Premium Subsidies and Cost-Sharing
The ACA provides financial assistance to help individuals and families afford health insurance. There are two main types of assistance: Premium Tax Credits (PTCs) that lower monthly premiums, and Cost-Sharing Reductions (CSRs) that lower out-of-pocket costs.
Premium Tax Credits (PTCs)
How PTCs Work
| Feature | Details |
|---|
| Type | Refundable tax credit |
| Delivery | Advance (monthly) or at tax time |
| Purpose | Reduce monthly premium cost |
| Calculation | Based on income and benchmark plan |
Eligibility Requirements
| Requirement | Details |
|---|
| Income | 100-400% FPL (permanent with enhanced subsidies) |
| Coverage source | Not eligible for employer coverage or government program |
| Tax filing | Must file federal tax return |
| Legal status | U.S. citizen or lawfully present |
2025 Income Thresholds
| Household Size | 100% FPL | 400% FPL |
|---|
| 1 | $15,060 | $60,240 |
| 2 | $20,440 | $81,760 |
| 3 | $25,820 | $103,280 |
| 4 | $31,200 | $124,800 |
Enhanced Subsidies (2021-2025)
| Change | Impact |
|---|
| Premium cap | 8.5% of income maximum |
| No income cliff | Subsidies continue above 400% FPL |
| Lower contributions | Reduced premium contributions at all income levels |
| $0 premiums | Many low-income enrollees pay nothing |
Key Point: The enhanced subsidies that began in 2021 removed the 400% FPL income cliff. Now, no one pays more than 8.5% of household income for a benchmark Silver plan, regardless of income.
How Premium Tax Credits Are Calculated
The Benchmark Plan
| Feature | Details |
|---|
| Definition | Second-lowest cost Silver plan in your area |
| Purpose | Used to calculate subsidy amount |
| Enrollment | You don't have to choose this plan |
| Variation | Changes each year, varies by location |
Calculation Formula
| Step | Action |
|---|
| 1 | Determine household income as % of FPL |
| 2 | Find expected contribution percentage |
| 3 | Calculate annual contribution (income × %) |
| 4 | Find benchmark plan premium |
| 5 | Subtract contribution from benchmark = PTC |
2025 Expected Contribution Rates
| Income (% FPL) | Expected Contribution (% of Income) |
|---|
| Up to 150% | 0% |
| 150-200% | 0-2% |
| 200-250% | 2-4% |
| 250-300% | 4-6% |
| 300-400% | 6-8.5% |
| Above 400% | 8.5% (cap) |
Using the Tax Credit
| Option | How It Works |
|---|
| Advance Payment | Credit paid monthly to insurer |
| Full at tax time | Wait and claim on tax return |
| Partial advance | Take some monthly, rest at tax time |
Cost-Sharing Reductions (CSRs)
What CSRs Do
| Feature | Details |
|---|
| Purpose | Lower deductibles, copays, out-of-pocket max |
| Applies to | Silver plans only |
| Effect | Increases actuarial value of plan |
| Delivery | Automatic when you enroll |
CSR Eligibility
| Income Level | Silver Plan AV | Benefits |
|---|
| 100-150% FPL | 94% (vs. 70%) | Greatly reduced cost-sharing |
| 150-200% FPL | 87% (vs. 70%) | Significantly reduced cost-sharing |
| 200-250% FPL | 73% (vs. 70%) | Moderately reduced cost-sharing |
| Native Americans (all incomes) | 100% | Zero cost-sharing |
CSR Example
| Cost | Standard Silver | 94% CSR Silver |
|---|
| Deductible | $3,000 | $75 |
| Primary care copay | $40 | $5 |
| Specialist copay | $80 | $10 |
| OOP Maximum | $9,200 | $1,500 |
Exam Tip: CSRs are only available with Silver plans. Even if you qualify for CSRs, you won't receive them if you choose Bronze, Gold, or Platinum. This is why Silver is the most popular tier for subsidy-eligible enrollees.
Reconciliation at Tax Time
Advance PTC vs. Actual Entitlement
| Scenario | What Happens |
|---|
| Income lower than estimated | Get additional credit (refund) |
| Income higher than estimated | May owe money back |
| Significant income increase | Could owe substantial repayment |
Repayment Limits (Pre-2025)
| Income (% FPL) | Single Limit | Family Limit |
|---|
| Under 200% | $375 | $750 |
| 200-300% | $950 | $1,900 |
| 300-400% | $1,600 | $3,200 |
| Over 400% | Full repayment | Full repayment |
Key Point: Report income changes promptly! If your income changes significantly during the year, you should update your Marketplace application to avoid a large reconciliation at tax time.
2025 Out-of-Pocket Maximums
Annual Limits
| Coverage | 2025 Maximum |
|---|
| Individual | $9,200 |
| Family | $18,400 |
| Embedded individual (in family plan) | $9,200 |
What Counts Toward OOP Max
| Counts | Doesn't Count |
|---|
| Deductibles | Monthly premiums |
| Copays | Balance billing |
| Coinsurance | Out-of-network costs (some plans) |
| Non-covered services |
Employer Coverage and Subsidies
Affordable Employer Coverage Test
| Requirement | 2025 Threshold |
|---|
| Self-only coverage | Must cost ≤8.39% of household income |
| If affordable | NOT eligible for marketplace subsidies |
| If unaffordable | CAN get marketplace subsidies |
Family Glitch Fix (2023)
| Pre-2023 | Post-2023 |
|---|
| Affordability based on employee-only cost | Can consider family coverage cost |
| Family members often ineligible | Family members may qualify for subsidies |
Exam Tip: The "family glitch fix" in 2023 allows family members to get Marketplace subsidies if family coverage (not just employee coverage) would exceed 8.39% of household income, even when the employee has access to affordable self-only coverage.