What is a Premium Tax Credit?
Premium Tax Credit may be a term you have heard thrown around in the context of individual coverage through the Healthcare Marketplace or Healthcare.gov. There is a lot of confusion surrounding it, and hopefully this will help clarify what it is and how to use it.
Healthcare.gov or the Healthcare Marketplace is one of the best ways for individuals to get affordable health insurance coverage if they don't have coverage options through any of the following; Medicare, Medicaid, CHIP, TRICARE, or Employer Sponsored Coverage. Do note that if your partner's employer offers qualifying coverage for you you will not qualify for a premium tax credit. The premium tax credit or simply, the marketplace subsidy, is the amount of money that an individual or family can utilize to reduce their monthly premium by recording total gross household income for each tax year. Each year has different eligibility amounts, so it is important to update income information every year so the premium tax credit is calculated correctly. This subsidy helps individuals pay for coverage and make it more affordable based on your income compared to the Federal Poverty Level.
For example if an individual or household falls at or under 138% of the Federal Poverty Level they do not qualify for a subsidy as they will be eligible for Medicaid instead. Then if you are between 138% and 150% of the Federal Poverty Level individuals are typically expected to contribute 0% of their annual income towards marketplace coverage. The cost being benchmarked at the second-lowest cost "Silver" level plan available. And moving up the expected amount to contribute goes up, to 2%, 4%, 6%, and 8.5% of annual income. Typically when a household is making 400% or above of the Federal Poverty Level they do not receive a premium tax credit. But through 2022 with the ARPA passed in 2021, the maximum amount individuals are expected to pay is 8.5% of their income for coverage through the market place. Still being benchmarked off of the second-lowest cost Silver plan available of course. So for 2022 it is possible for those households making more than 400% of the Federal Poverty Level to get assistance paying for their Marketplace coverage, as long as the benchmarked monthly premium is more than 8.5% of the household income.
There is further cost-sharing available at the Silver level when an individual or household falls between 138% and 250%. This caps out the maximum deductible and out of pocket maximum that the plans can have for a year. As well as having deductibles and copays lowered to make the insurance plans at this level even more affordable. Southwestern Montana Insurance Center has many qualified team members to help you understand and navigate premium tax credits and Healthcare.gov. Take advantage of this today, open enrollment ends January 15th.