You may have heard about tax credits and subsidies to help cover the cost of health insurance under the new healthcare mandate, but how do you know if you qualify, and how much does it really reduce the cost of coverage? Although the terms tax break and subsidy are sometimes used interchangeably, they are not the same thing. The main difference between the two is that tax breaks help cover the cost of the premium, while cost-sharing subsidies reduce an insured person’s out-of-pocket expenses from copays, deductibles, coinsurances and other fees.
You’re probably also well aware of the healthcare mandate that requires that most Americans have health insurance this year in order to avoid a penalty. The official deadline to have signed up for insurance in order to comply with the law was December 23, 2013, with a January 1, 2014 effective date; however, the deadline has been extended to March 31, 2014 to allow more people to sign up.
More on Tax Breaks
Individuals with incomes between 100% and 400% of the federal poverty level (between $11,490 and $45,960 for an individual, or between $23,550 and $94,200 for a family of four in 2013) who buy coverage through the health insurance marketplace may qualify for a tax credit. The credits are applied directly to the cost of the premium and go straight to the insurance company—you don’t have to wait until you file your taxes to benefit.
More on Cost-Sharing Subsidies
Copayments for doctor visits, deductibles and coinsurance rates can present a real financial burden for some people, especially when cost-sharing amounts are high. The cost-sharing subsides under the ACA are designed to help reduce these costs for consumers. People with incomes between 100% and 250% of the federal poverty level (FPL) qualify. Here’s an example of how costs are distributed with the cost-sharing subsidies, based on a person’s income:
- A person earning 100%-150% of the FPL will pay just 6% of their medical costs, and the insurance company will pay 94%.
- A person earning 150%-200% of the FPL will pay just 13% of their medical costs, and the insurance company will pay 87%.
- A person earning 200%-250% of the FPL will pay 27% of their medical costs, and the insurance company will pay 73%.
The tax breaks and cost-sharing subsidies were created to make insurance more affordable. If you’re one of the many Americans who have been unable to afford health insurance in the past, the changes enacted under the ACA could finally change that. Consult with a licensed, knowledgeable agent at Benefit Packages to help you find affordable California health insurance, whether inside the state’s health insurance exchange, or through a private plan. Call us at 1-800-356-3615 for a quote today.