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Affordable Care Act Subsidy Calculator
The ins and outs of the Affordable Care Act can be daunting but it pays to know the details. For example, the new ObamaCare individual health insurance premiums are meaningless without including the U.S. tax credits that will lower the cost.
Beginning in October 2013, middle-income people under age 65, who are not eligible for coverage through their employer, Medicaid, or Medicare, can apply for tax credit subsidies available through state-based exchanges.
Larry Levitt, Gary Claxton and Anthony Damico of the Kaiser Family Foundation said premium subsidies — in the form of federal tax credits — will be available for people buying their own insurance via the new marketplaces or exchanges who have incomes from 100 percent up to 400 percent of the poverty level or $24,000 to $94,000 per year for a family of four in 2014. Those with access to employer-provided insurance or Medicaid are ineligible for these tax credits.
The amount of the tax credit is based on a benchmark premium, which is the cost of the second-lowest-cost silver plan in the area where a person lives. The tax credit equals that benchmark premium minus what the individual is expected to pay based on their family income, which is calculated on a sliding scale from 2 percent to 9.5 percent of income, the researchers said.
For example, a 40-year-old individual making $30,000 a year:
- Estimated benchmark premium for a 40-year old = $3,857 per year. This number varies from area to area.
- A person is responsible for paying 8.37 percent of their income = $2,512
- Tax credit = $1,345
The tax credit can be used in any plan offered in the health insurance marketplace, so the person would end up paying less than $2,512 to enroll in the lowest cost silver plan or a lower cost bronze plan, and more to enroll in a higher cost plan. A calculator from the Kaiser Family Foundation provides subsidy estimates for families and individuals of varying characteristics.
Anyone who is currently not covered for health insurance from an employer can calculate his or her federal subsidy under the Affordable Care Act here.
The calculator is intended to illustrate how families in varying circumstances may be affected by the tax credits and limits on age rating included in the law. Premiums will vary from region to region and based on assumptions insurers make in setting premiums. In addition, there are many other factors that could increase or decrease how much people pay, including efforts to make the health care system more efficient and additional revenue measures to finance the federal cost of reform.
Kaiser Family Foundation provided the subsidy calculator for the Affordable Care Act and and is referenced as a resource guide in this article.