This weekly Q&A addresses questions from real patients about healthcare costs. Have a question you'd like to see answered? Submit it to AskChristina@nerdwallet.com.
Question:
I've heard about premium tax credits, subsidies and other ways the Affordable Care Act is supposed to make health insurance more attainable, but I don't know how to take advantage of these things. How can I find out if I qualify for this assistance without having to sign up?
Answer:
The purpose of the Affordable Care Act is evident in its name: to provide affordable health care to all Americans. This includes, as you mentioned, tools designed to make health insurance more attainable for those who may otherwise struggle to pay for their health care. But understanding how to use these tools can be tricky. The first step is learning how they work.
Know the difference between premium tax credits and cost-sharing subsidies
Premium tax credits are designed to reduce the amount of your monthly health insurance premium, that is, the amount you'll pay for your health insurance plan. The ACA set limits on how much people should have to pay for health insurance premiums; they are capped at no more than 9.56% of your income for 2015. These credits help pick up the difference.
Cost-sharing reductions or subsidies, on the other hand, help reduce the out-of-pocket expenses you might have for medical services, such as your copay and deductible. Out-of-pocket expenses are what you pay when you access care.
Eligibility for both the primary tax credit and cost-sharing subsidies is based on your estimated income for the upcoming year.
Do you qualify for the ACA primary tax credit?
Source: Healthcare.gov
Just how much you'll get depends on where you fall within this range.
You also have options on how you want to receive your discount. The ACA allows you to opt for a monthly break on your premium, known as "advance payment of the premium tax credit," or you can choose to receive it when you file your tax return.
Do you qualify for cost-sharing subsidies?
Fewer people are eligible to receive cost-sharing subsidies. Also, to receive these benefits, you must choose to purchase a plan in the Silver category. (The ACA groups health insurance into four categories: Bronze, Silver, Gold and Platinum).
Source: Healthcare.gov
If you qualify, the amount you spend on copays, deductibles and coinsurance will be reduced. The lower your income, the more assistance you'll receive.
These reductions will be applied immediately, as you use your health insurance at the doctor's office, in the hospital or anytime you're required to pay a portion of your health care costs.
Do you qualify for Medicaid?
Before you resort to paying out of pocket for health insurance, you should consider whether you might be eligible for Medicaid. Medicaid is a state-operated health care program that provides coverage at little to no cost for low-income individuals and families.
Though the ACA intended to expand income eligibility for Medicaid across the entire country, a Supreme Court ruling determined this expansion was optional, and many states opted out. Find out if your state expanded Medicaid here.
The income limits for Medicaid vary from state to state. In some states, where Medicaid was not expanded, consumers fall into a "coverage gap" where they make too much to qualify for Medicaid and not enough to get help from the ACA tax credit. Learn more about Medicaid policies in your state here.
Determining how much assistance you'll receive
You mentioned not wanting to sign up until you knew whether you would qualify for assistance. The good news is that the federal ACA marketplace, state exchanges and several online tools allow you to determine your qualification for the primary tax credit, cost-sharing subsidies and even Medicaid without signing up.
If you use Healthcare.gov, the official federal website of the ACA Marketplace, you can enter your ZIP code, family size and estimated 2015 income, and you'll receive an estimated assistance amount. You can then browse plans in your area, along with their costs, both with and without the discounts applied.
The website will also alert you if you might be eligible for Medicaid and, for many states, allow you to apply directly or provide you with contact information for your state's Medicaid office.
Only once you've found a plan you're interested in will you have to provide personal information.
Words of caution
- When you estimate your 2015 income during this open enrollment period, take your time. If you underestimate and end up receiving more tax credits than you are entitled to, you could be forced to repay the government for any overpayments come tax time.
- Unless you qualify for an exemption, you will be penalized if you go without health insurance. For 2015, the penalty for going without is the greater of two options: 2% of your household income or $325 per adult and $162.50 per child.
- Don't hesitate to ask for help if you're unsure of your options or how to apply. The Marketplace Call Center can be reached at 800-318-2596. You can also submit questions about health care costs to
