How to save on health coverage
Individual health coverage that fits your budget is important. The good news is that to help make coverage more affordable, the federal government set a maximum for how much people should pay for health coverage and offers help through the Affordable Care Act (ACA).
There are two types of financial assistance available for people shopping for Individual & family plans.
- Premium tax credit: Lowers your monthly premium cost. You can choose to take the credit each month or all at once when you file your federal tax return.
- Cost-sharing reductions: Lowers your out-of-pocket costs for things like your deductible, copayments and coinsurance when you choose a Silver plan
If you're eligible, you can receive both a premium tax credit and cost-sharing reductions. When you shop for MyPriority plans, we'll check for both types of assistance.
Premium tax credit
A premium tax credit (PTC) is a refundable credit that helps cover premiums for health coverage purchased through the Marketplace. The amount of your PTC is based on the information you provide about your estimated household size and projected income for the year you're applying for.
When you enroll, you can choose to have the estimated PTC paid directly to your health plan provider to lower your monthly premiums; this is called an advance premium tax credit (APTC). You can also choose to take the credit when you file your taxes for the year, which will lower the amount of taxes owed on your return or increase your refund.
Keep these in mind for most situations:
- You may qualify for a PTC if your household income is between 100% and 400% of the federal poverty level
- Through 2025, if you make over 400% of the federal poverty level, tax credits gradually decrease as your taxable income raises
- Since eligibility is based on your household income, you have to file a joint tax return if you're married
- APTC is based on your estimated income so you have to reconcile the amount paid on your behalf when filing your federal tax return
- You can receive a PTC on Bronze, Silver or Gold plans
What does it mean to reconcile?
The advance premium tax credit (APTC) is based on information you provide about your estimated household size and projected income for the year you're applying for. When you file your federal income tax return for that year, you will have the actual numbers and will need to reconcile.
When you reconcile
- Take the amount of premium tax credit you used in advance during the year (paid directly to your health plan so your monthly payment was lower)
- Subtract the premium tax credit you actually qualify for based on your final income for the year
- Any difference between the two figures will determine your federal tax refund or tax owed
How to reconcile
- Get your Form 1095-A, which you receive in the mail or retrieved from healthcare.gov
- Print Form 8962
- Use the information from your Form 1095-A to complete Part II of Form 8962
After completing Form 8962, you will know if you used more or less premium tax credit than you qualified for based on your final yearly income.
Here's an example:
Anna and her husband, David, shop and apply for an Individual & Family plan on the Marketplace. During enrollment, they entered their household size and estimated their income for the year they were shopping for. They found out right away that they qualified for a premium tax credit. They chose to use the advance premium tax credit, which was paid directly to their health plan and lowered their monthly premium payment.
Now it's time to file their yearly federal tax return.
Scenario 1: During the year, Anna got a promotion with a raise and David worked some overtime during the holidays. These increased their annual income, making it a little more than what they estimated it to be. When they filed their federal tax return, they completed Form 8962, where they put in their actual income.
It determined that their actual premium tax credit amount was less than the advance premium tax credit paid on their behalf–the credit was too much–so the difference will be subtracted from their refund or added to their balance due.
Scenario 2: David's boss decreased his hours during the summer and it lowered their annual income, making it less than what they estimated. When they filed their federal tax return, they completed Form 8962, where they put in their actual income.
It determined that their premium tax credit amount was more than the advance premium tax credit paid on their behalf–the credit wasn't enough–so the difference will increase their refund or reduce their balance due.
If Anna had reported her raise to the Marketplace when it happened, their premium tax credit would have been adjusted based on their new household income. While it could mean a change in the advance premium tax credit paid to their health plan each month, when they reconciled their federal tax return, there may not be a balance owed.
Any life change, like household size or income, should be reported in your healthcare.gov account.
What is the federal poverty level?
Federal poverty guidelines are determined each year by the Department of Health and Human Services (HHS) and are used to determine eligibility for many programs, including PTC and CSR for Marketplace plans.
To be eligible for a PTC, your household income needs to be between 100% and 400% of the federal poverty level. (Through 2025, if you make over 400% of the federal poverty level, tax credits gradually decrease as your taxable income raises.) You may also be eligible for CSRs if your income is up to 250% of the federal poverty level.
Since the amount of a PTC is based on a sliding scale, it's best to check if you qualify for a subsidy.
Here are the 2023 federal poverty guidelines for coverage year 2024. Use your household's adjusted gross income.
For families/households with more than 8 persons, add $5,140 for each additional person.
Cost-sharing reductions (CSR) are discounts that lower the amount you have to pay for deductibles, copayments and coinsurance.
Deductible: The amount you pay each year before the health plan starts to pay for certain services
Copayment: A set amount you pay at the time you receive health care services or prescriptions
Coinsurance: A percentage of the cost of health care services or prescriptions
Here are some things to keep in mind:
- You typically qualify for CSRs if your household income is up to 250% of the federal poverty level
- You can only receive CSRs on Silver plans
If you qualify for cost-sharing reductions, take a look at Silver plans, even if the monthly premium is a little higher. You could ultimately save more because of lower deductibles, copayments and coinsurance each time you receive care.
More ways to save
When you shop for Individual health coverage, you'll find many choices on the Marketplace. It's wise to select health coverage with an eye on affordability; however, a monthly premium isn't the only indicator of how much your plan will really cost you every month.
Be sure you're looking at the plan details, networks, deductibles, copays and what added benefits it offers.
Choose a dependable and affordable plan that will be there for you when you need it most.
Health coverage 101
- How to save on health coverage
- How to compare health plans
- OEP checklist
- 5 step guide to shopping
- Take a quiz to find your plan
- 5 health plan terms to know
- What's a high-deductible plan?
- Understanding metal levels
- 6 Affordable Care Act key terms
- MyPriority plan benefits
- Chronic condition coverage
- 5 must haves in a plan
- Narrow Network plans
- Coverage for immigrants