Did you know the government offers tax credits to help offset the cost of your health insurance? If you are an individual that works for a small business (less than 50 people), if you recently lost coverage from your employer, or if you've never had health insurance, the Premium Tax Credits program could save you thousands of dollars per year in healthcare costs!
Here are some interesting stats from Covered California from 2022:
- About half of the individuals enrolled in a Covered California-sponsored healthcare plan paid less than $50/month for their health insurance.
- A little more than a quarter of the individuals enrolled in a Covered California-sponsored healthcare plan paid $0/month for their health insurance.
What is Covered California?
Covered California is California's Healthcare Marketplace, where residents of California that are not covered by a healthcare plan from their employer or by a plan provided by another member of their immediate family can purchase individual Healthcare plans directly from major insurance companies (Kaiser Permanente, Blue Shield, Aetna, etc.). These plans are subsidized by the federal government with Premium Tax Credits (we'll get into that later), often reducing the plan's cost to the individual by between 50% and 100% of the premium cost!
What if I don't live in California?
That's not a problem! The federal government manages a Federal Healthcare Marketplace at healthcare.gov, where individuals can shop for a subsidized healthcare plan. If your State has a healthcare marketplace (like Covered California), then healthcare.gov will redirect you to your State's marketplace. Otherwise, you'll shop and purchase directly from healthcare.gov.
All the plans offered through a Healthcare Marketplace (regardless of whether it's a federal or State marketplace) are eligible for Premium Tax Credits, which can help offset the cost of your healthcare premiums.
Ok, so what are these Premium Tax Credits you keep talking about?
The Affordable Care Act introduced Premium Tax Credits when the government passed it in March 2010. This credit is available immediately upon enrollment in a qualified insurance plan. You can choose to have premium tax credit payments go directly to the insurer, reducing the monthly premium you pay!
The American Rescue Plan Act increased the credits' size and made more people eligible for the credits beginning in 2021. In addition, the recently passed Inflation Reduction Act extended these credits through the end of 2025.
How do I know if I qualify?
To qualify for a subsidized plan through a Healthcare Marketplace, you must meet the following criteria:
- Your employer does not provide an affordable healthcare plan to you. If your employer does not provide access to health insurance at all, or the cost of that health insurance costs you more than 9% of your income, then your employer does not provide an affordable healthcare plan.
- Your income is between 100% and 400% of the Federal Poverty Level (FPL). For an individual, the national FPL is currently $13,590. For a family of 4, the national FPL is currently $27,750.
To translate that to plain English, if you are an individual, and your employer does not offer you healthcare, and you make between $13,590 and $54,360, then you should qualify. If you have a family of 4, your employer does not offer you healthcare, and you make between $27,750 and $111,000, you should qualify!
If you make more than 400% of the FPL, don't worry! Thanks to the recently passed Inflation Reduction Act, you may still qualify for subsidies.
Let's look at an example.
Marketplace Healthcare Plans are grouped into four metal tiers, each representing the premium cost vs. out-of-pocket expenses for care:
- Bronze is the lowest premium tier, and you'll pay the highest out-of-pocket amount for care.
- Silver has lower premiums, and you'll pay a moderate out-of-pocket amount for care.
- Gold has higher premiums, and you'll pay less out-of-pocket for care.
- Platinum has the highest premiums, and you'll pay the lowest amount out-of-pocket for care.
Chart courtesy of Which Metal Plan to Choose
In our example, we have a family of 4 living in the Bay Area in California. The ages of the family range between 11 and 35. The Adjusted Gross Income of the household is $90,000. They are eligible for $1028 per month in premium tax credits. They could get a Silver plan with a major carrier for just $520/month. They could get a Bronze plan with a major carrier for $0!
How can Xiggit help you save money on your health insurance?
Xiggit is helping everyone increase their financial wellness. We offer an affordable Roth IRA to help you save long-term, emergency savings account to help you save short-term, and our daily Xiggit Boosts financial wellness game to help boost your savings. In addition, we are now also offering affordable Health Insurance! The team at Xiggit can help you enroll in an affordable Health Insurance plan from the Healthcare Market! Download our app today to learn more.