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A change in subsidy eligibility changes your options

SEP impacts people already enrolled in an exchange but who have become newly eligible ... or newly ineligible ... for ACA's subsidies

The ACA provides two types of subsidies for eligible individuals who enroll in health plans through the exchanges:

  • Premium subsidies are available to people who aren’t eligible for Medicaid, and whose household income is at least 100 percent of the federal poverty level, and no more than 400 percent of the poverty level.
  • Cost-sharing subsidies, otherwise known as cost-sharing reductions, are available to people who aren’t eligible for Medicaid, who purchase a Silver plan, and whose income is at least 100 percent of the poverty level but no more than 250 percent of the poverty level.

For people who are already enrolled in a plan through the exchange, an income change counts as a qualifying event if it results in a change in eligibility for either type of subsidy. The enrollee then has 60 days to select a different plan.

Examples: changes in premium subsidy eligibility

If John is receiving a premium subsidy and experiences a mid-year increase in income that makes him ineligible to continue receiving a subsidy, he’ll have access to a 60-day special enrollment period during which he can switch to a different plan. He may decide he wants to keep his plan, or he may prefer to pick a less expensive option once his premium subsidies are no longer available. The choice is his.

If Mary’s income is too high for premium subsidies, she may have initially selected a low-cost plan since she has to pay the entire bill herself. If her income subsequently drops into the subsidy-eligible range, she’ll have a 60-day SEP during which she can change plans.

Her premium subsidy can be applied to any metal-level plan in the exchange, including the plan she already has (as long as it’s not a catastrophic plan). If her existing plan is a catastrophic plan, this SEP will be particularly helpful, since catastrophic plan premiums can’t be subsidized. Even if she already had a metal-level plan, she’ll have the option to pick a different one during her SEP.

Examples: changes in cost-sharing subsidy eligibility

If Kylie’s income was initially higher than 250 percent of the federal poverty level, she may not have selected a Silver plan when she enrolled, since she wasn’t eligible for cost-sharing subsidies. But if her income drops under 250 percent of the poverty level later in the year, the SEP gives her an opportunity to enroll in a Silver plan with cost-sharing subsidies included in the coverage. (Cost-sharing subsidies are only available on Silver plans.)

There are three different levels of cost-sharing subsidies, depending on income. The subsidies are more robust at lower income levels, and relatively modest for people with income above 200 percent of the poverty level. If Trent’s income initially placed him in one eligibility bracket for cost-sharing subsidies, and it changes mid-year to one of the other eligibility brackets, he’ll have a SEP during which he can select a different plan.

If Elaine initially qualifies for cost-sharing subsidies but her income increases during the year and she loses her eligibility for cost-sharing subsidies, she’ll have a SEP during which she can pick a new plan.

Limited to those already enrolled through exchange

In all of these cases, the SEP only applies if the person is already enrolled in a plan through the exchange. If you’re enrolled in an off-exchange plan, you do not get a SEP if your income changes mid-year.

This is one of the reasons a person with income too high for subsidies might still want to enroll through the exchange. Income changes and job changes can sometimes be difficult to predict, but neither of those count as a qualifying event if you’re not already enrolled through the exchange.

A third-party enrollment site like healthinsurance.org will let you compare both on- and off-exchange plans, and it’s worth looking at both if you’re not eligible for subsidies. (Subsidies are only available in the exchange.)

But enrolling in an exchange plan provides you with additional flexibility to make plan changes later in the year if your income fluctuates above or below the threshold for subsidy eligibility.