Get Reformed: What is a subsidy or tax credit?

Category: Blog
  • PPACA includes two types of subsidies to help make coverage more affordable. These subsidies are available only for coverages purchased in a state-based marketplace and available only to certain lower income households.  They are currently not available for health plans purchased outside of the marketplace.
  • The first is a “premium tax subsidy” that provides a tax credit toward the cost of the premium on a sliding scale based on the household’s income compared to the federal poverty level. The actual dollar value of these subsidies is not yet certain.
  • The second subsidy is an “out of pocket cost” maximum limit that ensures total out of pocket expenses do not exceed a fixed percentage of the household’s income. Like the premium tax subsidy, the fixed percentage is on a sliding scale based on the household’s income compared to the federal poverty level. Exactly how this subsidy will be provided is not yet determined.

Again, these subsidies will onlybe available to certain low income households who purchase coverage through astate based marketplace.

Our next blog will focus on determining your eligibility for tax credits.

As always if you have any questions, please call our service center and we’ll be happy to help you!

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