What Is a Health Insurance Subsidy?

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If you qualify for an income-based health insurance subsidy, you can use it to lower the amount of money you have to contribute toward your health insurance premium or covered health care services. Alternatively, you could qualify for subsidized coverage through a government-funded program like Medicaid or the Children’s Health Insurance Program (CHIP).

Keep reading to find out how health insurance subsidies work and how you can find out if you’re eligible for financial support through the Affordable Care Act (ACA) Marketplace.

Key Takeaways

  • The two main types of health insurance subsidies are premium tax credits, which lower your monthly premium, and cost-sharing reductions, which lower your deductibles, copays, coinsurance and out-of-pocket maximum.
  • Your eligibility for health insurance subsidies generally depends on factors like your income, location and access to other types of health coverage.
  • Health insurance subsidies are only available if you shop for coverage through a state or federal ACA Marketplace.
  • Medicaid provides free or low-cost coverage for low-income people and CHIP provides low-cost coverage for children that don’t meet the eligibility requirements for Medicaid and can’t otherwise obtain coverage.

What Is a Health Insurance Subsidy?

A health insurance subsidy is a type of benefit offered by the federal government and occasionally by state governments to make health coverage more affordable for eligible individuals and families. These subsidies may lower your regular premium payments or your out-of-pocket costs whenever you visit a health care provider.

Eligibility primarily depends on factors like your estimated household income, the number of people living in your household and the state you live in.

What Types of Health Insurance Subsidies Are There?

There are two main types of Marketplace subsidies: premium tax credits and cost-sharing reductions. When you qualify for a premium tax credit based on your estimated income for the year, the government pays the tax credit directly to your health insurance company, allowing you to pay a lower premium for coverage.[1]

Also known as “extra savings,” cost-sharing reductions lower the portion of your medical expenses that you are responsible for paying out of pocket. This means your plan will come with a lower deductible, lower copays or coinsurance and a lower out-of-pocket maximum while still providing the same level of coverage.[1]

The phrase “subsidized coverage” can also refer to government-funded programs that offer insurance at little or no cost to eligible people such as Medicaid and CHIP.[2] Medicaid predominantly covers low-income people, while CHIP primarily covers children whose families make too much money to qualify for Medicaid but too little money to obtain affordable private insurance.

How Do Health Insurance Subsidies Work?

To calculate your premium tax credit, you must subtract your required individual contribution based on your income relative to the federal poverty level (FPL) from the amount you would have to pay for your state’s benchmark plan, which is the second-cheapest Marketplace plan in the silver tier that is available in your state. The below health insurance subsidy chart goes over the percentage of your income you would have to contribute to the premium for a benchmark plan at various income ranges.[1]

Household Income Relative to the FPL

Required Individual Contribution to Benchmark Plan Premium

Less than 150%

0% of your household income

150% to 200%

0% to 2% of your household income

200% to 250%

2% to 4% of your household income

250% to 300%

4% to 6% of your household income

300% to 400%

6% to 8.5% of your household income

More than 400%

8.5% of your household income

For example, if you are an individual who makes $60,000 per year, which is more than 400% of the FPL, then your required individual contribution is $5,100. So, if your state’s benchmark plan would cost you $5,500 per year, then you can qualify for a $400 tax credit. This means you can subtract $400 from the annual premium for any non-catastrophic Marketplace health plan you purchase even if you opt not to enroll in the benchmark plan.[1]

Since you claim tax credits based on your estimated household income, it’s possible you could receive more advance premium tax credits than you are actually eligible for if you end up making more money than you expected by the end of the year. In this case, you would have to pay back the excess amount when you file your federal tax return. Conversely, if your income was lower than expected and you received fewer credits than you were actually eligible for, you will receive the difference in the form of a tax refund.[1]

Am I Eligible for a Health Insurance Subsidy?

You must generally meet the following eligibility requirements to qualify for a premium tax credit:[1]

  • Having an estimated household income that is 100% of the FPL or higher
  • Lacking access to affordable employer-sponsored health insurance
  • Being ineligible for Medicare, Medicaid and CHIP
  • Showing proof that you are a citizen or lawful resident of the United States
  • Filing your taxes jointly if you are married

Keep in mind that, if your household income is below 100% of the FPL, you don’t need a Marketplace plan because you should be eligible for Medicaid. At the other end of the spectrum, there is currently no official limit on the amount of money you can make while still qualifying for premium tax credits and there won’t be such a limit until 2026 at the earliest. However, you are de facto ineligible if your required individual contribution based on your income is higher than the cost of your state’s benchmark plan.[1]

Meanwhile, cost-sharing reductions largely have the same eligibility requirements as premium tax credits except that your household income must fall between 100% and 250% of the FPL. In addition, you cannot claim your out-of-pocket savings through cost-sharing reductions unless you purchase a silver health plan.[1]

Where Do I Get Health Insurance Subsidies?

The only way to get a subsidy for health insurance is to buy coverage through the federal Health Insurance Marketplace or your state’s equivalent ACA Marketplace. You can check if you are eligible for a subsidy by inputting your zip code, income and household information at HealthCare.gov.

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Are there health insurance subsidies for dental and vision?

ACA-compliant plans are required to include dental and vision insurance for children, which means your Marketplace subsidies will automatically go toward paying for these services.[3] However, even if your plan comes with adult dental or vision coverage, your tax credit won’t apply to the portion of your premium that covers those services since they aren’t considered essential health benefits.[1]

Do I have to pay back my health care subsidy?

If you received too many premium tax credits because your estimated household income when you claimed the credits was lower than your actual household income at the end of the year, you will have to pay back the difference when you do your taxes.[1]

What is the maximum income for an Obamacare subsidy in 2023?

There will be no official maximum income for claiming premium tax credits through the end of 2025. However, you can’t claim a tax credit if 8.5% of your income exceeds the amount you would have to pay for your state’s second-lowest-cost silver plan (SLCSP).[1]


  1. KFF. “Explaining Health Care Reform: Questions About Health Insurance Subsidies.” Accessed Nov. 7, 2023.
  2. HealthCare.gov. “Subsidized Coverage - Glossary.” Accessed Nov. 7, 2023.
  3. HealthCare.gov. “10 Covered Marketplace Health Benefits.” Accessed Nov. 7, 2023.

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