your income and family size, you would be eligible for both of them — and premiums subsidies are larger than they used to be, thanks to the American Rescue Plan. In addition, in almost every state, your children will be eligible for the Children’s Health Insurance Program (CHIP) or Medicaid.

Assuming you’re in the continental U.S., your family’s income puts you at 179% of the 2020 federal poverty level for a family of four, and 177% of the 2021 federal poverty level. (The 2020 poverty level numbers are used to determine subsidy eligibility for all health plans with 2021 effective dates, and the 2021 poverty level numbers are used to determine Medicaid and CHIP eligibility in 2021).

So that income makes your kids eligible for CHIP or Medicaid in every state except North Dakota, assuming they’re eligible based on immigration status. So your premium subsidies in the exchange would be limited to the adults in the household, since subsidies are only available for people who aren’t eligible for CHIP or Medicaid.

Premium tax credits

Premium tax credits help cover monthly premiums, and the American Rescue Plan has made these tax credits larger than they used to be (the larger subsidies are in effect through the end of 2022, and that could be extended with future legislation).

You can use these tax credits toward the purchase of any plan sold in the exchanges except a catastrophic plan.

Our subsidy calculator will let you estimate how much your subsidy will be, based on where you live and how old you are.

But just to give you an idea of how affordable your coverage might end up being, the national average premium subsidy amount for a family earning $47,000 with two 40-year-old parents and two young children is $1,395/month for 2020.

After that subsidy is applied, the national average cost for the benchmark silver plan for this family would be just $46/month (without a subsidy, it would have been $1,441/month). And that’s for a silver plan — there are many areas of the country where this family could get a bronze plan with no premium at all, after the subsidy is applied, although the silver plan is likely to be a better option due to cost-sharing reductions, discussed below.

(Keep in mind that these average premiums would be for just the parents’ coverage, since the children are almost certainly going to qualify for Medicaid or CHIP.)

Plan availability varies significantly from one area to another, so you’ll want to run the numbers based on your own zip code and ages. You’ll likely find quite a few affordable options.

Cost-sharing subsidies

In addition, cost-sharing subsidies (aka cost-sharing reductions, or CSR) can help reduce your deductible, co-pays, and out-of-pocket exposure. Cost-sharing subsidies are available only if you purchase a silver plan and have a household income up to 250% of the poverty level ($65,500 for a family of four in 2021).

Cost-sharing subsidies serve two purposes: they lower the plan’s maximum out-of-pocket, and they also increase the plan’s actuarial value (AV), which is a measure of the percentage of an average enrollee’s costs that a plan will pay.

In 2021, the unsubsidized out-of-pocket maximum for an individual is $8,550 ($17,100 for a family). But enrollees who are eligible for cost-sharing subsidies can get plans with lower out-of-pocket limits, as long as they select silver plans:

  • For applicants with income between 100% and 200% of the poverty level, silver plans have a maximum out-of-pocket of $2,850 ($5,700 for a family) in 2021.
  • Those with income between 200% and 250% of the poverty level can select a silver plan with a maximum out-of-pocket of $6,800 ($13,600 for a family) in 2020. (Note that these amounts are adjusted each year for inflation; the 2021 numbers are in the 2021 Notice of Benefit and Payment Parameters.)
  • Silver plans with built-in cost-sharing subsidies only appear on the exchange websites for applicants who qualify for them, and they’re displayed in place of the regular (unsubsidized) silver plans that would be displayed for applicants with income above 250% of the poverty level.

In your case, your income ($47,000 for a family of four) is about 179% of the poverty level in terms of how premium subsidies for 2021 are calculated.

This means you’d be eligible to get a silver plan with a maximum out-of-pocket of $5,700 for the family in 2021. But again, if the kids are eligible for Medicaid or CHIP, the silver exchange plan would only cover the adults in the household (Medicaid and CHIP out-of-pocket limits are nominal, so they wouldn’t add considerably to the family’s total out-of-pocket exposure).

Cost-sharing subsidies also increase the AV of your Silver plan to between 73% and 94%. Normally, Silver plans have an AV of about 70%. But for enrollees eligible for cost-sharing subsidies, Silver plans will have higher AV. For enrollees with household income between:

  • 100% to 150% of FPL, AV is increased to 94% (better than a Platinum plan)
  • 150% to 200% of FPL, AV is increased to 87% (nearly as good as a Platinum plan – your family would be in this range)
  • 200% to 250% of FPL, AV is increased to 73% (better than the normal 70% for a regular Silver plan)

The end result

There’s a good chance that your children will be eligible for CHIP or Medicaid, so in most states, you’ll only be paying for private insurance for the adults in your household.

As long as you select a Silver plan, your out-of-pocket exposure will be capped at $5,700 for the family in 2021 (not including the children, if they end up on CHIP or Medicaid), and your plan will have an AV of roughly 87 percent (that means it will pay 87% of average expected claims, across all enrollees, including those with particularly high claims; for each individual enrollee, the portion of claims paid over the course of the year will vary considerably).

You’ll also be eligible for a premium subsidy that will cover the bulk of the monthly premiums, making the coverage significantly more affordable than it would otherwise be.

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 Her state health exchange updates are regularly cited by media who cover health reform and by other health insurance experts.

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