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Types of health insurance subsidies

Types of health insurance subsidies


There are two types of health insurance subsidies available: the advance premium tax credit (APTC) and cost-sharing reductions (CSRs).


Advance premium tax credit (APTC)


The advance premium tax credit (APTC) is a tax credit that helps lower the costs of monthly health insurance premiums. You may qualify for the credit if your household income is between 100% and 400% of the federal poverty level.

There are two ways to use the APTC: You can take it in advance or get a credit when you file your tax return.

If you opt to take the credit in advance, you can use it throughout the year by applying the credit directly to the payments you make to your insurance company. Then, when you file your tax return, you report the exact amount of subsidy you used throughout the year.

You can also opt to receive the entire credit when you file your taxes. The biggest challenge with this option is that you will still have to pay the full premiums throughout the year, which may not be affordable for many of the people who qualify for subsidies.





Cost-sharing reductions (CSRs)


Cost-sharing reductions sometimes called extra savings, work similarly to the premium tax credit, with a couple of key differences. They only apply to Silver plans, unlike the tax credit, which you can apply to any health insurance plan. However, you do calculate the value of your subsidy in the same way, by using the second-lowest-cost Silver plan.

A CSR also applies to more than just your monthly premiums. If you qualify for a cost-sharing reduction and you enroll in a Silver plan, you automatically get a version of that Silver plan that has reduced deductibles, copayments, and coinsurance. You will also receive a lower out-of-pocket maximum.




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