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 insurance through the exchanges?
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A. The government offers 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. In addition, in almost every state, your children will be eligible for the Children’s Health Insurance Program (CHIP) or Medicaid.
[In 2018, your family’s income puts you at 187 percent of the poverty level. That makes your kids eligible for CHIP or Medicaid in every state except Idaho and North Dakota, assuming they’re eligible based on immigration status. That means 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 if you earn less than 400 percent of the Federal Poverty Level (FPL). For coverage effective in 2018, that income limit amounts to $98,400 for a family of four, and $48,240 for an individual). 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.
This website shows incomes relative to the poverty level for various family sizes; note that 2017 federal poverty level numbers will continue to be used for subsidy eligibility determinations for all coverage effective in 2018, even though the 2018 poverty level numbers were published early in 2018. The 2018 numbers won’t be used for subsidy eligibility determination until open enrollment begins for 2019 coverage, in November 2018.
In addition, cost-sharing subsidies 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 percent of the poverty level ($61,500 for a family of four in 2018; this will increase to $62,750 in 2019). 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 2018, the unsubsidized out-of-pocket maximum for an individual is $7,350 ($14,700 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 percent of poverty level, silver plans have a maximum out-of-pocket of $2,450 ($4,900 for a family). These amounts will increase in 2019, to $2,600 for an individual and $5,200 for a family.
- Those with income between 200 and 250 percent of the poverty level can select a silver plan with a maximum out-of-pocket of $5,850 ($11,700 for a family). These amounts will also increase in 2019, to $6,300 for an individual and $12,600 for a family.
- 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 percent of the poverty level.
In your case, your income ($47,000 for a family of four) is about 191 percent of the poverty level in terms of how premium subsidies for 2018 are calculated, although it will be 187 percent of the poverty level for 2019 coverage if your income remains the same (current year poverty level guidelines are used for Medicaid and CHIP eligibility determination — as noted at the top of this article — but the prior year’s poverty level guidelines are used for determining subsidy eligibility in the exchange).
This means you’d be eligible to get a silver plan with a maximum out-of-pocket of $4,900 for the family in 2018, and $5,200 in 2019. But again, if the kids are eligible for Medicaid or CHIP, the silver exchange plan would only cover the adults in the household.
Cost-sharing subsidies will also increase the AV of your Silver plan to between 73 percent and 94 percent. Normally, Silver plans have an AV of 70 percent. 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 $4,900 for the family in 2018 (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 percent 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 make the coverage more affordable.
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.