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9.5% Rule and Your Health Subsidy Amount
We've discussed the importance of the 400% Rule in terms of qualifying for a health care subsidy but there's another important number to look at. The 400% rule determines if you are eligible for a subsidy while the 9.5% Rule dictates how much you can expect to receive if you do qualify. The answer is probably quite a bit if you qualify so let's look at how the 9.5% Rule works.
Health Subsidies will be based on two factors:
Part 1 - your health insurance premium for subsidy eligible plans
The first factor to look at is the actual cost of a subsidy eligible health insurance plan. A few factors will drive this cost. Subsidy eligible plans are only available in the Health Exchange (which you can quote through our Health Quote link starting October 1st, 2013 in most States). There may also be health plans outside the Exchange but these plans will not be eligible for the subsidy. You will be able to quote these as well through Quote engine.
The cost of your health plan is driven by the same factors which have always played a part but with the costs are expected to be much higher than what most individuals and families pay now. The core drivers are age, area, and of course benefits. On average, costs go up as you get older and choose richer benefits. Comparing the new Health Exchange plans with the typical plan that most people choose now on the Individual and Family market is not exactly apples and apples which is why the cost is supposed to be so much higher. The benefits allowed are mandated by the Health Reform bill and they are quite a bit richer than what most people choose today (due to cost). So this is the first part and we'll go a sample premium of $1200 for a family of four based on a given age/area. Let's look at the next part, the 9.5% Rule.
Part 2 - the 9.5% cap on health insurance premium sharing
The Health Reform ACA bill stipulates that a person (or family) should not pay more than 9.5% of their income towards health insurance premiums. The percentage may actually be lower as income goes down from 400% to 150%. Once we've established that the family qualifies (let's assume income of $84K/annually or $7K/monthly), then the ACA bill states that they shouldn't pay more than just under $700/monthly for premium. In the case of our sample $1200/monthly premium above (assuming subsidy eligible plan), the health subsidy that family can expect to receive is $500/monthly or $6K annually. You can see that if your monthly insurance premium goes up, your subsidy goes up. If your annual income goes up (but stays under 400% of the Federal Poverty Level), your subsidy goes down.
Of course there will be many twists and turns as the health subsidy starts up but the above gives you a basic understanding on how they determine how much subsidy you will receive. You can also use our Health Subsidy Calculator for more detail information specific to your situation and the Health Quote Page (starting Oct 1st, 2013) will show actual amounts based on real health plans.
Los Angeles, Family of 4
making $60K. Subsidy=$8,388*
Iowa, Single Adult making $30K
*Based on age, expected costs, and other assumptions according to Kaiser Calculator. Actual subsidies will vary and official subsidy amounts will be available Oct 1st, 2013.
Health Subsidy Calculator
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