How to quality for a government health insurance subsidy

Chicago Tribune reports:

“As health care reform kicks into high gear, many Americans are asking: Will I qualify for a government subsidy to buy health insurance under the new health care law, and when do the changes kick in?

Eligibility depends on your income, family size and the cost of coverage in your area. The biggest changes from the health care law take effect on Jan. 1, 2014, when insurers will no longer be able to reject people for coverage or charge higher rates because of their health.

The law also sets limits on how much insurers may charge older buyers (for example, premiums for a 64-year-old can be no more than three times as much as they are for a 21-year-old). The law requires individuals to have health insurance or pay a penalty, and it gives people the opportunity to buy coverage on new state health insurance exchanges.

Many middle- to low-income people who buy coverage through the exchanges will also get government tax credits to help pay for their health insurance.

You can qualify for this subsidy if your income is less than 400 percent of the federal poverty level, which is about $46,000 for an individual and $94,000 for a family of four in 2013. The subsidy represents the difference between the amount you’re expected to contribute based on your income and the cost of the benchmark plan for someone your age in your state.

If your adjusted gross income is $70,650 for a family of four, for example, you’re expected to pay 9.5 percent of your income for the benchmark plan’s premiums. If your family’s premiums for the benchmark plan are $12,500, you’d be expected to pay $6,711 of the premium and would get a tax credit worth about $5,790, according to Families USA.

You could buy a plan that costs more or less than the benchmark plan, but your subsidy would remain the same. You can run your numbers through the Kaiser Family Foundation’s health insurance subsidy calculator. You’ll also be able to get details about your subsidy through your state’s health insurance exchange as the sites are launched in the next few months (see for more information, including links to state exchanges.)

You can only get the subsidy if you buy your coverage through the exchange, and you can’t get a subsidy if you have an offer of insurance from your employer that meets certain standards. Open enrollment for the exchanges begins on Oct. 1, 2013, for coverage beginning in 2014. The subsidy is sent directly to your insurance company and applied to your premiums when you buy the coverage through the exchange.

A recent study by Avalere Health estimates that 40 percent of individuals who currently have nongroup health insurance (and 46 percent of people who are currently uninsured) will qualify for the subsidies, and about two-thirds of young adults (age 30 or under) who are currently uninsured or have nongroup health insurance will be eligible for the subsidies.

Many early retirees are likely to qualify, too, especially if their income drops after they stop working (subsidies are only available if you are under age 65). For more information about coverage choices for early retirees under the new health care law, see New Health Insurance Options for Early Retirees.