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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?

  • By
  • healthinsurance.org contributor
  • December 30, 2016

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

The election of Donald Trump and the retention of a GOP majority in Congress means that changes are coming for the ACA (see more in our Repeal & Replace section), but those changes will not take effect in 2017. ACA repeal is likely in 2017, but with an extended timeline for implementation that could be as long as four years. For the time being, nothing has changed. Subsidies are still available for 2017, and coverage is still guaranteed-issue, regardless of medical history. But don’t delay — open enrollment for 2017 coverage ends on January 31, 2017.

Premium tax credits

Premium tax credits help cover monthly premiums if you earn less than 400 percent of the Federal Poverty Level (FPL).  ($97,200 for a family of four in 2017, $47,520 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 2016 federal poverty level numbers will continue to be used for subsidy eligibility determinations for all coverage effective in 2017, even after the 2017 federal poverty level numbers are published in early 2017..

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 ($60,750 for a family of four in 2017). 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 2017, the unsubsidized out-of-pocket maximum for an individual is $7,150 ($14,300 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 $2,350 ($4,700 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 $5,700 ($11,400 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 193 percent of the poverty level (enrollment for 2017 uses the 2016 poverty guidelines), which means you’d be eligible to get a Silver plan with a maximum out-of-pocket of $4,700 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 $4,700 for the family (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.

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