How Health Insurance Subsidies Work


If you’re a low- or middle-income individual or family, you may be eligible to save money thanks to the Affordable Care Act (ACA) subsidies. These government subsidies are designed to help you pay for health insurance coverage.

The Affordable Care Act made subsidies available to help qualifying Americans pay for their health insurance premiums.

These subsidies work on a sliding scale, limiting what you are personally required to contribute toward your premiums to a fixed percentage of your annual income. In most cases, subsidies are available to those earning 400 percent, or lower, of the federal poverty level. If your income is below the federal poverty level, you generally do not qualify for ACA subsidies but may qualify for Medicaid.

The dollar value of your subsidies will depend in part on the cost of the benchmark Obamacare plan in your area. If the benchmark plan costs more than a certain percentage of your estimated annual income, you can get a subsidy for the amount of the difference. You may then use that subsidy when you buy a qualified Obamacare health insurance plan.

In order to calculate your subsidy amount, the following variables are considered:

  • Your estimated household income for the year.

  • The cost of plans in your area. ACA considers health insurance unaffordable when annual premiums for the lowest priced plan costs more than 8.05% of your modified adjusted gross income (MAGI) in 2018.

Qualifying for Obamacare subsidies In order to quality for Obamacare subsidies, you must meet certain criteria including:

  • You must currently live in the United States.

  • You must be a US citizen or legal resident.

  • You cannot be currently incarcerated.

  • Your income can be no more than 400 percent of the federal poverty level.

According to the Federal Register, in 2018 the poverty level for an individual is $12,140. So if you are a single person making more than 400 percent of that ($48,560) then you will likely not qualify for subsidies. The federal poverty level varies based on the number of members in your household and on where you live in the United States. If your income is below the federal poverty level, you generally don’t qualify for ACA subsidies but may qualify for Medicaid.

Applying for subsidies You can apply for Obamacare subsidies through the government-run health insurance marketplace in your state or through qualifying licensed agents like RCB & Associates,LLC and private online marketplaces that cooperate with the government marketplace.

The government makes the final determination on your eligibility for a subsidy, so you can shop through eHealth, but the subsidy actually comes through the government-run Marketplace.

Things to know about subsidies Anyone applying for subsidies should know the following:

Your eligibility for subsidies is based on your income in the year in which you’re covered by your health plan – not on your income as reported on last year’s tax return. This means that you must estimate your income when applying for subsidies.

If you earn more than expected during the year, you may be required to pay back some or all of the subsidy dollars that were applied on your behalf to your monthly health insurance premiums.

If you earn less than expected during the year, you may be due additional subsidy assistance, which may be applied when you file your taxes for the year.

Most important thing to know

Whether you navigate the online marketplace by yourself or call our team and work through a qualified agent, your cost is the same. There is no charge to you when you use an agent.

Save the frustration and possible mistakes of securing insurance online, and let RCB & Associates, LLC assist you, correctly, the 1st time!

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