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Health Insurance Subsidy: What is it and Do I Qualify?

An African-American physician giving medical care to a Caucasian child thanks to his parent's health insurance subsidy.

If you have been following the latest news regarding the Affordable Care Act (ACA) then you know that major changes are coming in 2020 that will impact your health insurance. The most prominent change you should be aware of is the new mandate that requires all individuals to obtain coverage or face penalties. If you do not currently have health insurance you may be concerned about paying for it; however, the good news is you may be eligible for a healthcare subsidy that will help to make your health insurance more affordable.

What is a Healthcare Subsidy?

An insurance subsidy helps to lower the amount that you pay for healthcare coverage. ACA subsidies, also known as premium tax credits, are available to individuals whose income falls within 100 to 400 percent of the federal poverty level.

Obamacare Subsidies 2019 vs. Obamacare Subsidies 2020

In previous years, individuals who earned more than 400 percent above the federal poverty line were not eligible to receive a premium tax credit for their health insurance. With the 2020 changes, the minimum income for Obamacare subsidies remains the same, but the maximum income qualification has increased.

In the new year, individuals and families who earn between 400 and 600 percent of the federal poverty line will now also be eligible to receive an insurance subsidy in the state of California.

Consider the comparison below:

Maximum qualifying income for a family of four for a healthcare subsidy:
2019 2020
$100,400 $150,000


What is the 2020 Penalty for Lack of Coverage?

California has enacted legislation that requires all residents to obtain healthcare coverage beginning on January 1, 2020. Failure to obtain insurance will result in penalties of $695 for individuals when they file their 2020 state income taxes. A married couple may be penalized $1,395 and a family of four may be penalized $2,085 for failing to obtain qualifying coverage.

Qualifying coverage includes employer-provided plans, Medicare, Medicaid, student health plans, and individual plans that meet the ACA market requirements.

How Can the Penalty Be Avoided?

In order to avoid facing a tax penalty, you must sign-up for health care coverage through Covered California, the health insurance marketplace that was established through the Affordable Care Act. It enables individuals to buy brand name health insurance with federally subsidized premiums.

The most important thing to note is that health care coverage must be purchased during the open enrollment period and it cannot be purchased any other time. The open enrollment period ends January 31, 2020, in California so it is important that you do not miss the window.

How Do I Determine if I Qualify for Obamacare Subsidies?

According to an analysis completed by Covered California, 922,000 consumers will be eligible for a health insurance subsidy in 2020.

If you think you may be one of these consumers, below are some factors that will impact whether or not you qualify:

  • Your income. The most significant factor in determining if you qualify for an insurance subsidy is your total household income. The subsidies are based on the amount you expect to earn in the coming year. If that amount is between 100 and 600 percent of the federal poverty line then you will likely qualify.
  • Your household size. As your family size increases so does the income threshold to qualify for a subsidy. For example, you would not qualify for a subsidy as an individual making $75,000 per year, but you would if you had a family of four at the same income level.
  • Where you live. You may be eligible for a larger subsidy if you live an area that is more expensive for health insurance.

The end of the open enrollment period is coming! Do not run the risk of a penalty for failing to get health insurance. With Affordable Care Act subsidies, health insurance may cost less than you think. Contact a licensed agent today to help you determine if you are eligible.

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