A health insurance subsidy provides tax credits to qualifying individuals to make monthly health insurance premiums more affordable. If your annual income is too high to qualify for a subsidy, you can shop for more affordable alternatives, such as short-term plans, to fulfill your health insurance needs until you can purchase more comprehensive coverage.

Affordable health insurance can be a challenge for some people, but it is not necessarily something that you need to face on your own. If you are curious about what to do if you can’t afford health insurance, take a look at a few important points below.

What is a health insurance subsidy?

If you do not get health insurance through your employer, or if you are not eligible for Medicare or Medicaid, other financial aid sources are available— such as a health insurance subsidy. Health insurance without a subsidy can be expensive, but you can qualify for a subsidy that can help you cover the cost of health insurance. Essentially, a subsidy covers a portion of your health insurance expenses, making the total cost much more affordable. Before you buy health insurance on the marketplace, it is critical to check and see if you qualify for a health insurance subsidy.

Who qualifies for subsidies?

Those who qualify for government subsidies – in the form of premium tax credits or extra savings – typically have a household income between 100% and 400% of the federal poverty line.

Your income in comparison to the federal poverty line or (FPL) is what determines if you are eligible for government subsidies to help offset the cost of health insurance. There are two types of subsidies: premium tax credits and cost sharing subsidies.

Premium tax credits are the most common type of subsidy and help you save on your monthly premium. Cost-sharing subsidies help offset the costs of out-of-pocket expenses such as deductibles and copays.

However, there is a steep cut off for subsidies in most states. This eligibility cut off with no phase out is referred to as the “subsidy cliff”. 

Middle-income individuals and families who make just above the subsidy cut off of 400% of the FPL do not qualify for subsidies. This means that earning as little as $204 per year could put an individual or family over the 400% line and make them unqualified for subsidies.

With the Marketplace average benchmark premium in 2024 is at $477 in the U.S., while many find it difficult to afford health insurance without a subsidy.

What are the two types of subsidies?

Obamacare (ACA) subsidies can be beneficial, and there are two other types of subsidies available as well. The first type of subsidy is called a tax credit. This type of subsidy is based on your household size and overall income. It also considers the average cost of health coverage in your area. If you qualify, you can receive a credit toward your taxes that can help you save money on federal income tax. That way, you can take the money you save and put it toward your health insurance. 

The other type of subsidy is called a cost-sharing reduction subsidy. This is an extra saving that can help you reduce the deductible on your health insurance plan, lowering your out-of-pocket expenses. To qualify for this subsidy, you must enroll in a plan in the silver category. Otherwise, you will not receive the extra benefit that can help you reduce your out-of-pocket costs.

The American Rescue Plan and Subsidies

The American Rescue Plan Act (ARPA), signed into law by President Biden in 2021 and still in effect in 2024, expanded eligibility for subsidies to make health insurance affordable for even more Americans. People that are already enrolled in health plans through the marketplace may find they qualify for more subsidies to bring down the cost of their monthly premiums. Those that could not afford to enroll in a plan due to the “subsidy cliff” may now have the opportunity to sign up for coverage.

The new law allows people with incomes below 150% of the poverty level to enroll in silver plans with a zero premium. Deductibles for these plans will also be dramatically reduced allowing individuals and families with lower incomes the ability to have affordable health benefits. The ARPA also reduces the amount people must pay if they have income between 100% and 400% of the federal poverty level.

The ARPA also provides subsidies for some people with income between 400% and 600% of the poverty line, those considered on the “subsidy cliff” in the past. This may allow individuals and families within these income levels to find more affordable, ACA-compliant plans, which could positively impact more than 2 million people. Check out our guide to the American Rescue Plan Act to find out more about how it may affect your ability to qualify for subsidies.

What if I don’t qualify for subsidies?

While the ARPA has expanded subsidies to make health insurance more affordable for millions of Americans, there are still people that may not be able to afford a marketplace plan because they are not eligible for financial assistance. These individuals and families may find other affordable coverage options in their area that will provide necessary health insurance at a lower rate.

To have the minimum essential coverage guaranteed by the ACA, you must buy an ACA-compliant plan. One low-cost option is to enroll in the lowest-priced bronze individual or family plan available in your area. However, this is not your only choice.

What to do if you can’t afford health insurance: Alternative health insurance options

If you are and individual under the age of 30 – or qualify for a hardship exemption – and are in generally good health, you may be eligible for a catastrophic plan. Catastrophic plans are low-premium plans that tend to have a high-deductible but offer ACA-compliant coverage.

In most states, you can also buy short-term health insurance plans. Premiums for short-term plans tend to be substantially lower than those of comprehensive health plans available on the marketplace.

Short-Term Insurance Compared to Traditional Major Medical Insurance

	Major Medical Coverage	Short-Term Coverage
When can coverage start?	Usually within 2-6 weeks.	Usually within 1-14 days.
Can it protect me from an Obamacare tax penalty?	Tax penalty repealed for 2019.	Tax penalty repealed for 2019.
Can I buy it year-round at any time?	No	Yes
Can my application be declined because of pre-existing conditions?	No	Might not cover you due to preexisting health conditions like diabetes, cancer, stroke, arthritis, heart disease, mental health & substance use disorders.
Will it cover maternity care?	Yes	Not usually
Will it cover some Rx drugs?	Yes	Might not cover prescription drugs.
Will it cover office visits to the doctor?	Yes, typically	Yes, typically
Will it cover things like hospitalization due to injury or serious illness?	Yes, covers all essential health benefits.	Might not cover things like prescription drugs, preventative screenings, maternity care, emergency services, hospitalization, pediatric care, physical therapy and more.
Can it be purchased with a government subsidy?	Varies by plan. Some plans are renewable up to three years.	Varies by plan. Some plans are renewable up to three months.
Does it have a dollar limit on coverage?	Protects you with limits on what you pay each year out-of-pocket for essential health benefits.	Might have no limit on what you pay out-of-pocket for care.
Can I renew it every year, as long as the plan is available?	Yes	No, plan can only be renewed for one additional month.
How much does it cost?	Varies based on location, age, and insurance company.	Plans can start at $100/month (varies based on location, age, and insurance company)

Although they are called short-term plans, you typically can keep your coverage up to 3 years in most states by simply renewing your plan annually. While these plans do not offer the comprehensive coverage of a major-medical health insurance plan, they do provide an affordable alternative to ACA-compliant plans that can keep you covered in worst-case scenarios.

If you enroll in a short-term plan, you will pay a monthly premium and a deductible. These plans typically offer the following benefits:

• Some prescription medications
• Visits to your doctor
• Hospitalization due to illness or injury

Keep in mind that short-term plans can deny coverage for these services based on a pre-existing medical condition.

Find an insurance plan that’s right for you with eHealth

Whether you are in the market for a comprehensive health plan due to changes in your subsidy eligibility, or a more affordable alternative that you can pay for out of your own pocket, eHealth can help. We offer a wide range of insurance plans in every state so you can find the plan that works best for your family and your budget. Enroll in a plan through our website or live chat, or on a phone call with one of our licensed agents. We offer 24/7 support, and our services are always free of charge for you. Check out all of your individual and family health insurance options to start comparing plans in your area today.

Short-Term Notice 2024