Health Insurance: What is the Premium Tax Credit?

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The premium tax credit is a government subsidy to help make health insurance premiums more affordable for middle and low-income people.

The subsidy is only available to people with modified adjusted gross incomes from 100 to 400 percent of federal poverty level. Additionally, the subsidy is only available for those buying health insurance through government-run health insurance exchanges.

If you’re eligible for the premium tax credit subsidy, you can choose to have it paid in advance directly to your health insurance company each month.

This will lower the amount you’ll have to pay for premiums each month. Or, you can choose to get it as a lump sum included with your federal income tax refund.

Want to learn more about the premium tax credit? Find out if you’re eligible, how to apply, how much the credit is, and why you might have to pay back part of the credit by reading, “How Does the Premium Tax Credit Health Insurance Subsidy Work?

Can I Get Help Paying for Health Insurance?” will give you more information about government programs, including the premium tax credit, to help low and middle income people get health insurance without going broke.

Also Known As

Some refer to the premium tax credit as the health insurance subsidy or the premium subsidy.

Who Qualifies?

Those who make between 100 and 400 percent of federal poverty level can qualify for the premium tax credit health insurance subsidy. Federal poverty level changes every year, and is based on your income and family size.

You can look up this year’s FPL here.

You'll use this year's FPL figures to apply for next year's health insurance subsidy. For example, if you're applying for a 2016 Obamacare plan during open in the autumn of 2015, you'll use the FPL figures for 2015.

Using 2015 FPL levels, you can qualify for the health insurance subsidy as an individual with an income of $11,770-$47,080.

Couples qualify with an income of $15,930-$63,720, and a family of three earning $20,090-$80,360 qualifies.

In order to figure out how much your premium tax credit will be, you must know:

  1. Your expected contribution toward the cost of your health insurance
  2. The cost of your benchmark health plan
    Your benchmark plan is the silver-tiered health plan with the second lowest monthly premiums in your area. Your health insurance exchange can tell you which plan this is and how much it costs.

Your subsidy amount is the difference between your expected contribution and the cost of the benchmark plan in your area. You can ready more about the Premium Tax Credit here.

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