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How do I qualify for free Obamacare?

How do I qualify for free Obamacare?

Middle and low-income families often worry about how they will afford health insurance. The Affordable Care Act, also known as ACA or Obamacare, provides subsidies to qualifying individuals and families to help make coverage more affordable.

What are ACA tax credit subsidies?

ACA subsidies are tax credits available to many people whose net income is between 100% and 400% of the Federal Poverty Level (FPL). ACA subsidies go toward paying health insurance premiums for those who might otherwise struggle to afford health insurance.

In general, ACA-subsidized people are also shielded from rising premiums as ACA subsidies usually increase (or decrease) in proportion to the premiums. This helps keep health insurance affordable for people with lower- and middle-class incomes.

In 2020,  87% of the 10.7 million people who purchased health insurance on the Marketplace received ACA premium subsidies, the Centers for Medicare & Medicaid (CMS) reported.

Obamacare Subsidy Eligibility

Obamacare offers subsidies, also known as tax credits, that work on a sliding scale. They limit the amount you pay in monthly premiums to a percentage of your annual income. Most people are eligible for subsidies when they earn 100% – 400% of the FPL.

Be aware, however, that the American Rescue Plan Act (ARPA), signed into law on March 11, 2021, brings further, temporary relief to many Americans who struggle to find affordable health insurance during the economic and social trauma of the COVID 19 pandemic. For a two-year period—2021 and 2022— many Americans can take advantage of several provisions of the ARPA designed to make health insurance coverage even more affordable than the original Obamacare subsidies. For example under the ARPA:

  • No citizen or legally present noncitizen who doesn’t have access to other affordable insurance (e.g., from an employer, Medicaid, or Medicare) will pay more than 8.5% of income for a Marketplace Silver plan.
  • Most people who receive at least one week of unemployment compensation at any time in 2021 will be able to obtain a Silver plan with $0 premiums and cost-share reductions.
  • Individuals who earn 500% of the FPL and do not have access to other affordable health insurance, may take advantage of certain cost-sharing reductions of Marketplace plans available to people with lower incomes.

If your income is below 138% of the federal poverty level (FPL) and your state has expanded Medicaid coverage, you may qualify for Medicaid based on your income. If your income falls below the FPL, you may not qualify for subsidies, but you are more likely to qualify for Medicaid. Medicaid is the national healthcare program for low-income individuals and families.

To qualify for Obamacare subsidies you must meet the following criteria:

  • You are currently living in the United States
  • You are a US citizen or legal resident
  • You are not currently incarcerated
  • Your income is no more than 400% (or 500% in 2021 and 2022) of the FPL

According to the Federal Register, the 2021 FPL for an individual is $12, 8800. The FPL varies based on the number of members in your household. Alaska and Hawaii have different poverty levels. The Obamacare household income chart changes annually as poverty rates are adjusted every year for inflation.


How Obamacare subsidies work?

There are two kinds of ACA subsidies.

The more common kind is called “Advanced Premium Credits”, which can help pay ACA health insurance premiums purchased on the Marketplace through the year. If you qualify based on your projected income for the current year, you can either:

  1. Take the tax credit throughout the year to be paid directly to your health insurer to offset the premium of your coverage, or
  2. Pay the premium in full each month and receive your tax credit when you file your income tax return.

If you take the advance tax credit each month (option #1 above) and you underestimate your actual household income, you will owe some of this advanced money back at the end of the year. On the other hand, if you overestimate your income, you will receive an adjusted tax credit refund when you file your income tax return. To avoid this issue, report changes to your income by updating your Marketplace application online or contacting the Marketplace call center.

It’s important to know tax-credit subsidies apply to ACA plans you can purchase on the Marketplace. They are not available to ACA-compliant plans offered outside the Marketplace, catastrophic coverage plans, short-term health insurance, standalone prescription drug plans, or insurance supplements for such care as dental, vision, and critical illness. These alternative insurance plans may cost less, but provide fewer benefits than Marketplace plans offer, generally.

The second kind of ACA subsidy is called a “Cost-Sharing Reduction (CSR) Subsidy”. If you are eligible, CSR subsidies can reduce your out-of-pocket costs for covered services by paying a portion of your deductible, copayment, or coinsurance.

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