Five Tips: Understanding Marketplace Subsidies
Written by Shannon Saksewski
In a recent article, we introduced Health Insurance Marketplaces. In order to understand how the Affordable Care Act (ACA) impacts individual consumers—especially those who do not receive employer-sponsored coverage—it is important to understand the basics of both Marketplaces and health insurance subsidies.
Enrolling via the Individual Marketplace, at healthcare.gov, whether on one's own or with the help of an insurance agent, is the only way to claim subsidies which help lower the cost of insurance. If you, a loved one, and/or a patient with whom you are working are one of the millions of Americans who intends to enroll via the Marketplace, here are some tips to help you along the way.
1) There are two types of subsidies. Advance premium tax credits are available to people whose household incomes fall between 100% and 400 percent of the Federal Poverty Level (FPL). These tax credits can be taken in advance of the end of the tax year-- at the time the premium is due to the insurer. Rather than billing an individual subscriber for the amount of the subsidy, the insurer bills/is paid by the government. Cost-sharing subsidies are available to people whose household incomes fall under 250 percent of FPL. This subsidy helps households who earn less income afford the out of pocket costs of obtaining health care.
2) Understand who's in the tax household. Many factors, including household size, are used to determine whether or not people are eligible for subsidies. But what is a household? For the purposes of subsidy qualification, anyone included in a family's tax filing is included in the household. This is important not only for defining household size, but also for determining income—both of which are important to subsidy qualification.
3) Estimate your MAGI. On the Marketplace application, enrollees will be asked to estimate their household's Modified Adjusted Gross Income (MAGI). The total MAGI of everyone in the tax household (see the second point, above) is what's relevant to subsidy determination.
4) Settle up with the IRS at tax time. Those who qualify for a subsidy can request that all, some, or none of it be applied to their monthly premium when applying for coverage. The subsidy will be paid directly to the insurer in this case. The insurance company will then bill the enrollee for the balance of the monthly premium. Those whose estimates are off on their MAGI will reconcile with the IRS at tax time. If there is a change in income during the year, consumers can report this change via their Marketplace account.
5) Eligibility for subsidies is also dependent upon whether qualifications for Medicaid or Medicare. If, after answering questions about income and household size, it is determined that the applicant qualifies for either Medicaid or Medicare, they should be able to apply for those programs immediately. Not all states have chosen to expand Medicaid, however. In those states which did not expand Medicaid, applicants who fall below 100 percent of the FPL are ineligible for subsidies. The ACA was written with the expectation that Medicaid would be expanded nationwide. However, according to a 2012 Supreme Court ruling, this aspect of the ACA was not deemed enforceable.
Understanding Marketplace and subsidy basics is important to the bottom line of both individual consumers as well as your health system. However, the rules around subsidies are complicated and can change. Staying abreast of changes and regulations, as well as sharing this information with others in your healthcare system can help to answer questions and facilitate efficient healthcare provision across the nation.
We welcome your questions and/or concerns regarding Marketplaces and subsidies. Join the conversation and tweet them to @healthadmdegrees and @ssaksews.
Shannon Saksewski has been practicing and studying health strategy in multiple contexts for more than five years. She earned a BA in psychology and studies in religion, a MSW focused on counseling practice, and a MBA focused on health strategy from the University of Michigan. Shannon can be reached via email (firstname.lastname@example.org), Twitter (@ssaksews), or LinkedIn.