Health Care Costs and Getting Help Paying for Coverage

At Covered California, you can find affordable health insurance that meets your needs and budget. You can shop online, in person or by phone and compare different health insurance plans, as well as learn whether you qualify for financial help, such as federal tax credits to reduce your monthly premium costs.

Health insurance premiums through Covered California are based on an enrollee’s age, where they live (their ZIP code), their household size, their projected household income, and the health plan and benefit level they select.

Covered California uses the Federal Poverty Level (FPL) to determine eligibility for financial help and programs such as Medi-Cal. These levels, set each year by the federal government, take into account the individual’s annual household income and household size. View the Federal Poverty Level chart to estimate your percentage of FPL. Then use the Shop and Compare tool to see the cost of plans in your area and find out whether you qualify for financial help or free or low-cost Medi-Cal.

To read more about getting financial help paying for your insurance premium and other costs associated with using health care, click on the topic headings below.

Financial Help: Premium Assistance and Cost-Sharing Reductions

Covered California offers two main types of help to pay for coverage: premium assistance and cost-sharing subsidies.

  • Premium assistance is a tax credit (formally called the Advanced Premium Tax Credit, or APTC) to reduce a person’s monthly premium cost.
  • Cost-sharing reductions are subsidies to reduce an individual’s out-of-pocket costs (their copays, coinsurance, deductible and out-of-pocket maximum).

Premium Assistance

Premium assistance to help reduce the cost of health care is available to individuals and families who enroll in a Covered California health insurance plan and meet certain income requirements.

Even though premium assistance is a tax credit, it is available to eligible consumers whether or not they have filed taxes for the previous year. However, to receive it, individuals must confirm that they will file taxes for the year that they will be enrolled in a Covered California plan and will be receiving the premium assistance. It is only available for health plans purchased through Covered California or other federally operated or state-operated marketplaces. To be eligible for premium assistance, an individual must:

  • Be a U.S. citizen, a U.S. national or a lawfully present immigrant buying coverage through Covered California.
  • Have an annual household income between 138 percent and 400 percent* of the federal poverty level (FPL). Estimate your FPL here.  
  • Not be eligible for other public health coverage** — including full-scope Medi-Cal, premium-free Medicare Part A or military coverage.
  • Not have access to affordable, minimum-value health insurance through an employer.*** 

Notes:

*Premium assistance is also available to lawfully present immigrants with incomes below 138 percent of the FPL who are not eligible for Medi-Cal because of their immigration status.

**Individuals eligible for or enrolled in certain employer or government insurance options still qualify for premium assistance through Covered California. These health programs include:

***Employer coverage is considered affordable if the premium for the employee only (not including dependents) is less than 9.5 percent of the employee’s household income. The employer’s plan is considered minimum-value if the plan pays at least 60 percent of the average cost of covered benefits

Cost-Sharing Reductions

Cost-sharing reductions are subsidies that lower a consumer’s out-of-pocket costs, including their copayments, coinsurance, deductibles and out-of-pocket maximum. These are the costs an individual has to pay when they get health care. Individuals who are eligible for premium assistance and have an annual household income of up to 250 percent of the FPL can qualify for cost-sharing reductions.

You will find out if you qualify for cost-sharing reductions after completing the Covered California application. If you qualify, you will only receive them if you select a Silver-level plan. If you qualify, all of the plans displayed in the Silver level will be Enhanced Silver plans that automatically include cost-sharing reductions. This means that these plans will have lower co-payments, coinsurance, deductibles and out-of-pocket maximums than regular Silver-level plans.

If you select a Silver plan, your cost-sharing reductions will be automatically applied when you use health care benefits. For instance, when you go to see your doctor, the price of the visit will be automatically reduced. You are not required to choose a Silver-level plan, but if you qualify and choose Silver, your costs will be reduced.

Calculating Income to Receive Premium Assistance and Cost-Sharing Reductions

When you apply for a Covered California health insurance plan with premium assistance, you will be asked to enter your current sources of household income. Only certain kinds of income are considered, such as:

  • Annual income, including wages, salaries and tips.
  • Business or self-employment income, including rental income.
  • Interest received or accrued.
  • Lottery and gambling income.
  • Capital gains.
  • Pensions.
  • Social Security retirement benefits.
  • Foreign-earned income.
  • Alimony income.
  • Bartering income (i.e., exchange of goods or services without exchanging money).

To determine eligibility for premium assistance and cost-sharing reductions, Covered California uses the household modified adjusted gross income (MAGI). For most taxpayers, MAGI is the same as adjusted gross income (AGI), which can be found on line 4 of a Form 1040EZ, line 21 of a Form 1040A or line 37 of a Form 1040. Taxpayers who receive non-taxable Social Security benefits, earn income living abroad or earn non-exempt interest should add that income to their AGI to calculate their MAGI. It's important to remember that if an individual claims their spouse or children as dependents, their incomes count toward the household income. Also, in order to receive premium assistance through Covered California, spouses are required to file their income tax returns jointly.

Covered California takes the income information entered at the time of the application and calculates the amount that the household will receive for the rest of the year. For example, if your application states that you earn $3,000 each month, Covered California calculates that you will earn $36,000 during the year, and your premium assistance will be based on this calculation. But what if you end up earning more during the year, or less? Your premium assistance amount would be different. For this reason, it is important to inform Covered California if your income changes significantly during the year, so that we can adjust your premium assistance.

If your income fluctuates a lot each month, estimate what you will earn by the end of the year and divide that amount by 12 to get a monthly average to enter on your application. If you notice that you are earning more or less than your annual estimate, be sure to notify Covered California so that we can adjust your premium assistance.

These adjustments are important, because your tax return will reflect what you actually earned (instead of just an estimate), as well as what you received in premium assistance.

Covered California will send you a statement called a Form 1095-A that shows how much premium assistance you received during the year you were covered. You will need that form when you file your taxes. Read more about that form here. If Covered California does not have accurate income information when calculating your premium assistance, you may receive too much and have to pay some or all of it back at tax time. Or you may receive too little during the year, and you will receive a tax credit. This is why it’s important to keep in mind the income you entered at the time of your application and to notify Covered California if your income changes significantly during the year, so that we can adjust your premium assistance. Read more in the sections “Reporting Income Changes to Covered California” and “Repaying Premium Assistance if You Receive Too Much.”

Using Premium Assistance

If you qualify for premium assistance, you will have options about how and when to use it:

  • You can use it each month during the year: You may choose to have the full amount of your premium assistance sent directly to the health plan you select, to lower your monthly premium payments. The government will pay the tax credit directly to your insurance company each month, and the insurer will bill you for the rest of your premium cost.
  • For example, if you are eligible for $100 per month in premium assistance, the government will send this amount each month to your health plan. At the end of the year, your 1095-a tax form will show that you received $1,200 in premium assistance ($100 each month).

    Or you can decide to use less than the full amount you are eligible for each month. For example, if you are eligible for $100 dollars a month, you can tell Covered California you’d like to use just $50 per month. At the end of the year, your tax form will show that you received $600 in premium assistance ($50 each month). You will also see a tax credit for the $600 that you were eligible for but didn’t use during the year. Deciding to use less premium assistance during the year is one way to reduce your risk of owing back any excess premium assistance. You can take less each month during the year and receive the balance as a tax credit at the end of the year.

  • You can receive it when filing taxes: You can choose to pay the full price of your premium payment each month and then receive your entire premium assistance amount in the form of a tax refund when you complete your tax return for the year. 
  • For example, if you are eligible for $100 per month in premium assistance, you can tell Covered California you don’t want to use any of it during the year. You will pay the full amount of your health insurance premium each month, but at the end of the year, you will have a $1,200 tax credit.

Tax Credits if you are Offered Health Insurance by Your Employer

Ninety percent of Covered California consumers receive financial assistance paying for their health insurance through tax credits. With tax season here, we want to make sure that as you renew or purchase new coverage, you are informed about how your participation in Covered California may impact your taxes. In particular, we want to ensure consumers who are offered health insurance by their employers do not receive tax credits that they are not eligible for and may have to repay come tax time.

The Basics of Advanced Premium Tax Credits
Advanced premium tax credits (APTCs) are tax credits you can use to help you pay for your health insurance premium. These tax credits are provided in the form of a reduction in premiums paid by an eligible individual enrolled in a Covered California plan. Eligibility for APTC is based on your income, family size, and other factors. If you received financial assistance during 2015 to help pay your insurance premiums, then you received APTCs for the 2015 tax year. Although many consumers choose to take monthly APTCs to reduce their health insurance premiums, consumers also have the option of taking all or part of the credit at tax time. Consumers who are not eligible for tax credits, or who received more APTCs than they were eligible for, may have to pay back APTCs when they file their tax returns.

Employees who are offered health coverage by their employers MAY NOT be eligible for APTCs and may have to pay back APTCs they received.
Employees who are offered health coverage by their employer that is affordable and that meets minimum value standards are NOT eligible for tax credits to help pay premiums for an individual Covered California health plan. Employees who are offered affordable and minimum value health coverage by their employer, may decline the employer-based coverage and purchase insurance through Covered California, but at the full cost without tax credits. That means if your employer offered you affordable and minimum value coverage, but you turned it down, signed up for an individual plan through Covered California, and received APTCs to help you pay for that plan, you may have to pay back some or all of the APTCs you received in 2015 when you file your taxes this year.

Affordable and Minimum Value Coverage
Most health plans offered by employers is affordable and offers minimum value. A health plan meets minimum value requirements if it is designed to pay at least 60% of the total cost of medical services for a standard population and includes substantial coverage of inpatient hospital and physician services. Employees offered job-based coverage that provides minimum value and is considered affordable aren’t eligible for a premium tax credit. Employer insurance is considered affordable under the ACA if the employee’s share of the premium for the lowest priced plan available that would cover the employee only — not the employee’s family — is 9.56% or less of their household income. Employees offered job-based coverage that’s affordable and provides minimum value are not eligible for a premium tax credit if they purchase a plan through Covered California.

Contact IRS for More Information
For information from the IRS regarding the tax provisions of the Affordable Care Act visit www.irs.gov/aca.

Reporting Income Changes to Covered California

As mentioned above, premium assistance is based on your:

  • Age at enrollment.
  • Plan and benefit level.
  • Household size.
  • Projected annual household income.
  • ZIP code.

Household size, income and ZIP code are the items on this list that are most likely to change during the year. If you move, it is important to notify Covered California so we can update your mailing address. Additionally, if your ZIP code is in a new plan region, you will need to pick a new plan, and your premium amount and premium assistance will likely change.

It’s also really important to tell Covered California about changes in your household size and income, because these are part of how your premium assistance is calculated. If your household size and projected income change a lot during the year, the amount of premium assistance you are eligible for will change. So, during the year, it’s important to consider the income you entered at the time of your application and to notify Covered California if your income changes significantly, so that we can adjust your premium assistance.

You can report changes in your income through your online account, with the help of a certified enroller or by calling Covered California at (800) 300-1506.

Repaying Premium Assistance if You Receive Too Much

If you stated that your income would be a certain amount, and then you received premium assistance based on that amount, but your income turned out to be lower than you stated, you may have been entitled to more premium assistance than you received, and you will receive the balance as a tax credit when you file your tax return. If your income turned out to be higher than you projected, then you likely received too much premium assistance. If so, you will have to pay back the difference at tax time, up to a certain limit.

The table below shows the repayment limits.

Household income percentage of federal poverty level (FPL) Limit on repayment amount — single person Limit on repayment amount — family
Less than 200 percent of FPL $300 $600

At least 200 percent of FPL but less than 300 percent of FPL

$750 $1,500
At least 300 percent of FPL but less than 400 percent of FPL

$1,250 $2,500
Greater than 400 percent of FPL (i.e., the person was not eligible for premium assistance) All premium assistance received All premium assistance received

Medi-Cal and Income Changes

If you have an income that qualifies for a Covered California health plan with premium assistance, and then later your income is lower and you become eligible for Medi-Cal, you will not have to repay the premium assistance you received, as long as you report the income change within 30 days. However, it is your responsibility to report this change to Covered California so that you can get help to switch programs. Within Covered California’s online enrollment system, there is a button that allows consumers to “Report a Change” and update their income. You can also call Covered California at (800) 300-1506, and a Service Center representative can help you report your income change.

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