Reader Question: Do I Qualify for an Obamacare Subsidy?

We recently published The Definitive Guide to Obamacare for Individuals. It truly is a comprehensive guide to the Patient Protection and Affordable Health Care Act. In response to a question from a reader named Linda, however, today we are going to focus specifically on the health insurance premium subsidies that are available under Obamacare.

Here’s Linda’s question:

I’m one of the forgotten people. I only get $796.00 monthly from Social Security, I’m only 62 and don’t qualify for Medicare. I’m in a no Medcaid state, and all my social security goes to the room I rent, and I’m on a very little food stamp allotment.

What do I do ?

Linda’s question raises several important issues. How do you qualify for an Obamacare subsidy? If you make too little to qualify, do you qualify for Medicaid? These are difficult issues that often depend on a variety of factors including where you live, how much you make, and your age. In this article, we’ll take a closer look at how the Obamacare subsidies work.

Who Qualifies for a Subsidy

Qualification is determined based on household income (more about what household income is in a minute). Those with household income between 133 and 400 percent of the federal poverty line will qualify for a subsidy. Those below 133 percent qualify for Medicare. Technically, the minimum threshold is 138 percent, but five percent is ignored, giving us a 133 percent floor. Further, in those states that have not expanded Medicaid, those with household income of at least 100 percent of the federal poverty line qualify for a subsidy. The Obamacare subsidy will come in the form of a refundable tax credit to help lower your monthly premium costs.

The amount of the subsidy will vary, depending on your household income. For example, if you make between 100 percent and 133 percent of the poverty line, you’ll pay, at most, 2 percent of your income toward health insurance. If you make between 300 percent and 400 percent of the poverty level, you’ll pay a maximum of 9.5 percent of your income in insurance premiums.

The chart below gives the sliding scale, depending on your relationship to the federal poverty line (Note: FPL stands for the Federal Poverty Level):

Percent of Income

This tax credit is set up so that you won’t pay more than a specified percentage of your income for your second-lowest costing Silver level plan.

Basically, this means that your dollar-amount subsidy will be based on the assumption that you’ll buy the second-lowest cost Silver plan. If you buy a cheaper or more expensive plan, you’ll still get that same dollar-amount subsidy, but the premium you pay will be different.

In addition, if your income is between 100 percent and 250 percent of the federal poverty level, you may also be eligible for a cost-sharing reduction subsidy. This further subsidy will help lower your deductibles, co-insurance and co-payments. To be eligible for this subsidy, you must choose a Silver-level plan.

What is Household Income

Under the Affordable Care Act, eligibily for a subsidy is based on a household’s Modified Adjusted Gross Income (MAGI). The Labor Center at Berkeley pulled together this useful chart on MAGI:

Obamacare MAGI
Obamacare MAGI

The use of MAGI to determine household income has one critical feature. Many people may be on the bubble of qualifying for a subsidy. For example, those with household incomes that are just over 400 percent of the FPL may be able to lower their income just enough to qualify. The chart above lists those items that are subtracted in the MAGI calculation, including certain education expenses, moving expenses, and even penalties on early withdrawals of savings, such as CDs.

The key is that some may be able to qualify for subsidies with a little tax planning.

Subsidies and the Health Exchanges

So where must you go to get the subsidy if you qualify. At the moment, the subsidies are only offered through the exchanges in each state. That’s a bit of a problem, of course, given all the issues with federal health exchange website.

The good news is that there is an alternative. For those living in the 36 states served by the exchange run by the federal government (see Obamacare Map to find your state), you can shop for insurance at eHealthInsurance.

I reached out to eHealthInsurance and asked them if subsidies were available through its website. Here’s the response I received back:

We are licensed by the Federal government to enroll people in health insurance plans, with a subsidy, in 36 states. However, the delays at the Federal exchange have forced us to delay that implementation – we hope to be enrolling people by December 1, if not sooner.

And we have a “rain check” system on our web site where we allow people to shop for plans with their estimated price, after the subsidy has been applied. They can save plans they’re interested in and enroll once the connection to the Federal exchange is functioning properly.

These are the 36 states: ID, NM, AL, AK, AZ, FL, GA, IN, LA, MS, MO, NJ, NC, ND, OK, PA, SC, TN, TX, WI, WY, AR, DE, IL, IA, MI, NH, WV, KS, ME, MT, NE, OH, SC, VA, UT

Finally, you can use this following calculator from The Kaiser Family Foundation to estimate your eligibility for a subsidy:

Published or Updated: November 7, 2013
About Rob Berger

Rob founded the Dough Roller in 2007. A litigation attorney in the securities industry, he lives in Northern Virginia with his wife, their two teenagers, and the family mascot, a shih tzu named Sophie.

Comments

  1. jim says:

    Rob,

    Actually I’m pretty sure this individual would NOT qualify for a premium subsidy.

    They are supposed to get Medicaid but their state doesn’t offer it to them.

    Because half the states chose not to expand Medicaid there is a gap. Obamacare was written with the assumption that Medicaid expansion would be national. So anyone under 133% poverty would get Medicaid and tax subsidies wouldn’t apply. But since the Supreme Court made Medicaid expansion optional half the states chose not to and now we have people in that limbo gap between the law as written which gave Medicaid to people under 133% and their state not implementing it.

    See the NYT article :
    http://www.nytimes.com/2013/10/03/health/millions-of-poor-are-left-uncovered-by-health-law.html

    And KFF paper :
    http://kaiserfamilyfoundation.files.wordpress.com/2013/10/8497-medicaid-eligibility-for-adults-as-of-jan-1-2014.pdf

    “In states that do not expand Medicaid, significant coverage gaps will remain for many poor adults.
    In the 26 states not currently moving forward with the Medicaid expansion, adults between the January 2014 Medicaid eligibility limits and 100% FPL will not gain a coverage option. These adults will not be eligible for Medicaid or the federal subsidies to help pay for Marketplace coverage. As of January 2014, 22 states will have Medicaid eligibility levels for parents below 100% FPL (Figure 2) . Moreover, in all of these states, childless adults will remain ineligible for full Medicaid coverage regardless of how low their income levels are”

    In addition they say: “all my social security goes to the room I rent,”

    I think they should move to a state that offers them Medicaid and where they can find reasonably affordable rent.

    If that is literally true and they are renting a room for about $796 then they should move somewhere cheaper. That sounds like someone living in NYC or San Francisco. You can’t afford to live somewhere where rooms rent for >$700. There are lots of places in the US where you can rent a room for $300 or less. I’m suspecting that their comment is not literally a ‘room’ for nearly $800 but maybe thats rent on an apartment with utilities?? I don’t know.

    You could also move to a state that has expanded medicaid and get free health insurance.

    • Rob Berger says:

      Jim, thanks for the detailed comment. You are right that there is a coverage gap. The math behind all of this gets very complicated. The best bet is to use the calculator I included in the article. But the Medicaid gap is a big issue, so I’ve edited the article based on your comment.

      • Jim says:

        Its a sad situation when the poorest can’t get a subsidy but people making median income levels qualify.
        The gap should be easy to fix by just allowing anyone eligible for medicaid to opt for a policy on the exchange and get the subsidy, but would unfortunately that would require them to change the Obamacare law. Getting Obamacare amended like that successfully now seems impossible given congress conducts itself lately.

        • Rob Berger says:

          Jim, while I’m not a supporter of Obamacare, I do see its benefits, and agree 100% that the Medicaid gap must be addressed. Thanks for your thoughts on this issue!

    • Marinell Smith says:

      I was so looking forward to enrolling in this plan, all on my own, had educated myself on the whole thing, except I misunderstood one little thing about this—–I am exactly the true example of who Jim was talking about. (See the date on my reply compared to his prophecy, lol!) I am going toward my mid 60s now, retired on divorced widow’s pension, that form of Social Security, (originally to take care of my Ahlzheimer’s Mom, bless her heart; she just died two months ago), not eligible for Medicare, living in TEXAS, so not eligible for Medicaid, yet not eligible for subsidies because I don’t have any taxes with the IRS any more. I’m not unhealthy enough for disability (you know how that goes; you have to be not breathing or maybe crawling across the floor on your belly, with one paralyzed side on your body, in order to be able to say that you are ” dependent” or “not healthy”), so I would be spending endless yrs in court, until I actually WOULD be dead, and then, mission accomplished, they wouldn’t have to pay a darn thing out on me at all, in the long run, if they could keep me in the courts long enough, lol!! I likely destroyed my body lifting people all night and half of the day in a Texas nursing home (yeh, you get to take care of people all your life, but nobody’s going to take care of YOU because you spent your body on this type of profession; no one respects CNAs; if they only knew what all we really do/did), but it’s not enough for the government to say “you are on the verge of being disabled”, plus the age thing at the same time.

      I was so looking forward to finally having health care, after all these yrs without it (nursing home owners in Texas are very stingy with insurance; if there’s a town around that actually insures real nurse aids, then I just don’t know where it is, except in California; I’m too old to be moving away from all of my children into no man’s land, where I don’t know anyone; so call me a wuss, whatever, anyway). Alas, I don’t qualify, plus Texas did not expand Medicaid (bless Rick Perry’s little greedy heart; the state of Texas has paid for his mansion, etc…etc….you know the drill). Even if they had, where would I find a doctor in this state, not 100 miles away from my community, who hasn’t dropped ALL their Medicaid patients, as well as, if you can believe it, ALL their MEDICARE patients, yes, MEDICARE patients?! I know this for a fact because I called almost every single one of them for my mother’s sake, but they refused; I sure didn’t have the money for her healthcare either, as well as my own. What do all these poor little REALLY old people do, like my Mom?? The only doctor she had that stuck with her Medicaid, Medicare and so on, was her cardiologist. She was dropped for the primary because not one doctor close-by would see her without us buying the bank, and she had a little indigent income cause my dad left her when she was 60 something yrs old. Gee, I can hardly wait to get there!! Elderly respected in this country?? No, I know better, they all lie, every single one of them, especially that sorry congress sitting up there, leaching off of the American public. I sign every single petition that I can think of on those leaches.

      Now I get to pay a penalty, unless they have mercy on me. It all is just—-guess what—-making me SICK. I need to see a doctor now, for sure, after all this crappy stuff. They try to blame it on us for “not making better choices early in life”, but, you know, they all want someone kind to take care of THEIR moms and dads.

  2. Marinell Smith says:

    BTW, to the someone who wondered how the rents could be so high? Calculate: If you are completely on your own, you are paying the rent, the electricity, maybe the water (not so often in an apartment, but always the electric), insurance, possibly a car payment, maybe, food, gasoline. I live in a very small apartment now, since Mom passed away, but before that, a very old house (which cost me more money than the little apartment because of lack of insulation, etc…because she needed a fence to keep her from wandering down the road and getting killed), with our small combined incomes, even when I was working, then retired. It costs money just to breathe in and out, and we didn’t all become corporate heads, etc…..someone has to do these other things; otherwise, how could the rich man find someone to take care of their parents, get a shoe shine, be served a good meal; just imagine if we all were in the same boat; no one would be minding the store. Anyway, when you live all on your own, it costs money, and I’m NOT talking about going shopping and to Disneyland. I even have a little college under my belt, but I just got too tired of doing both at a later age.

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