Guide to ACA (Obamacare) Health Insurance Subsidies
ACA health insurance subsidies reduce premiums and out-of-pocket costs based on your income and household size, primarily for people earning between 100% and 400% of the federal poverty level.
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By Mark Fitzpatrick
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Head of Insurance, MoneyGeek
Mark Fitzpatrick is a Licensed Property and Casualty Insurance Producer and MoneyGeek's Head of Insurance. He has analyzed the insurance market for over five years, conducting original research and creating personalized content for every kind of buyer. He has been quoted in several insurance-related publications, including [CNBC](https://www.cnbc.com/2020/04/15/cant-keep-up-with-insurance-premiums-heres-what-to-do.html), [NBC News](https://www.nbcnews.com/business/autos/flooded-cars-are-problem-their-owners-future-car-buyers-n1278493) and [Mashable](https://mashable.com/article/tesla-insurance-rates). Fitzpatrick earned a master’s degree in economics and international relations from Johns Hopkins University and a bachelor’s degree from Boston College. He is passionate about using his knowledge of economics and insurance to bring transparency around financial topics and help others feel confident in their money moves.
Edited by Casie McCoskeyCasie McCoskey is a professional editor passionate about providing people with accessible information on personal finance. Before MoneyGeek, she worked in the legal field, drafting and editing briefs and motions.
MF
By Mark Fitzpatrick
MF
Head of Insurance, MoneyGeek
Mark Fitzpatrick is a Licensed Property and Casualty Insurance Producer and MoneyGeek's Head of Insurance. He has analyzed the insurance market for over five years, conducting original research and creating personalized content for every kind of buyer. He has been quoted in several insurance-related publications, including [CNBC](https://www.cnbc.com/2020/04/15/cant-keep-up-with-insurance-premiums-heres-what-to-do.html), [NBC News](https://www.nbcnews.com/business/autos/flooded-cars-are-problem-their-owners-future-car-buyers-n1278493) and [Mashable](https://mashable.com/article/tesla-insurance-rates). Fitzpatrick earned a master’s degree in economics and international relations from Johns Hopkins University and a bachelor’s degree from Boston College. He is passionate about using his knowledge of economics and insurance to bring transparency around financial topics and help others feel confident in their money moves.
Edited by Casie McCoskeyCasie McCoskey is a professional editor passionate about providing people with accessible information on personal finance. Before MoneyGeek, she worked in the legal field, drafting and editing briefs and motions.
Updated: May 22, 2024
Advertising & Editorial Disclosure
An ACA (Affordable Care Act) health insurance subsidy is government-provided financial aid to lower the cost of health insurance for eligible individuals and families. It is available through the Health Insurance Marketplace. Subsidies come as premium tax credits to lower premiums and cost-sharing reductions to decrease out-of-pocket expenses.
Typically, you're eligible if your income is between 100% and 400% of the federal poverty level (FPL). However, due to recent policy changes, those with incomes above 400% FPL may qualify if the cost of a benchmark plan exceeds 8.5% of their household income.
A health insurance subsidy is a financial support mechanism introduced by the Affordable Care Act (ACA), commonly called Obamacare. These subsidies, provided by the government, aim to make health coverage more affordable for individuals and families. They are an integral part of the health care system, especially for those with limited financial means.
Eligibility for these subsidies is determined based on income and other factors, such as family size and the cost of health plans in your area.
MONEYGEEK EXPERT TIPKeep in mind that subsidies are only available through the Health Insurance Marketplace, a platform established under the Affordable Care Act (ACA). Enrolling in a plan outside the Marketplace means you will not be eligible for ACA subsidies.
The ACA provides two key types of subsidies to help individuals and families afford health insurance: premium tax credits, which reduce monthly premiums, and cost-sharing reductions (CSRs), which lower out-of-pocket costs for eligible enrollees.
Together, these subsidies provide individuals and families access to more options for affordable medical insurance.
Who qualifies for an ACA health insurance subsidy is primarily determined by income, residency status and access to other affordable insurance. Subsidies might also be influenced by the age of enrollees and regional insurance market costs.
Your household income is a central factor. To qualify, only those earning between 100% and 400% of the federal poverty level (FPL) were initially eligible for subsidies.
However, with recent legislative changes under the ARP (American Rescue Plan) and the Inflation Reduction Act, people with higher incomes may also qualify if their health insurance costs exceed a certain percentage of their income.
How the ARP and Inflation Reduction Act Impact Subsidies
Under the American Rescue Plan (ARP), people with household incomes above 400% of the federal poverty level can now qualify for premium tax credits if the cost of the benchmark plan (the second-lowest-cost Silver plan) exceeds 8.5% of their household income. This cap applies to both individual and family coverage.
Additionally, the ARP reduces the amount people with all income levels must pay for their health insurance premiums before getting tax credits. For example, those earning between 100% and 150% of the federal poverty line could be eligible for a zero-premium benchmark Silver plan, a benefit extended to individual and family coverage options.
If your earnings are 500% of the FPL but you lack access to other affordable health insurance, you also could benefit from certain Marketplace plan cost-sharing reductions, typically reserved for lower-income brackets.
These changes, initially for 2021 and 2022, have been extended through 2025 with the Inflation Reduction Act.
Note that insurance subsidies in states that have expanded Medicaid effectively start above 138% FPL, as Medicaid covers lower income levels. In states that have not expanded Medicaid, the lower income threshold for subsidy eligibility starts at 100% of the federal poverty level (FPL).
The FPL is updated annually to reflect inflation adjustments. This level varies based on household size and is higher in Alaska and Hawaii. The table below demonstrates the 100% FPL for 2024.
Family/Household Size Poverty Guideline 2024Add $5,380 per additional person
If someone else claims you as a dependent on their tax return, you cannot receive subsidies on your own. In such cases, the household income of the person claiming you as a dependent is considered for subsidy eligibility.
Subsidies are available to U.S. citizens, nationals and lawfully present immigrants. There are specific guidelines for immigrants, so it is important to check your eligibility based on your residency status.
You are not eligible for ACA subsidies if you have access to affordable health insurance through an employer or government program, are incarcerated or are not lawfully present in the U.S.
You may not be eligible for the tax credit if you have access to an affordable employer-sponsored health plan. For 2024, a plan is deemed affordable if your share of the premium for the lowest-cost, self-only plan is less than 8.39% of your household income. Additionally, the plan must meet the minimum value standard, meaning it covers at least 60% of the total allowed cost of benefits.
Being eligible for other government-provided health programs like Medicare, Medicaid or CHIP disqualifies you from receiving ACA subsidies.
If you are married and choose to file your taxes separately (except in specific situations like domestic abuse or spousal abandonment), you cannot receive ACA subsidies.
You are ineligible for ACA subsidies if you are incarcerated or not lawfully present in the United States.
Subsidies are only available for plans purchased through the Health Insurance Marketplace. If you buy insurance outside this platform, you won't receive ACA subsidies.
In states that haven’t expanded Medicaid under the ACA, individuals who earn less than 100% of the FPL might not qualify for subsidies or Medicaid, creating a coverage gap.
To calculate ACA (Obamacare) health insurance subsidies, you need to understand your income in relation to the federal poverty level (FPL) and how this impacts the cost of a benchmark Silver plan in your area.
Your ACA subsidy is determined by your Modified Adjusted Gross Income (MAGI) — your adjusted gross income along with non-taxable Social Security benefits, interest and foreign income. Estimate your household income for the year you're seeking coverage.
The FPL is a measure of income issued annually by the Department of Health and Human Services. Your subsidy eligibility depends on your income as a percentage of the FPL. For 2025 coverage, use your projected 2025 income and compare it with the 2024 FPL figures (as mentioned above). Different income brackets have different implications for subsidy amounts.
Based on your income, the ACA limits the maximum percentage of your income that should go towards health insurance. This percentage scales with income. For instance, those with lower incomes might pay a very small percentage, potentially qualifying for zero-premium plans, while those with higher incomes could pay up to 8.5% of their income. These percentages are defined under Section 9661 of the American Rescue Plan and are applicable through 2025, as per the Inflation Reduction Act.
Income as % of Federal Poverty Level (FPL) Expected Contribution to Health Insurance0% (Zero-premium for benchmark plan)
0% to 2% of your income
2% to 4% of your income
4% to 6% of your income
6% to 8.5% of your income
Capped at 8.5% of your income
The subsidy amount is partly determined by the cost of the second-lowest-cost Silver plan in your area. This benchmark plan’s premium acts as a reference for calculating subsidies. The specific plan that qualifies as the benchmark can change annually due to market fluctuations. For accurate information on plan costs, consult the state or federal exchange websites or contact Healthcare.gov at 800-318-2596. If your state has its own health care marketplace, check its website for contact details.
Subtract the amount you are expected to contribute (based on your income level and the relevant percentage) from the cost of the benchmark Silver plan. The remainder is the subsidy for which you are eligible. For example, if the benchmark plan costs $300 per month and your expected contribution is $100 per month, your subsidy would be $200 per month.
This subsidy can be applied to any plan available in the Marketplace, not just the benchmark Silver plan. If you choose a less expensive plan, your out-of-pocket cost could be lower. If you select a more expensive plan, you will need to pay the difference.
It's important to provide accurate income estimates. If your actual income for the year differs from your estimate, your subsidy amount might be adjusted the following tax season, either requiring repayment or providing additional credit.
You can also use the Healthcare.gov calculator to calculate your subsidy.
A clear understanding of the enrollment process and eligibility criteria will make your application for health insurance subsidies more straightforward. When you fill out a Marketplace application, you will provide income information. The Marketplace then determines if you qualify for a premium tax credit or cost-sharing reductions and how much aid you're eligible for. You can enroll in a plan of your choice accordingly.
Create a list of everyone in your household who needs coverage, including those not enrolling in insurance and information on health insurance availability through employment for each household member. You will need the legal names and birthdates of all household members needing coverage. Social Security numbers (or document numbers for legal immigrants) for all applicants will also be necessary.
Estimate the total household income for the year you’re applying, incorporating all income sources for your household. Have your most recent tax return at hand to confirm income estimates.
Collect information on current health coverage from any source, such as employer-provided plans, Medicare, Medicaid, CHIP or military insurance. Also, details on any available job-related health insurance, regardless of enrollment.
Understand the difference between the open enrollment period, typically at the end of the year, and special enrollment periods, which are available due to qualifying life events like marriage, change in residence, change in income, birth or loss of other insurance.
Visit Healthcare.gov, or if your state has its own marketplace, use the respective state website. First-time users should create an account while returning users can log in.
Complete the application form accurately with personal, financial and household information. This data determines your eligibility for subsidies.
After submitting the application, you’ll receive an eligibility determination, which includes the subsidy amount you qualify for.
Browse through the available health plans. The subsidy amount will be shown alongside each plan, indicating how much your premium will be reduced. Choose the plan that best fits your needs. You can complete enrollment online, and the subsidy will be applied directly to your premium. Be sure to complete this step during the open enrollment period or a special enrollment period if you qualify.
Complete your enrollment by verifying the details and confirming your plan choice
Post-enrollment, it’s important to report any changes in income or family size to the Marketplace, as this can affect your subsidy.
MoneyGeek has compiled a list of frequently asked questions to help you understand how to apply for and receive ACA health insurance subsidies.
How do you get the money from ACA subsidies?ACA subsidies are applied directly to your insurance premium, reducing the amount you pay each month. If you've paid premiums without advance credit, you can claim them as a tax credit when filing your annual taxes.
What happens if you overestimate your income for Obamacare?If you report a higher income than you actually earn, you may pay more for your monthly premium than required. This could qualify you for a tax credit at the end of the year to offset the overpayment.
What happens if you underestimate your income for Obamacare?Reporting lower income than your actual earnings can lead to receiving more subsidies than you're entitled to. Consequently, you might have to repay the excess subsidy amount when you file your annual tax return.
Can you get ACA subsidies if your employer offers health benefits?You can qualify for ACA subsidies if your employer's health benefits are unaffordable or do not meet the minimum value standard set by the ACA.
Are people with Medicaid or CHIP eligible for premium subsidies?Individuals enrolled in Medicaid or CHIP are not eligible for ACA premium subsidies, as they already have coverage through these programs.
What age is too old for a premium subsidy?Age does not disqualify you from receiving a premium subsidy; eligibility is income-based unless you are already enrolled in Medicare.
How do you find out how much your subsidy will be?The amount of your ACA subsidy is determined by subtracting your expected contribution towards health insurance (based on your income) from the cost of the benchmark Silver plan in your area. The higher the plan cost and the lower your income, the larger your subsidy will be.
About Mark Fitzpatrick
Mark Fitzpatrick is a Licensed Property and Casualty Insurance Producer and MoneyGeek's Head of Insurance. He has analyzed the insurance market for over five years, conducting original research and creating personalized content for every kind of buyer. He has been quoted in several insurance-related publications, including CNBC, NBC News and Mashable.
Fitzpatrick earned a master’s degree in economics and international relations from Johns Hopkins University and a bachelor’s degree from Boston College. He is passionate about using his knowledge of economics and insurance to bring transparency around financial topics and help others feel confident in their money moves.
