ACA Insurance Subsidies: Understanding How Your Income Affects Your Health Insurance Costs

If you’re a sole proprietor or self-employed, understanding how your income affects your health insurance costs under the Affordable Care Act (ACA) is critical. The ACA includes provisions for health insurance subsidies to help make health insurance more affordable for low- and middle-income Americans. However, the amount of subsidy you receive is based on your adjusted gross income (AGI).

Adjusted Gross Income (AGI)

AGI is a measure of your total income after certain deductions have been taken, such as deductions for student loan interest, traditional IRA contributions, and self-employment taxes. The ACA uses AGI to determine your eligibility for premium subsidies.

Health Insurance Subsidies

The ACA provides premium subsidies to help make health insurance more affordable for those who qualify. The amount of subsidy you receive is based on a sliding scale, with lower-income individuals receiving a higher subsidy.

To be eligible for premium subsidies, your AGI must be:

– Between 100% and 400% of the federal poverty level (FPL) for your household size
– 100% of the FPL is approximately $12,880 for a single person in 2023
– 400% of the FPL is approximately $51,520 for a single person in 2023

Impact of Income on Subsidies

If your AGI is above 400% of the FPL, you are not eligible for premium subsidies. However, even if your AGI is below 400% of the FPL, the amount of subsidy you receive will decrease as your AGI increases.

This means that if you are a sole proprietor or self-employed, your income can have a significant impact on the cost of your health insurance. If your AGI increases, the amount of subsidy you receive will decrease, which could lead to higher health insurance premiums.

Planning for Income Changes

If you are anticipating a change in your income, it is important to consider how it could affect your health insurance costs. If you expect your AGI to increase, you may want to consider setting aside money to cover the potential increase in your health insurance premiums.

Seeking Professional Help

If you are unsure how your income will affect your health insurance costs, it is important to seek professional help. A licensed insurance agent can help you understand your options and make sure you are getting the best possible coverage for your needs.