In case you missed it during a frenzied election period, the annual Open Enrollment period for ACA marketplace plans (which provide ACA-compliant health coverage) in 2024 kicked off on November 1. You may also have missed that in 2021, the American Rescue Plan Act made coverage in private plans offered in the ACA marketplace more affordable than it used to be, and that the enhanced premium subsidies will continue at least through 2025, thanks to the Inflation Reduction Act passed in August 2022.
If you’re a U.S. citizen or a lawfully present noncitizen, are under 65, cannot obtain health coverage through your employer or your spouse’s employer, and are not on disability Medicare, you should explore what’s available to you in the ACA exchanges. HealthCare.gov, the federal exchange that serves 33 states, reports that four out of five enrollees can find a plan for $10 per month or less (though many will choose a plan that costs more).
Your Income Matters When Selecting a Health Insurance Plan
While you may be pleasantly surprised by what the ACA exchanges offer, it’s best not to be too shocked. That is, it’s important to have some awareness of what you’re likely to qualify for at different income levels.
A general rule is that the higher your income, the more you’ll pay for coverage, ranging from zero in the lowest income brackets (for Medicaid or free private-plan coverage) to 8.5% of household income for a benchmark Silver plan if your income is well above average.
Before shopping, keep two key rules in mind:
-
Small differences in projected income can have a significant impact on available benefits.
-
The income you report is an estimate for the coming year—so for many people, there’s some built-in flexibility.
The poet Robert Frost said that writing poetry without rhyming was like playing tennis without a net. Getting ACA coverage without understanding the income levels at which benefits change is like playing tennis without lines. And when you don’t see the lines, it’s easy to hit the ball out.
Rule 1: Know Key Income Thresholds
In the ACA application, your estimate of your gross (before-tax) household income for the coming year will place you in one of several income brackets, defined as a percentage of the federal poverty level (FPL). (The ACA application slightly modifies the “Adjusted Gross Income” you see on your annual tax return.) How much you’ll pay—and sometimes, the type of coverage available to you—depends on which bracket you fall into. Let’s look at some key breakpoints where benefits change.
100% FPL—The Minimum Income Required for Private Plan Coverage in 11 States
-
$14,580 per year for a single person
-
$19,720 for a two-person household
-
$24,860 for a family of three
-
$30,000 for a family of four
It’s an unfortunate reality that in 11 states—Alabama, Florida, Georgia, Kansas, Mississippi, North Carolina, South Carolina, South Dakota, Tennessee, Texas, and Wyoming—most adults who estimate household income below the 100% FPL threshold receive no government assistance for health coverage.
As originally designed, the ACA made Medicaid available to most adults with incomes below 138% FPL. However, in 2012, the Supreme Court ruled that the federal government could not force states to expand Medicaid eligibility. The states listed above have not yet adopted the expansion, leaving many adults with incomes below 100% FPL without financial assistance. (In the November 2022 election, South Dakota voted to adopt the expansion, and Medicaid enrollment under the ACA eligibility rules will begin there in July 2024.)
Fortunately, the ACA pegged the minimum income for subsidy eligibility at 100% FPL instead of 138% FPL. So, in non-expansion states, having an income of at least 100% FPL moves you out of the “no assistance” category.
If your income is near this level in a non-expansion state, it’s crucial to estimate next year’s income above the eligibility threshold. This is especially important because marketplace coverage with reduced out-of-pocket costs is available for free to applicants with incomes in the 100-150% FPL range.
138% FPL—The Upper Limit for Medicaid in Most States
-
$1,677 per month for a single person
-
$2,268 for a two-person household
-
$2,859 for a family of three
-
$3,450 for a family of four
In the 39 states that have expanded Medicaid, most adults and lawfully present noncitizens with incomes below 138% FPL qualify for Medicaid, making them ineligible for marketplace coverage.
Medicaid eligibility is determined on a monthly basis, meaning that if your income drops suddenly—due to job loss, for example—you can qualify for Medicaid immediately.
For most people near this income level, Medicaid is an excellent option, as it typically has no premium (a few states charge a small one at the top of the income bracket), and out-of-pocket costs range from none to minimal.
However, in over 20 expansion states, Medicaid enrollees over age 55 may be subject to Medicaid Estate Recovery upon death. If the enrollee has significant assets, the state may attempt to recover costs from their estate.
Rule 2: How Income Estimates Affect Eligibility
During the ACA’s annual Open Enrollment period (Nov. 1—Jan. 15 in HealthCare.gov states), benefits for the coming year are based on an estimate of future gross (pre-tax) income, adjusted in some cases by deductions. Those who qualify for a Special Enrollment Period outside of Open Enrollment also estimate their income for the current year.
For those with stable employment and fixed salaries, estimating income is straightforward. For others, including many low-income individuals, estimating income involves uncertainty and flexibility. This includes hourly workers, tipped employees, freelancers, and those with multiple jobs.
If you underestimate your income and receive too much in advance premium tax credits (APTC), you will owe the difference at tax time. However, CSR subsidies will not be clawed back. The exchange may reduce your APTC and CSR going forward if external data sources indicate your income is higher than estimated.
If you are close to the 100% FPL threshold in a non-expansion state or near the 138% FPL threshold in an expansion state and do not want Medicaid, there is no penalty for a good-faith estimate that leans slightly higher. For example, if you estimate your 2024 income at $15,000 (just above 100% FPL) but your tax return later shows it to be $13,500, your subsidies will not be clawed back unless the estimate was made with “willful or negligent disregard for the facts.”
Your income estimate must be made in good faith. However, if you have reasonable uncertainty about your earnings, you are entirely within your rights to use your knowledge of ACA income thresholds to your advantage.