Health Insurance Subsidies


A subsidy is a benefit provided by the government, given in the form of a tax break or monetary payment. Health insurance subsidies are a component of health care reform, which help make health insurance available to those who cannot afford it. The purpose of subsidies is to provide coverage to low-income individuals and families, and help them avoid high out-of-pocket costs. The government gives those who are eligible assistance for paying the cost of health insurance coverage. Since health reform encourages all to go out and get a health plan, subsidies make the task more feasible for people who would not otherwise be able to afford one.

Many individuals are not offered health insurance through their employer, and subsidies make it possible to pay the premiums, copayments, and deductibles on a private health plan. Several kinds of subsidies exist, each specific to its intent: there are premium subsidies, which pay premiums and also include the cost of Medicaid for those with very low income, and cost-sharing subsidies address whether or not low-income individuals will be able to use the health plans they receive, and also if they will be able to afford to seek treatment if they become ill.

 

 

As of 2014, health care reform will include individual financial subsidies  through premium tax credits and lowered cost-sharing. In order to qualify for a subsidy, you must have a household income level under 400% of poverty level, which was $89,400 for a family of four in 2011. If you fall under poverty level but not low enough to qualify for a subsidy, you may be eligible for Medicaid or other public health plans available in your state.

To qualify for a premium tax credit, you must be unable to qualify for minimum essential coverage, or you must qualify for an employer group policy that is either unaffordable or low-value. Group coverage through an employer is considered unaffordable if the worker has a premium that exceeds 9.5% of their household income. For a household income of $30,000, this would mean a premium of $2,850.

A health plan is considered low value when its share of total allowed cost of benefits is less than 60%. Determining the plan’s total allowed costs and the plan’s share can be done by measuring the amount of claims paid. If the employer’s total claims are $1 million, and the employer paid less than $600,00 for the claims would make the plan low-value.

Cost-sharing subsidies reduce the total out-of-pocket cost for medical expenses, for those who meet the income level qualifications. This is applicable to individuals enrolled in the silver plan of an Exchange (which will have platinum, gold, silver, and bronze as plan options). Cost-sharing subsidies may also restrict the amount the employee pays based on actuarial value. These will only be available during the months premium tax credits are also available.

Sources:

1. Kaiser Family Foundation, “What Are Health Insurance Subsidies?”, http://www.kff.org/healthreform/upload/7962.pdf

2. Beyond Health Care Reform, “Subsidies Under Health Care Reform”. Maly and Hladilek. http://beyondhealthcarereform.com/2011/02/looking-ahead-to-2014-government-subsidies-under-health-care-reform/