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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 insurance through the exchanges?

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 most states, your children will be eligible for the Children’s Health Insurance Program (CHIP) or Medicaid.

Premium tax credits

Obamacare open enrollment guide

Our updated Insider’s Guide to Obamacare’s Open Enrollment offers time-saving strategies for selecting coverage during open enrollment. (Click the image for the latest edition.)

Premium tax credits help cover monthly premiums if you earn less than 400 percent of the Federal Poverty Level (FPL).  ($97,000 for a family of four in 2016, $47,080 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 when open enrollment for 2017 coverage begins on November 1, 2016, the exchanges will begin using the 2016 poverty level guidelines – until then, they’re using 2015 numbers.

Cost-sharing subsidies

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 ($60,625 for a family of four in 2016). 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 2016, the unsubsidized out-of-pocket maximum for an individual is $6,850 ($13,700 for a family). But enrollees who are eligible for cost-sharing subsidies can get lower out-of-pocket limits as long as they select a Silver plan. For enrollees with income between 100 and 200 percent of poverty level, Silver plans have a maximum out of pocket of $2,250 ($4,500 for a family). If your income is between 200 and 250 percent of poverty level, Silver plans will have a maximum out-of-pocket of $5,450 ($10,900 for a family).  These plans only show up on the exchange websites for enrollees who qualify for them (ie, have an income up to 250 percent of the poverty level (note that the out-of-pocket maximum amounts for cost-sharing subsidy plans will increase slightly in 2017).

In your case, your income is about 194 percent of the poverty level (enrollment for 2016 uses the 2015 poverty guidelines), which means you’d be eligible to get a Silver plan with a maximum out-of-pocket of $4,500 for the family.

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 $4,500 for the family (not including the children, if they end up on CHIP or Medicaid), and your plan will have an AV of 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.

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