The Affordable Care Act (ACA) created the premium tax credit, a federal tax credit where those who purchase health insurance through state or federal health insurance exchanges can receive government money to subsidize some of the cost. Previously, these subsidies were limited to only those whose income is within 400% of the poverty line.
However, as mentioned in “How the Wealthy Can Take Advantage of Health Insurance Subsidies in 2022,” the American Rescue Plan Act added a temporary provision which made it possible for families of any income size to receive government subsidies in 2021 and 2022.
Now, as part of the Inflation Reduction Act of 2022, Congress made this temporary provision permanent. These new changes effectively rewrite U.S. Code 36B(b)(3)(A) so that the default premium percentage table is 2022’s temporary one and modify U.S. Code 36B(c)(1) so that these rules apply to everyone with a household income above 100% of the poverty line with no upper cap for all years beyond December 31, 2021.
To take advantage of these rules again this year, you must be sure that you purchase health insurance which is “on the exchange.” Only plans which are on the exchange qualify for federal subsidies. “Off the exchange” health insurance, that which is purchased directly from insurance providers such as Anthem, does not qualify for the government subsidies.
The main place to purchase on-exchange health insurance is HealthCare.gov. For a few states, you need to go to your state exchange instead, which is found here. There are also several private companies offering the ability to shop and purchase all plans, both on- an off-exchange, such as HealthSherpa.
As a helpful hint, often the on-exchange plan will have an “X” in the plan name. Such as “Anthem HealthKeepers Catastrophic X.”
If you currently have off-exchange health insurance, you’ll have to weigh the benefits of the subsidies against the benefits of your current health insurance plan. Some families still have what is called a “grandfathered plan,” meaning one which does not have to comply with ACA requirements. These plans are sometimes better, cheaper, or more finely tuned to your specific insurance needs. For this reason, you may not want to switch plans.
For others, you would likely benefit from at least exploring on-exchange plans. If you are already considering a plan off-exchange which is available on-exchange, buy the on-exchange version without advancing yourself any of the subsidies. This leaves your tax preparer the option of filing for the premium tax credit on your tax return without giving you any burden for repayment if you end up not getting a subsidy.
If you want to identify possible subsidies you may be able to receive in advance of filing your tax return, you can use KKF’s Health Insurance Marketplace Calculator, which has been updated to 2023 numbers. You may be surprised by the amount of subsidies you can receive.
Photo by Kaylee Garrett on Unsplash