Updated: 2020-08-06 by
There are three primary ways to reduce the cost of health plans under the Affordable Care Act in Texas.
- You may be able to lower the cost of monthly premiums when you sign up for a private health insurance plan. Your savings will come in the form of a federal tax credit.
- You may be able to reduce your out-of-pocket costs -- including copayments, deductibles, and coinsurance -- with cost-sharing subsidies paid for by insurers.
- You may qualify for free or low-cost coverage through Medicaid in Texas, or your children may be able to obtain coverage through the Children’s Health Insurance Program (CHIP).
Each of these forms of assistance depends on your income and family size.
Many people who apply for coverage at the Texas exchange will be eligible for some form of financial assistance. Read on to learn more about each option.
Who Qualifies for Obamacare Tax Credits?
Obamacare tax credits can immediately bring down your monthly health insurance premiums; you don't have to wait until tax time to claim them. Using these tax credits, many lower-income Americans are able to sign up for free or very low-cost health insurance plans, while others achieve significant savings on monthly premiums.
Tax credits are available for those who are:
- under age 65
- not eligible for job-based health coverage or Medicaid, and
- earning between 100% and 400% of the federal poverty level.
In 2020, here's what 100% to 400% of the federal poverty level looks like for different household sizes:
- $12,760 to $51,040 for individuals
- $17,240 to $68,960 for a family of 2
- $21,720 to $86,880 for a family of 3
- $26,200 to $104,800 for a family of 4
- $30,680 to $122,720 for a family of 5
- $35,160 to $140,640 for a family of 6
- $39,640 to $158,560 for a family of 7
- $44,120 to $176,480 for a family of 8
The amount of your tax credit will be sent directly to your insurer to immediately lower your insurance premiums.
One caveat: If your income significantly increases during the year, you must report the change to Healthcare.gov. If you don't, you may find yourself with a big tax bill at the end of the year because you will have to pay back the tax credits for which you were no longer qualified.
Your final eligibility for tax credits will be determined when you apply for a health plan at Healthcare.gov.
Cost-Sharing Subsidies Are Still Available
In 2017, the Trump administration decided to end a second type of Affordable Care Act subsidy, called "cost-sharing reductions" or CSRs. These subsidies were paid by the federal government directly to insurers, allowing them to reduce deductibles and co-payments for people with incomes between 100% and 250% of the federal poverty level.
The good news is that insurers figured out a way to continue to offer CSRs to consumers. That means that, in addition to saving money with tax credits, cost-sharing subsidies may help you pay for out-of-pocket costs. They also lower the total amount you'd have to pay for health care in a given year. (The annual out-of-pocket spending limits for plans offered by Healthcare.gov will vary depending on the type of plan – platinum, gold, silver, or bronze. See How Much Does Obamacare Cost in Texas?)
Cost-sharing subsidies are available for people earning between 100% and 250% of the federal poverty level. The limits below will help you determine whether you qualify. (These amounts are based on the federal poverty level for 2020.)
- $12,760 to $31,900 for individuals
- $17,240 to $43,100 for a family of 2
- $21,720 to $54,300 for a family of 3
- $26,200 to $65,500 for a family of 4
- $30,680 to $76,700 for a family of 5
- $35,160 to $87,900 for a family of 6
- $39,640 to $99,100 for a family of 7
- $44,120 to $110,300 for a family of 8
Note that these out-of-pocket savings are available only for silver plans. Generally, if you qualify for the subsidy, you’ll get the out-of-pocket benefits of a gold or platinum plan for the price of a silver plan.
Getting Free or Low-Cost Coverage Through Medicaid or CHIP
You may qualify for free or low-cost coverage through Medicaid in Texas, or your children may be able to obtain coverage through the Children’s Health Insurance Program (CHIP).
Medicaid. If you are eligible for Medicaid, you will get free or low-cost health care. You will not need to buy a separate health plan through Healthcare.gov.
When you apply for health coverage at Healthcare.gov, the state will check your application against the Medicaid eligibility rules and tell you whether you qualify for Medicaid or the other savings options described above.
Children’s Health Insurance Program (CHIP). Even if you don’t qualify for Medicaid, your children may be eligible for the Children's Health Insurance Program (CHIP). Kids covered by CHIP don’t need to be included in another health plan.
When you apply for health coverage at Healthcare.gov, the state will check to see whether your children might qualify for CHIP. If so, it will alert the Texas CHIP agency.
What Counts as Income for Obamacare Subsidies?
Subsidies are calculated using what's called "modified adjusted gross income." To get a rough idea, start with your Adjusted Gross Income, which you can find on your 1040 federal tax form. Add to that any tax-exempt income like Social Security, tax-free interest, or income exluded by the foreign income or housing exclusion rules.
For more information, see What to Include as Income at HealthCare.gov.
You can learn the final costs for specific plans, including whether you qualify for subsidies or low-cost care programs, when you apply for insurance online at Healthcare.gov or when you talk to a navigator or broker about the plans available to you.
For more information, see How to Sign Up for Obamacare in Texas.
You may also be interested in:
Learn the five factors that determine what residents of Texas will pay for health insurance under the Affordable Care Act.
Where to go in Texas to get health plans under the Affordable Care Act (Obamacare) and how to get help with the application process.
A licensed insurance agent or broker can help you compare plans, figure out whether you qualify for subsidies, and apply for coverage in Texas.