Options for Using Financial Help
Covered California has two kinds of financial help to lower your monthly premium: federal tax credits and the state subsidy.
Federal Tax Credit: Your Choice
- You can use it each month during the year. Most people who qualify for federal tax credits choose to use them each month during the year. 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. It’s that simple.
For example, if you are eligible for $100 per month in premium assistance, you can choose to have this amount sent 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.
Or, you can decide to use less than the full amount you are eligible for each month. 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.
For example, if you are eligible for $100 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.
- Receive tax credits at the end of the year. 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.
If you qualify for a state subsidy, the state of California will pay the subsidy amount to your insurance company each month. There is no way to adjust the amount that is sent each month. If you are receiving both federal tax credits and the state subsidy and are concerned about owing money back at tax time, you can decide to use less in federal help to bring down the total amount.
If you only qualify for state subsidy but don’t want to use it each month, you can call Covered California and ask to switch to an “unsubsidized application.” You will have to pay the full premium each month, but at the end of the year, you will receive a summary of the amount of subsidy you can claim on your state tax return.