The Affordable Care Act mandates that everyone must have health insurance by January 2014. More than 25 million uninsured Americans will become insured for the first time and millions more will have their health insurance expanded. As an individual purchasing health insurance for the first time, this can be an intimidating process. Among the questions you may have, how will I possibly afford to comply with this federal mandate? Thankfully, the law also makes insurance more affordable, offering government-sponsored subsidies such as tax credits and reduced cost sharing, as well as an expanded Medicaid program. If you qualify for a government program like Medicaid or Medicare, or if an employer offers coverage that meets minimum essential coverage and affordability standards, you are not eligible for these subsidies. Tax Credits The Health Insurance Marketplace will be arranged by four metal levels: Bronze, Silver, Gold, and Platinum. Tax credits are based on the second lowest cost silver plan premium, which we will not know until all Michigan insurers have released their prices. You will be capped on the amount you have to pay for that plan based on your household income and family size.
Once the subsidy has been established, you can apply this credit in several ways:
- Apply none of it to the monthly premiums, and receive the lump sum as a tax credit at the end of the year.
- Apply all of it to the monthly premiums to lower the amount paid each month.
- Apply some of it to the monthly premiums to lower the premium, and get the rest as a tax credit. This option helps to avoid owing the government if your income increases during the year.
You can use this subsidy towards any of the four metal levels. If you want to go down to bronze, your monthly premium will be reduced, in some cases to zero. If you want to go up to gold, your monthly premium will increase. The Health Insurance Marketplace is the only spot that individuals and small businesses can access a tax credit. If you do not buy through the Marketplace, you cannot get those subsides. Reduced Cost Sharing If you qualify for tax credits, you may also be eligible for reduced cost sharing. This would mean the government would reduce your out-of-pocket maximum and, in some cases, provide lower deductibles, co-payments, or co-insurance. You can also get a rough estimate of your expected health care costs by imputing your information into the Kaiser Family Foundation’s subsidy calculator. For more information on health care reform, visit Healthcarereformbasics.com.