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.
Your family’s income puts you at 183 percent of the 2019 poverty level for a family of four. [The 2019 poverty level numbers are used to determine subsidy eligibility for health plans with 2020 effective dates, and will be used to determine Medicaid and CHIP eligibility until the 2020 poverty level numbers are issued in January.] That 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 if you earn less than 400 percent of the Federal Poverty Level (FPL). For coverage effective in 2020, that income limit amounts to $103,000 for a family of four, and $49,960 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.
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 with two 40-year-old parents and two young children is $1,251/month for 2020. After that subsidy is applied, the average cost for a silver plan for this family would be just $222/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.
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.
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 percent of the poverty level ($64,375 for a family of four in 2020). 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 2020, the unsubsidized out-of-pocket maximum for an individual is $8,150 ($16,300 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 the poverty level, silver plans have a maximum out-of-pocket of $2,700 ($5,400 for a family) in 2020.
- Those with income between 200 and 250 percent of the poverty level can select a silver plan with a maximum out-of-pocket of $6,500 ($13,000 for a family) in 2020.
- 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 183 percent of the poverty level in terms of how premium subsidies for 2020 are calculated.
This means you’d be eligible to get a silver plan with a maximum out-of-pocket of $5,400 for the family in 2020. 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 about 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 $5,400 for the family in 2020 (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.