Whether an individual qualifies for Health Insurance Subsidy is a question that is on every adult American’s mind during the open enrollment period. Well, the short answer is: It depends on how much you earn.
In 2022, an individual is eligible for enrollment in the Obamacare subsidies if the benchmark plan costs more than a certain percentage of your monthly income, up to 8.5%. Moreover, the cut-off threshold keeps increasing over a sliding scale determined by your income. So, a person who pays more than 8.5% of household income toward health insurance is eligible for a subsidy in 2022.
Criteria to qualify for health insurance subsidy
1. Figure out your subsidy
One must know that subsidies are calculated based on three things: The individual’s income, the list price of the benchmark plan, and how much the ACA states you have to pay toward your health insurance. The actual subsidy lies in the difference between the benchmark pan and the amount you are expected to pay.
An individual needs to make a reasonable estimate of his/her income in advance. It is because people usually apply for coverage before the start of the next year. Moreover, one needs to also compare the total plan premium with household income before the coverage begins.
Before 2021, an individual applying for health coverage was expected to pay anywhere between 2% to 9.83% of one’s income. Other than that, one could earn up to 400% of the federal poverty level and qualify for Health Insurance Subsidy. So, for a family of 4 individuals, the amount equaled $104,800 per year.
2. What’s different about ACA subsidies in 2022?
The American Rescue Plan (ARP) made considerable changes in matters of subsidies for the year 2022. These changes could very well be made permanent in the future. The ARP Act made major improvements concerning the affordability of the ACA.
Firstly: The American Rescue Plan Act removed the Federal Poverty Level cap requirement. Before, an individual did not qualify for subsidies if he/she earned more than 400% FPL, irrespective of how much the benchmark Silver plan cost.
With the current changes, a benchmark Silver plan can cost no more than 8.5% of one’s annual household income, irrespective of how high the income might be. While the subsidies still eventually drop down to nothing, they taper off rather gradually instead of having a harsh cut-off that previously existed for those whose income hit 400% FPL.
Secondly: The ARP increased the number of subsidies for those people who earn less than 400% FPL and are now eligible. Before 2021, an individual was expected to contribute anywhere between 2% to 9.83% of their household income toward the Health Insurance Subsidy.
The percentage for the amount to be paid has dropped and is now 0% to 8.5% for two years.
Thirdly: Anyone who received or was approved for unemployment benefits can now enroll in a free or low-cost, low-deductible health plan after the enhanced federal subsidy. This change took effect on July 1st, 2021.
The American Rescue Plan has also introduced a Special Enrollment Period in the Health Insurance marketplace. So, the individuals who are currently enrolled in a health plan can change and opt for a different health plan or re-enroll in the same plan if they so desire.
It has been stated by the Federal government that the average premium has dropped by $30/per person on average. Moreover, the median deductible has dropped from $450 per annum to $50 per annum. So, there has been a drop of a staggering 90%.
3. What can be factored in as income?
One must submit only their modified adjusted gross income (MAGI). It is the annual income you report on your tax return.
4. What about people who earn too little or too high to qualify?
After the ARP removed the Federal Poverty Level cap requirement, anyone is eligible for a Health Insurance Subsidy irrespective of how low or high their income might be. The only thing is that you won’t be eligible for monthly premium assistance if you earn more than the income limit.
A household that makes less than 100% of the federal poverty level will not qualify for Obamacare subsidies. However, such a household may be eligible for Medicaid in most states
The bottom line: Do check your eligibility for Health Insurance Subsidy irrespective of your income. One can use various online resources such as subsidy calculators to calculate their subsidy rates.
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