Some enrollees qualify for a “premium tax credit” that lowers the amount of premium they pay each month to their insurance plan. The amount of the tax credit depends on the estimate household income for the year on you Marketplace application.
Tax credits can be applied to the monthly insurance premium payment in advance. The Marketplace will send the tax credit directly to your insurance company, so you will pay less each month.
Changes in Household Income
If your income goes up or you lose a member of your household, you will likely qualify for a lower tax credit. In order to avoid taking more credits that you qualify for, it is necessary to reduce the amount of tax credits that you in advance each month.
If your income goes down or you gain a household member, you will likely qualify for an higher tax credit. In order to take advantage of this tax credit against you premium, you will need to increase the mount of tax credit you take.
At the end of the year, if you have taken more or less premium tax credits than your eligible for, your federal income tax return will be adjusted. This is referred to as reconciling.
Cost Sharing Reductions
In addition to premium tax credits, your income may qualify for a Cost Sharing Reduction (CSR). Cost Sharing Reduction lowers the plans deductible, which decreases the total amount of pay “out-of-pocket” for covered medical services per year. This has the benefit of:
Lower copayments or coinsurance: These are the payments that are made every time you get care. For example, if your plan as a $30 copayment for a doctors visit, with a Cost Share Reduction you may pay only $15 or $20.
Lower deductible: A deductible is the portion of costs that an individual must pay out-of-pocket before insurance begins to cover healthcare costs. Cost-sharing reductions can decrease deductibles from $750 annually to $500 or $300.
Low Out-of-Pocket Maximum: The total amount of out-of-pocket expenses that are paid annually. Instead of a maximum of $5,000 in out-of-pocket expenses, a plan may be capped at $3,000.
Qualifying For Cost Sharing
After applying for Marketplace coverage, check the Eligibility Determination Notice. If the notice says “choose a health plan with lower copayments, coinsurance and deductibles” and is follow by a (04), (05) or (06), you qualify for income based savings, if you pick the Silver plan.