As individuals gear up to begin shopping for their health-care coverage via state and federal exchanges on Oct.1, one of the Affordable Care Act’s most controversial and confusing aspects will kick in: the subsidies.
Subsidies will be available for those making up to 400% of the federal poverty level. For an individual, this tops out at around $45,000 per year, and for a family of four, this cuts off at around $94,000 per year, according to the Kaiser Family Foundation.
While premiums, on average, are expected to rise between 22% and 33%, according to a report by the Rand Corporation that was requested and funded by the Department of Health and Human Services. These subsidies will help to pare down costs for those who are eligible to keep the health insurance mandate affordable for lower-income people and families.
While the Kaiser Family Foundation has its own subsidy calculator, Cynthia Cox, a policy analyst with the foundation, says exact figures will be available for those who are eligible once the exchanges are up and running for open enrollment. State and federal exchanges will have their own subsidy calculators for consumers, and more information can be found on Healthcare.gov.
“Hopefully it should be a fairly straightforward process for people,” Cox says. “There is a lot of misunderstanding about the law in general and how it impacts people.”
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Carrie McLean, director of customer care for eHealthInsurance.com, says the subsidies are based on prices for the second-lowest silver plan under the new health-care law. Silver plans under the ACA cover about 70% of the average subscriber’s costs. eHealth also has its own subsidy calculator for consumers.
“I don’t know that people realize that there is help out there, and that they may qualify for it,” she says.
The way these subsidies operate can vary depending on how the consumer applies for them, says Cox. Some may wish to have their subsidy upfront, called the “advance payment” option to lower their monthly health-care costs.
“If they opt for that, the subsidy is paid directly to the insurance company,” she says. “The other option would be to wait until you file for your taxes.”
In that case, you would receive a tax credit with your return, she says.
McLean notes that just because subsidies are based off of the second-lowest cost silver plan in the ACA, that doesn’t mean consumers have to choose that plan for coverage. It is possible to apply a subsidy toward a gold or bronze plan, she says.
“If you have $200 a month to apply to your health insurance, you can buy a bronze level plan and just pay less per month,” she says. “It will definitely knock down the price of [premium] increases.”