In 2014, the Affordable Care Act, also known colloquially as Obamacare, came into effect. This law expanded coverage options, reduced insurance restrictions, and required that all Americans have a minimum amount of health care insurance. If you can’t afford health insurance, there are still some options.
The government realized that certain Americans who had lower incomes would rather forgo health coverage than pay out of pocket for a plan. Under the ACA, these individuals are now offered subsidies and tax credits in order to help pay for insurance through the newly created national or state insurance markets.
However, some Americans were still left wondering if they could actually afford to buy health insurance. Fortunately, the federal government has put other programs and funding opportunities in place to help cover the gap between the health insurance plan rates and what you can pay out of pocket.
There are a variety of methods to help you pay for your health insurance. You are required by law to have minimum coverage, and below is a list of available funding options.
Premium Tax Credits
With the ACA, the government has established the maximum amount you are required in pay out-of-pocket costs and health insurance premiums. The two primary programs are premium tax credits and cost-sharing subsidies.
Premium tax credits are given to individuals and families as a way to reduce monthly premiums. You can have an annual income level up to 400 percent of the federal poverty rate and still get premium tax credits. For 2015, this ranged from an individual making between $11,670 to $46,680 per year and between $23,850 and $95,400 for a family of four.
Aside from income level, the other requirements are that you are a U.S. citizen, file taxes jointly if you are married, don’t have affordable coverage through your employer, and don’t qualify for other types of federal health insurance like Medicare, Medicaid, and CHIP.
Depending upon your annual income, the premium tax credit sets a cap on the maximum amount you are required to pay for health insurance. For example, if you make between 100-133% of the poverty level, then the cap is 2.01% for 2015. Then, the individual can either receive a monthly discount on their premium, or receive that annual discount amount as a tax credit when filing their taxes.
The second type of subsidy helps to pay for out-of-pocket expenses like co-payments, co-insurance, and deductibles. It caps the amount you spend out of pocket in 2015 to between $2,250 and $5,200 for an individual and $4,500 and $10,400 for a family.
Cost-sharing subsidies are only available for those who purchase a silver-level plan on the federal or state marketplace (there are bronze, silver, gold, and premium level plans available). The eligibility for cost-sharing subsidies is also limited to only those who earn between 100 and 250 percent of the poverty level. The lower costs are automatically applied when you pay for a medical service out-of-pocket.
Economic Hardship Exemption
If these two programs are not enough to help you afford coverage, then you may qualify for the economic hardship exemption. You can qualify if the amount you would need to pay for the cheapest available health insurance plan is greater than 8.05% percent of your annual income.
For example, let’s say you make $35,000 per year and you do not have health care coverage. You would not have to pay the tax penalty for not having coverage if the cheapest plan available in your area costs $2,800 per year or more.
Other Hardship Exemptions
There are a wide variety of tax exemptions aside from those related to income, including:
- You did not have health insurance last year for one or two consecutive months.
- You would have qualified for Medicaid if your state had expanded the program under the ACA.
- You are in prison or jail.
- You live abroad.
- You were homeless, evicted in the last 6 months, or facing foreclosure.
- A close family member died in the last three years.
- You were a victim of domestic violence in the last year.
- Your marketplace insurance plan was cancelled and other plans are unaffordable.
The list goes on. In some cases, you might not expect your personal or financial situation to be included as an exemption. Check the federal health care website to see if you qualify.
Catastrophic Health Insurance
If you are under 30 years old or have one or more of the hardship exemptions listed on the health care website, then you qualify for catastrophic health insurance. There are no income restrictions for this type of plan. You can buy this instead of paying for one of the standard plans on the federal or state health insurance marketplace.
Catastrophic health insurance includes three primary care visits per year and other health preventative services, like cholesterol screening, at no cost. You will have to pay for other doctor and hospital visits out of pocket until you reach your deductible limit. There is also a monthly premium, but it is less than the standard ACA plans. The main goal of catastrophic health insurance is to provide financial protection against major medical emergencies and illnesses.
Medicare, Medicaid, and CHIP
There are other federal health insurance programs available to those who qualify.
Medicare is a health insurance program for Americans aged 65 and older, or those individuals who are under 65 who have disabilities or certain chronic conditions. It provides coverage for doctor and hospital visits and prescription medications. The monthly fees differ, depending upon the amount of coverage you want and your previous contributions to social security. For example, Medicare Part A, or hospital insurance, is free if you or your spouse has paid social security taxes for 40 or more calendar quarters.
Medicaid specializes in providing health insurance to low-income Americans. The cost to the individual is either very low or free. Every state has slightly different requirements for qualification, but the system has improved and expanded under the ACA. Currently, Americans with incomes up to 138 percent of the poverty level are eligible in states that expanded coverage.
Medicaid covers routine doctor visits, hospitalization, prescription medication, services for pregnant women and young children, and long-term care coverage for the elderly and disabled.
CHIP, or the Children’s Health Insurance Program, is similar to Medicaid in that it provides health insurance to low-income individuals. If a family earns more than the set levels to qualify for Medicaid, yet still cannot afford other health insurance options, then CHIP is available for children. In some states, CHIP will cover parents and pregnant women as well.
CHIP includes medical treatments for children and pregnant women, like health screenings and immunizations. The plan also covers doctor and hospital visits, dental and eye visits, and x-rays.
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