How Much Is The Affordable Care Act Health Insurance Tax Credit Subsidy For Low Incomes?

The Affordable Care Act was enacted into law on March 23, 2010. It puts in place a requirement that all citizens must have a minimum level of health insurance coverage in place by 2014. Part of the law includes a provision whereby individuals and families can take a new premium tax credit to help them pay for health insurance. This is only for lower income citizens who's adjusted gross incomes are between 100% to 400% of the Federal Poverty Line (FPL).

You will be able to take this credit regardless of whether or not you have any tax liability. You can also have the credit paid in advance directly to your insurance company to help pay for your coverage premium's and keep your monthly costs low.

So, to be eligible, you must have an adjusted gross income between 100-400% of the poverty line. For example, the poverty line for 2011 is $10,890 per year income for a single individual and $18,530 per year for a single parent with 2 children. The proposed tax credits will basically cap your out of pocket costs for any premium's paid for a certain level of coverage determined by the HHS to a percentage of your adjusted gross income (line 37 on your 1040). This is your income minus any deductions for moving expenses, alimony payments, IRA's, etc.

The total out of pocket costs are currently proposed to range between 3% for those just above the poverty line up to 9.5% for those near or at the 400% mark. So, for example, let's say you are a single parent with two children and make just above the poverty level which will give you an adjusted annual income of about $20,000 per year. Your total out of pocket premium costs would only be $600 per year or $50 per month. All premium above this level for your family would be covered by the advance tax credit. You would have an approved private comprehensive health insurance plan approved by HHS for only $50 per month.

The tax credit for single individuals making near the 400% limit would extend up to an adjusted gross income of about $40,000 per year although they would pay more out of pocket. Considering the costs of health insurance, these caps and credits make coverage relatively affordable. A family of three would be eligible for a tax credit all the way up to about $70,000 per year.

Who is eligible for the Health Insurance Tax Credit Subsidy?

Both the tax credit and requirement to have health insurance don't take effect until January 1, 2014. You can't receive the credit until that date. At that time, you can find insurance coverage through one of the exchanges that will be set up in your state. Visit healthcare.gov for more information on the exchanges and any changes to the proposed rules.

You can also find individual plans from major private health insurers. If you want to compare rates and quotes , then we recommend InsureMe where you can compare rates from dozens of health insurers such as Aetna, Humana, BCBS, Anthem, United Health and many more. They also include quotes from independent insurance agents as well. eHealthInsurance.com is another great source of plan comparisons.

Those who will be eligible starting in 2014:

The proposed rules are still in progress and may change. If you have been turned down for health insurance in the meantime, then you may be eligible for coverage through a temporary high risk pool (PCIP).

Reference IRS - Affordable Care Act Provisions

Recommended Reading CCH Guide - Patient Protection Affordable Care Act

This should not be considered financial advice which can only be given by a qualified financial professional. We suggest you consult with a qualified financial planner and/or insurance professional who is most qualified to consult with you regarding policy decisions. Many factors are involved in your policy premium and approval; some of which may not be mentioned in this article. Federal laws and guidelines change frequently and any changes to these programs may not be reflected in this article. We are an affiliate of the Bankrate Insurance Network.

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