Help for individuals without employer-provided insurance
Starting in 2014, the new law allows individuals who purchase coverage for themselves or their family to receive assistance from the Federal Government in to pay for their premiums and out of pocket costs associated with health care.
Premium Limits
This premium tax credit is available for those who do not have employer provided insurance or, in some cases, where the employer provided insurance is too expensive for the individual to purchase. The amount of the available credit varies with income. It is based on premium limits that can be charged for the second lowest “Silver” plan that is available through the Exchange. This “Silver” plan has an actuarial value worth at least 70 percent. (There are four categories of plans available through the Exchange, Bronze with an actuarial value of 60 percent, Silver (70 percent), Gold (80 percent), and Platinum (90 percent))
| Federal Poverty Level (FPL) |
Actual Income Family of 4 |
Premium Limit % of AGI |
Premium Limit |
| 0-133% |
$29,326 |
2% |
$586 |
| 133-150% |
$33,075 |
3-4% |
$1323 |
| 150-200% |
$44,100 |
4-6.3% |
$2,720 |
| 200-250% |
$55,125 |
6.3-8.05% |
$4,437 |
| 250-300% |
$66,150 |
8.05-9.5% |
$6,284 |
| 300-400% |
$88,200 |
9.5% |
$8,379 |
| 400% + |
$90,000 |
No Limit |
Actual Cost |
If the person elects to obtain more expensive coverage than the second lowest Silver plan, they are responsible for that additional cost difference.
For example, if John Smith has a family of four and earns $44,000, the maximum amount that his family could be charged in premiums for the second lowest Silver plan is 6.3 percent of his income or $2,720 a year. If he elects “Gold” coverage that costs $3,000 more, he is responsible for the difference between that coverage and the second lowest Silver plan cost.
If an individual has employer-offered coverage, then they are not eligible to buy insurance through the Exchange and receive a premium tax credit unless the employer-offered plan does one of two things; the employer plan does not have an actuarial value of at least 60% or the person’s share of the premium for employer-sponsored insurance exceeds 9.5 percent of income. In those cases, the individual can purchase insurance through the Exchange and receive assistance.
In addition, if the employer offers insurance but it would cost the employee between 8 percent and 9.5 percent of their income to obtain it, the employer is required to offer a health insurance “Free Choice Voucher,” which is equal to the amount of money that the employer would have spent on insurance for that employee. The employee can then go to the Exchange and buy insurance with the help of the “Free Choice Voucher,” however, they would NOT be eligible for premium tax credits.
The premium tax credits are refundable and advanceable. A refundable tax credit is one that is available to a person even if he or she has no tax liability. An advanceable tax credit allows a person to receive the assistance at the time that they purchase insurance rather than paying their premium out of pocket and waiting to be reimbursed when filing their annual income tax return.
Out-of-Pocket Limits
In addition, the are limits that people may have to pay out-of-pocket for other services that are covered under their benefits. Generally, the limits are based on the maximum out-of-pocket limits for Health Savings Account-qualified health plans ($5,950 for single coverage and $11,900 for family coverage in 2010). People with incomes at or below 400 percent of poverty have their out-of-pocket liability capped at lower levels, as follows:
| Federal Poverty Level (FPL) |
2010 Income Individual |
2010 Income Family of 4 |
Out-of Pocket Limit |
| 100-200% |
$10,830-$21,660 |
$22,050-$44,100 |
one-third of the HSA limits
$1,983/individual $3,967/family |
| 200-300% |
$21,660-$32,490 |
$44,100-$66,150 |
one-half of the HSA limits
$2,975/individual $5,950/family |
| 300-400% |
$32,490-$43,320 |
$66,150-$88,200 |
two-thirds of the HSA limits
$3,987/individual and $7,973/family |
The limits on out-of-pocket maximum amounts means that a person with income of 150 percent of FPL purchasing coverage through the Exchange would have the limit on their out-of-pocket spending reduced by at least two-thirds of the normal maximum out-of-pocket limits.
For example, if the provision were in effect in 2010, the out-of-pocket maximum for single coverage for such a person would be about $1,983 for single coverage and $3,963 for family coverage.
The laws sets maximum out-of-pocket spending limits but otherwise does not specify the combination of deductibles, copayments, and coinsurance that plans must use to meet the actuarial value requirements. Therefore, for example, one plan may choose to have relatively higher deductibles but relatively low co-payments for office visits and other services, while another plan may choose a lower deductible but higher copayments or coinsurance for each service.
Total Cost
The Congressional Budget Office (CBO) estimates the direct cost of premium and cost-sharing subsidies to be $350 billion from 2010 to 2019, and $8 billion in indirect costs. The cost of the subsidies is a function of the number of people that are eligible for subsidies, and how generous the subsidies are.
For questions or additional information on “Premium Tax Credits,” email COSE’s advocacy team.
For more information about the law, see the summary of the new health reform law at www.kff.org/healthreform/8061.cfm.