Let's talk about something that confuses almost everyone: health insurance subsidies. If you've ever looked at health insurance prices on HealthCare.gov and wondered how anyone affords it, you're asking the right question. The truth is, millions of Americans get help paying for coverage—and you might be one of them, even if you think you earn too much to qualify.
Here's what you need to know: health insurance subsidies come in two forms. Premium tax credits lower your monthly bill, and cost-sharing reductions cut what you pay when you actually use your insurance. Both can save you serious money, but the rules for who qualifies and how to get them are different. We'll walk through everything step by step.
What Are Premium Tax Credits?
Premium tax credits are the big one—they're what most people think of when they hear about Obamacare subsidies. These credits reduce how much you pay each month for health insurance. You can have them applied directly to your premium, so you pay less upfront, or you can claim them when you file your taxes. Most people choose the upfront option because who wants to wait until tax season?
Here's how the math works: the government looks at the cost of the second-cheapest Silver plan in your area—called the benchmark plan—and compares it to your household income. Nobody has to pay more than 8.5% of their income for that benchmark plan. If it costs more than that, the premium tax credit covers the difference. For people with lower incomes, the percentage they're expected to pay is even smaller. If you're earning between 100% and 150% of the federal poverty level, you could pay as little as zero dollars per month.
Right now, through the end of 2025, there's no upper income limit for premium tax credits. That's a big deal. Before the American Rescue Plan enhanced these subsidies in 2021, if you earned more than 400% of the federal poverty level—about $60,240 for a single person—you got nothing. Now, even higher earners can qualify if their benchmark premium costs more than 8.5% of their income. This is especially helpful if you're older or live in an area with expensive health insurance.
Understanding Cost-Sharing Reductions
Premium tax credits help with your monthly bill, but cost-sharing reductions—CSRs—help with what you pay when you actually go to the doctor. These subsidies lower your deductible, copays, and coinsurance. The catch? You only get them if you pick a Silver plan from the marketplace, and your income has to be under 250% of the federal poverty level. For 2025, that's about $36,450 for a single person or $75,000 for a family of four.
How much you save depends on your income. If you're earning between 100% and 150% of the poverty level, your Silver plan will cover 94% of your health care costs on average—that means very low deductibles and copays. Between 150% and 200% of poverty, your plan covers 87%. Between 200% and 250%, it's 73%. Compare that to a standard Silver plan, which covers 70%, and you can see the difference adds up fast.
Here's something important: you don't have to choose between premium tax credits and cost-sharing reductions. If you qualify for CSRs, you also qualify for premium credits. But here's where it gets tricky—even though Bronze plans are usually cheaper each month, if you qualify for CSRs, a Silver plan will almost always give you more value because of the lower out-of-pocket costs. Run the numbers before you decide.
Income Limits and How to Qualify
To qualify for any marketplace subsidy, your income needs to be at least 100% of the federal poverty level. For 2025 coverage, that's based on the 2024 poverty guidelines: $15,060 for a single person or $31,200 for a family of four. If you earn less than that, you're supposed to qualify for Medicaid instead—though in states that didn't expand Medicaid, you might fall into a coverage gap where you earn too much for Medicaid but too little for subsidies. It's frustrating, but it's the reality in about a dozen states.
The income that matters is your modified adjusted gross income, or MAGI. That's basically your adjusted gross income from your tax return, with a few things added back in. For most people, it's close to their regular income. When you apply for coverage, you'll estimate your income for the year. If your actual income ends up being different, you'll settle up when you file taxes—either getting money back or owing some of your subsidy.
You also can't qualify for subsidies if you're eligible for other coverage. That includes Medicare, Medicaid, CHIP, or affordable employer coverage. Employer coverage is considered affordable if it costs you less than 9.02% of your household income for self-only coverage in 2025. If your employer offers insurance but it's too expensive, you can still get marketplace subsidies. Just be aware that if you turn down employer coverage to get a subsidized marketplace plan, your employer might not be happy about it—and the rules get complicated.
What Happens After 2025?
Here's the elephant in the room: these enhanced subsidies are temporary. The American Rescue Plan expanded them in 2021, and the Inflation Reduction Act extended them through 2025, but they're set to expire at the end of this year unless Congress acts. If that happens, the 400% income cap comes back, and the percentage of income people have to pay goes up across the board.
What does that mean in real terms? Someone earning between 300% and 400% of poverty who pays 6% to 8.5% of income now would jump to 9.5%. People earning just above 400% of poverty who pay 8.5% now could lose subsidies entirely and face the full premium cost. For a 60-year-old, that could mean going from a few hundred dollars a month to over a thousand. It's a big deal, and it's why health policy advocates are pushing hard for Congress to make the enhanced subsidies permanent.
How to Get Started
The good news is that applying for subsidies isn't complicated. You don't fill out separate forms or jump through extra hoops. When you shop for health insurance on HealthCare.gov or your state's marketplace, you'll enter information about your household size and estimated income. The system automatically calculates whether you qualify for subsidies and shows you plans with the subsidies already applied.
Before you start, gather your information: Social Security numbers for everyone who needs coverage, recent pay stubs or tax returns to estimate income, and details about any employer coverage offers. If you're self-employed or your income varies, do your best to estimate—you can update it during the year if things change. Many people find it helpful to use an online subsidy calculator first to get a rough idea of what to expect.
Open enrollment for 2025 coverage has passed for most people, but you can still enroll if you have a qualifying life event like losing other coverage, getting married, having a baby, or moving. If you already have marketplace coverage, you can update your income anytime during the year if it changes—doing this helps you avoid surprises at tax time. And if you're looking ahead to 2026, open enrollment typically runs from November 1 through January 15, though some states have different deadlines.
