If You Buy Your Own Insurance in the Exchanges, Will You Receive a Government Subsidy? How Much Will it Be for Couple, or a Family of Five?

ACA tax credits








No doubt you have read that if you are single, and earn less than 400% of the Federal Poverty threshhold (roughly $46,000 for an individual or $94,200 for a family of four) you will be eligible for a tax credit to help you cover the cost of insurance premiums.

But most of us don’t fit into one of those two categories. What if you are a couple, or a family of three? What happens if you have four kids?.

As the table above reveals, if a couple has  four children  and earns less  than $126,360 (400% of the FPL), they will be elibigle for the tax credits. Note: these credits are available only if you are self-employed, unemployed, or work for a company that does not offer affordable, comprehensive insurance. “Affordable” is defined as individual coverage that costs less than  9.5% of your income.

The credits are designed to make sure that no one who purchases their own insurance is forced to spend more than 9.5% of their income on health care. For instance, according to the Kaiser Family Foundation’s (KFF’s) new subsidy calculator, coverage for a 35-year-old couple with three children might cost $13,101./(This is an estimate; actual premiums will vary depending on where you live. Healthcare is much more expensive in some states than in others. ) If the parents earned roughly $100,000 a year, they would be asked to pay $9,500 toward their insurance and would receive a tax credit of $3,626.

This assumes that they purchase a “silver plan” which pays for an average of 70% of covered benefits. The family would owe the other 30% in  the form co-pays and deductibles. But keep in mind that preventive care is free, there are no co-pays and the deductible does not apply.

Assuming they need care other than preventive care, total out-of-pocket spending would be capped at $12,750, even if the entire family wound up in a car accident, three of them were hospitalized, and two needed surgery.

If they preferred, the family could purchase a less expensive Bronze plan which would pay for 60% of covered benefits. Their co-pays and deductible would be higher, but once again, preventive care would be free, total cost sharing still would be capped at $12,700, and the premium for a Bronze plan would be lower: KFF estimates that a family of five earning $100,00 would still receive a subsidy of $3,626 and their share of the premium would be just $7,253.

Why is the Government Subsidizing Households That Earn more than $125,000?

 If people choose to have four children, that certainly is their business. But why should I help pay for their healthcare?

The answer is two-fold:

First, people don’t necessarily choose to have 4 children –or more. Some couples are surprised (not to mention overwhelmed) when they disccover that they are having twins or triplets. 

Secondly as a society, we care about children. We don’t want any child to go without needed care.

But there also is a pragmatic reason for supporting large families. If those children don’t receive preventive care such as dental checks as well as  timely treatments when they are sick, down the road, we as a society will pay the price. The health of the population will play a major role in determining how productive we, as a nation, are.  






12 thoughts on “If You Buy Your Own Insurance in the Exchanges, Will You Receive a Government Subsidy? How Much Will it Be for Couple, or a Family of Five?

  1. Excellent article. Healthcare in general and healthcare for our children in particular should be a social and policy priority in our society. Thank you.

  2. Chloe–

    Thank you. Yes, i’m glad to see that the ACA does a good job of covering kids.
    Every time i read ‘up to $92,000 for a family of four’ I wondered–what if you’re a family of six?

  3. This posting says: “… these credits are available only if you are self-employed, unemployed, or work for a company that does not offer affordable, comprehensive insurance.”

    In the case of the unemployed, someone who would have no income from wages or salary, what value would a tax credit be? Would such a person even be eligible to use the exchange? Presumably his income would be less than 100% of the Federal Poverty Level.

    • Jack–

      Even if you don’t owe taxes, under the ACA the government gives you the tax credit in cash

      Many unemployed people would be eligible for Medicaid, and so wouldn’t need the tax credit to buy insurance. (Medicaid is free)

      But there are some unemployed folks out there who have income from investments (usually not much, but enough to mean they have to pay taxes, especially if they are over 62 and taking this income out of IRAs.(
      For these folks, the subsides will make a huge difference.

  4. Pingback: Subsidies Are Key To Limiting Rate Shock for Coverage in Exchanges

    • Thanks Louise.

      And you’re right– the one thing the Kaiser calculator can’t take into account is differeces in teh cost of care depending on where you live. Thus, it’s estimate of what your premiums will be (based on size of household) is a very rough estimate. It’s basically a national

      But I’m pretty sure that the subsidies adjust for that. In other words, if you live in a place where heatlhcare is very expensive, you’ll receive a larger subsidy than another 40-year-old couple who lives in a place where health care is cheap. So both couples will wind up paying the same amoung– after the subsidy.

  5. Something that still isn’t clear to me: Would the low income people have to purchase the insurance up-front from their meager earnings then later receive the tax credit? Or would the credit be figured in for them in their up-front costs so that the cost would be lower? If they have to purchase it up front they simply will not be able to do that.

    • Mary Bell–

      Good point! And the lawmakers who wrote the ACA thought of this.

      So If a person’s 2013 income makes them eligible for a subsidy they can ask the government to begin paying the subsidy directly to their insurer beginning in January of 2014.

      If it turns out that the person winds up earning more in 2014 than he did in 2013, he’ll settle up with the government when he pays his taxes in April 15 & give back a part of the subsidy. If, on the other hand, he earned less in 2014 than he did in 2013, the government will give him an extra tax credit when he pays taxes in April of 2015.

      What if he doesn’t owe an taxes? The government will just send him a check.

      One of the reasons the ACA is so long is that legislators actually thought of many of these potential problems, and covered them in the
      legislation. This is one reason why I’m so impressed with the ACA. It isn’t perfect, but they did an outstanding job of trying to take care of people

  6. Very informative article. My head is spinning from all the changes just from insurance.
    (My own doctor is now asking for membership fee in order to just keep him as a doctor. )

    • Sarah–

      First thanks for your comment.

      If you doctor is asking for a membership fee, I would suggest that you talk to some friends and try a new doctor.
      (I realize that you may be attached to your old doctor, but it’s definitely worth trying another doctor so that you
      can decide whether your physician is worth the membershp fee.)

      I would add if your current doctor is asking long-time patients who really can’t afford the fee to pay it–and is willing ot cut them off if they can’t–I have to say that this doesn’t sound like patient-centered, caring medicine.

  7. How much.would a family of 6 making 60,000 a year pay for a bronze plan? How much is subsidy for this family?

    • Dear Lee–

      A family of six earning less $126, 360 would be eligible for a subsidy.
      (This assumes that you don’t have an employer who offers comprehensive insurance. The subsidies are designed for people
      who are forced to buy their own insurance because they are unemployed, self-employed, or work for someone who doesn’t offer solid heatlh benefits.

      According to Kaiser’s calculator, if you bought a Bronze plan , you would receive a subsidy of
      $9, 961 and be expected to pay 2% of your income, or $1, 197 a year toward the premium.
      (This assumes your family of 6 is made up of 2 adults and 4 children, and that the adults are 40)

      Note that this is a national average. The cost of the insurance will vary depending on how much hospitals and doctors charge in he area where you live. But the subsidy adjusts to keep up with the cost of care in your area.

      Bottom line– wherever you live you would be expected to pay no more than $1,197 or 2% of your income toward the premium.

      For that you would get free preventive care, all of the essential benefits, and dental and vision for the children.

      Since you earn less than 400% of the poverty level, the amount you would be expected to pay out of pocket in co-pays and deductibles also would be capped.