About subsidies (financial help)

What are subsidies (financial help)?

Subsidies are advanced tax credits, provided by the exchange, to help pay your monthly premium. Another type of subsidy is a cost share reduction plan which helps by lowering other costs such as co-pays. Subsidies can only be used for plans purchased on the health benefit exchange in your area.

What is a health benefit exchange?

Health benefit exchanges are federal or state markets where you can shop, compare, and buy health care coverage. A common nickname for the health benefit exchanges is “exchange.”

How the ACA works

The (ACA) Affordable Care Act offers subsidies (tax credits) that work on a sliding scale. They pay for part of the cost of monthly premiums based on a percentage of your annual income. Most people are eligible for subsidies when they earn 100% to 400% of the Federal Poverty Level (FPL).

You can apply some or all of this tax credit to your monthly health care premium payment for health benefit exchange plans only. The health benefit exchange will send your tax credit directly to your health care company, so you’ll pay less each month. This is called taking an advance payment of the premium tax credit.

What to do if your household size or income changes

Any changes to your income, or if you add or lose members of your household, your premium tax credit will probably change too. It’s very important to report any income and household changes to the health benefit exchange as soon as possible.

  • If at the end of the year you’ve taken more advance payments of the premium tax credit than you’re eligible for, you may have to pay money back when you file your federal income tax return.
  • If the advance payments were lower than the credit you are eligible for, you will receive a credit when you file your federal income tax return.

This is called reconciling the advance payments of the premium tax credit and the actual premium tax credit you qualify for based on your final yearly income.