To provide you with an example, let’s assume a scenario where a family of three (two adults and one child) has an annual household income of 250% of the Federal Poverty Level (FPL), which is $41,437 for the year. Please note that this is a simplified illustration, and actual premium amounts can vary based on factors such as location, age, specific health plans available, and other individual circumstances.
For the purpose of this example, we’ll use some hypothetical numbers:
- Annual Household Income: $41,437 (250% of FPL for a family of three)
- Estimated Premium for a Benchmark Plan: $15,000 per year
Step 1: Calculate the Maximum Percentage of Income for Premiums In general, under the ACA, individuals and families at different income levels are expected to contribute a certain percentage of their income towards health insurance premiums. For a family at 250% of the FPL, the maximum percentage of income for premiums is capped at a certain level. This cap varies by income and family size. For this example, let’s assume the cap is 8.5% of the household income.
Maximum Premium Contribution = 8.5% of $41,437 = $3,519.45 per year
Step 2: Calculate the Premium Tax Credit (Subsidy) The premium tax credit helps reduce the amount you need to pay for health insurance premiums. It’s the difference between the cost of the benchmark plan and the maximum premium contribution.
Premium Tax Credit = Estimated Benchmark Plan Premium – Maximum Premium Contribution Premium Tax Credit = $15,000 – $3,519.45 = $11,480.55 per year
Step 3: Calculate the Final Premium Payment The final premium payment is the estimated benchmark plan premium minus the premium tax credit.
Final Premium Payment = Estimated Benchmark Plan Premium – Premium Tax Credit Final Premium Payment = $15,000 – $11,480.55 = $3,519.45 per year
In this hypothetical example, the family of three with an annual income of 250% of the FPL ($41,437) would pay approximately $3,519.45 per year for health insurance coverage through the Health Insurance Marketplace (Exchange). Keep in mind that this is just an illustrative example, and actual premium amounts can vary based on numerous factors. It’s recommended to use the HealthCare.gov website’s calculator or consult with a certified insurance agent for precise information based on your specific circumstances.
