Why You Don't Qualify for a Health Insurance Subsidy

The Affordable Care Act provides for government subsidies to help people with modest incomes pay for health insurance. However, the rules for calculating the premium tax credit health insurance subsidy are complicated, so sometimes even people with a modest income won’t qualify for a subsidy.  

Here are four reasons you might not qualify for a health insurance subsidy:

1
You're Disqualified for a Reason Unrelated to Your Income

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Any of the following things will disqualify you from receiving the premium tax credit health insurance subsidy even if you meet the income guidelines.

  1. You could have gotten affordable health insurance through your job.
  2. You’re eligible for government-sponsored health insurance such as Medicare, Medicaid, Veterans Administration, or the Children’s Health Insurance Program.
  3. You’re not living in the United States legally.
  4. You’re incarcerated.
  5. You’re married and you file your taxes using any status other than married filing jointly. (There's a special exception to this rule if you're married but unable to file taxes jointly due to a situation involving domestic abuse.)
  6. You can be claimed as a dependent on someone else's federal income taxes.

2
You Make Too Much Money

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People making between 100-400% of federal poverty level may qualify for a health insurance subsidy. If your modified adjusted gross income is more than 400% of FPL, you won’t qualify for a health insurance subsidy even if the cost of buying health insurance overwhelms your modest budget.

However, this doesn't mean you can't get a health insurance subsidy if you're wealthy. The subsidy is based on your income, not your assets or wealth. Learn more in "How the Rich Can Get Government-Subsidized Health Insurance."

Have just a little bit too much income to qualify, but feel like you still need help paying for health insurance? "How to Lower Your Income to Qualify for a Health Insurance Subsidy."

3
You Don’t Make Enough Money

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Even though it seems absurd, if you make less than 100% of FPL, you won’t qualify for help paying for health insurance.

When the Affordable Care Act was written, lawmakers intended to provide everyone making less than 133% of FPL with Medicaid coverage for free. They saw no need to provide a health insurance subsidy for the poorest of the poor since those folks would be covered by Medicaid. So, the law was worded to provide subsidies only to people making between 100% of FPL and 400% of FPL.

However, a Supreme Court ruling allowed states to opt out of expanding Medicaid coverage to everyone making less than 133% of FPL. This left the poorest of the poor without help in states that chose to opt out of expanding Medicaid coverage. Since the subsidy only kicks in if you make between 100-400% of FPL, making less than 100% of FPL doesn’t qualify you for a subsidy.

This isn’t a problem if you live in a state that expanded Medicaid coverage since you’ll be given Medicaid for free if your income is below poverty level. But it really leaves you high and dry if you’re among the poorest of the poor and live in a state that chose not to expand Medicaid. You won’t get the Medicaid coverage originally intended by the Affordable Care Act, and you won’t qualify for a subsidy to help you buy your own health insurance unless you can increase your income above 100% of FPL.

Too Poor to Qualify for a Health Insurance Subsidy? What Now?

4
Your Income Is Right, But Health Insurance in Your Area Isn’t Expensive Enough

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Image © Martin Barraud/Getty Images

In this case, you would qualify for a subsidy if health insurance were more expensive where you live, but the rates for health insurance in your area are low enough that you can pay them without paying more than the government feels you can afford.

The amount of your health insurance subsidy is based on the difference between what the government expects you to contribute toward your health insurance premiums and the cost of the benchmark health plan in your area.

How much you’re expected to contribute toward the cost of your health insurance in 2015 is based purely on a mathematical formula :

  • Those with incomes from 100%-132% of FPL are expected to contribute 2.01% of their income.
  • Those with incomes from 133%-149% of FPL are expected to contribute 3.02%-4.02% of their income.
  • Those with incomes from 150-%-199% of FPL are expected to contribute 4.02%-6.34% of their  incomes.
  • Those with incomes from 200%-249% of FPL are expected to contribute 6.34%-8.10% of their income.
  • Those with incomes from 250%-299% of FPL are expected to contribute 8.10%-9.56% of their income.
  • Those with incomes from 300%-400% of FPL are expected to contribute 9.56% of their income.

Source: Revenue Procedure 2014-37 IRS.gov (pdf)

The benchmark plan is the second lowest priced silver plan available in your area. Your health insurance exchange can tell you which plan this is and what its premium is.

So, let’s say your expected contribution is $3,325 per year. If the cost of your area’s benchmark plan is less than that, say only $3,300 per year, you won’t qualify for a subsidy even though your income meets the guidelines.

It’s not because you make too much money. It’s because your expected contribution toward your health insurance would cover the entire cost of your area’s benchmark plan. Health insurance in your area is priced low enough that the government feels you can afford it without a subsidy.

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