Health Insurance Subsidies

Subsidies are sums of money, granted by the government and given to businesses or individuals who meet certain pre-determined requirements. The Affordable Care Act offers subsidies solely through Marketplace plans, which provide health plan shopping and enrollment options available online, over the phone, or in person. Marketplace plans can be operated by either the Federal or State government, and individual health insurance plans in Utah can be found at healthcare.gov.

Once enrolled in a health care plan, subsidies under the Affordable Care Act are determined by income. Right now, anyone making less than 400% of the Federal Poverty Level qualifies for some level of subsidy. Although each year the Federal Poverty Level is adjusted for inflation, in 2016 for example, any individual household that was grossing $1,915 per month, which was 200% of the Federal Poverty level, would qualify for a subsidy that allowed that individual to pay no more than 6.3% of their taxable monthly income on their insurance premium. That means that the health insurance premium set by the company would be paid partially out of the pocket of the individual and partially by the government subsidy. The ratio of income to subsidy is set on a sliding scale, so the more money per month an individual or household grosses, the greater percentage they pay of their health insurance premium. Therefore, even for a household earning almost 400% more than the Federal Poverty Level, no more than 9.5% of their monthly income would be spent on health insurance premiums.  

While at first glance this system may seem to unfairly disfavor the wealthy, a four-person household can actually make up to $94,200 annually before losing access to subsidies. Furthermore, not qualifying for subsidies does not mean individuals lose access to health insurance provided through their employer, their spouse, their parents, or the Marketplace.

Unfortunately, the subsidy system under the Affordable Care Act is in jeopardy. The proposed GOP health insurance plan, the American Health Care Act, does not offer any government assistance at all based on income—instead, a tax credit is awarded for those who choose to buy health insurance through the individual market instead of obtaining it through their employer or other alternative sources. The problem with this system stems from the fact that many low-income individuals and families cannot afford full price premiums, therefore a tax credit that comes in April will not help them make monthly payments as do the current subsidies. Furthermore, even for those who do qualify for the tax credit, the amount of the credit is a flat rate determined solely by age. Therefore, younger low-income individuals will now have a hard time paying their premiums, and the proposed tax credits for older adults has been found to generally not be sufficient for low-income seniors.

Whether we like it or not, injuries and illness are an unavoidable reality of life. Under the GOP’s new health care plan, having a hard time paying for insurance premiums will be, too.