What Are Health Insurance Subsidies and How Do They Work?
Many college students don’t have easy access to healthcare. With rising tuition and living expenses, it’s not uncommon for health insurance to get overlooked. This is where health insurance subsidies come in—they can help ensure students get the care they need to stay healthy physically and mentally.
The ACA, or Affordable Care Act, provides health insurance coverage for people through the Health Insurance Marketplace, also called the Exchange. For many low- and middle-income individuals, including students, the ACA offers subsidies or premium tax credits that make health insurance more affordable.
Given the added financial strain of tuition, rent, and living expenses, these subsidies will help you reduce student debts. They help reduce out-of-pocket costs and ensure that you will remain covered when you need it most.
Featured Programs
Health insurance subsidies are based on your annual income and the federal poverty level (FPL). The lower your basic income, the higher the subsidy you can receive. In other words, they help bring down the cost of monthly premiums so health insurance doesn’t feel like such a financial burden. The subsidies are available to people whose income is between 100% and 400% of the FPL.
You might qualify for health insurance subsidies if your income falls within that range, even if you’re not working full-time. Your income is generally based on the income you expect to earn annually, not just in a single month. This is where things can get tricky during breaks when your income changes.
Why Summer Breaks and Income Fluctuations Matter
Students often face a range of challenges during non-school periods. However, the biggest struggle includes income fluctuation. Summer breaks and other school vacations can shake up your income, affecting your health insurance subsidies.
The problem is that the subsidies you get through the ACA are based on your total projected yearly income—not just what you earn during the school year. So, if your income goes up or down during breaks, you need to report those changes to the Health Insurance Marketplace to keep your subsidies accurate.
Here’s how it works:
You might have a steady part-time job or work-study position with a predictable income during the school year. But when summer rolls around, things can change. Maybe you pick up a paid internship or take on extra shifts, which increases your income. Or maybe you’re not working during the break, which lowers it.
It could cost you later if you don’t update your expected income when these changes happen.
- Example 1: Let’s say you report that you’ll make $15,000 for the year but only earn $10,000. Your subsidy was calculated based on that higher number, so you may have paid more for health insurance than needed.
- Example 2: On the flip side, if you get a paid summer internship and your income goes up but you don’t update it, you might receive too much subsidy. Then, when tax season rolls around, you could owe money back because you were technically overpaid.
You must stay proactive about updating your income information whenever your financial situation changes. Here’s what you can do to stay on track:
- Keep records of your pay and financial aid to report changes accurately.
- Report increases or decreases right away in your Health Insurance Marketplace account.
- Factor in seasonal income changes (like summer jobs) when estimating your yearly income. Adjust as needed.
- Know how taxes work
- Reach out to Marketplace assistants or financial aid advisors for guidance.
We will dive more into how to keep your health insurance during school breaks in the next section.
Strategies to Maintain Subsidies During School Breaks
Although subsidies aim to provide affordable health insurance for students, not reporting accurate income can lead to unexpected financial burdens. Here’s the rundown of steps to take to maintain break or summer health insurance coverage:
Report income changes immediately.
Whenever your income changes—whether you get a summer job, an internship, or take time off—update your projected annual income with the Health Insurance Marketplace.
Estimate carefully.
If you’re unsure how much you’ll earn during a break, try to make an educated guess. If you think you’ll make less money than you initially projected, it’s better to err on caution and lower your estimate. This can help prevent overpaying for coverage.
Use the marketplace’s tools.
The Health Insurance Marketplace has tools to help you easily project your annual income and update your information. Take advantage of these tools to stay on top of your income estimates, especially if your situation changes during school breaks.
Know the key dates.
Keep track of deadlines for updating your income projections. If you’re enrolled in an ACA plan through the Marketplace, there are specific times when you can change your coverage (like during open enrollment or special enrollment periods). Updating your income promptly can help you avoid complications with coverage or subsidies.
Be transparent about your earnings.
If you land a paid internship or a summer job, report the expected income to the Marketplace right away. If you’re not working or working fewer hours than usual, let them know as well. This will help the Marketplace accurately adjust your subsidies. If you are fortunate, this can give you access to better and more low-income student health insurance.
Options If You Lose Subsidies Temporarily
Fluctuating income and health insurance is inevitable. If, despite your best efforts, you end up losing your subsidies, don’t panic. There are backup options to help bridge the gap in your health insurance coverage.
Medicaid
Maintaining ACA subsidies during breaks is challenging. If you can’t do so, you can resort to Medicaid.
Medicaid, a government health insurance program, is meant for people with low incomes. For low-income students, it can be a lifesaver, as it covers everything from doctor visits and hospital stays to prescriptions and mental health support, often at little to no cost.
To qualify for Medicaid, the main things that matter are your income, household size, and sometimes your age or disability status. Each state sets its own rules, but here are some general guidelines:
- Income: Your income must be below a certain level, usually based on the Federal Poverty Level (FPL).
- Household Size: Larger families may qualify with higher incomes.
- Residency: You must live in the state where you’re applying, as Medicaid is state-specific.
- Age/Disability: Some states offer expanded eligibility for those under 26, and special guidelines exist for pregnant, disabled, or parent applicants.
Short-Term Health Insurance Plans
Another option to consider is short-term health insurance. These plans will give you temporary coverage for a short time. However, they usually don’t cover as many services as regular ACA plans. Here are a few affordable private short-term health insurance options:
- UnitedHealthcare Short-Term Plans
- National General Short-Term Health Insurance
- MediQwest Short-Term Health Plans
Before selecting an alternative, we advise that you seek help from a health insurance navigator or a licensed insurance broker. These professionals guide you through the options available in your state and give you practical student health insurance tips.
Proactive Steps to Avoid Coverage Gaps
School breaks are usually more relaxing and less hectic than regular school days. However, it’s important to remember that health issues can still happen, even when life slows down during breaks.
Whether you’re staying home or traveling, maintaining enrollment in a marketplace health insurance for students ensures you’re protected from unexpected medical expenses.
Here are a few steps to help you stay covered during school breaks:
Keep your marketplace account updated.
Ensure your personal details, such as income and contact information, are current. Any changes in your circumstances, like a change in employment or your living situation, could affect your eligibility or premiums. Reporting these changes promptly helps you avoid coverage gaps or overpaying for your insurance.
Use the marketplace resources.
The Health Insurance Marketplace offers a variety of resources to help you. Utilize their website, call centers, and online chat options for assistance. The marketplace representatives can help you understand your options, answer questions about coverage, and guide you through applying or updating your plan.
Ask for help if you’re unsure.
Health insurance can be confusing, so don’t hesitate to contact customer service if you’re uncertain about anything. Whether it’s about plan options, covered services, or eligibility, plenty of professionals can provide guidance. They may also help you navigate complex terms like “out-of-pocket maximum” or “premium subsidies.”
Document your communication.
Whenever you contact the marketplace, keep a record of your interactions. Make a record of the representatives you speak with, the date and time, and any important details shared. This way, you have a reference if something needs to be followed up on.
Set reminders for key dates.
It’s important to keep track of open enrollment deadlines and any other important dates. Missing these deadlines can result in delays in obtaining coverage or loss of eligibility for subsidies.
Get assistance with Special Enrollment Periods (SEPs).
If you experience a qualifying life event—such as a change in household size, income, or loss of other coverage—you might be eligible for a Special Enrollment Period (SEP). Reach out to the marketplace as soon as possible after the event to see if you qualify for this option.
Review your plan annually.
Even if you’re satisfied with your current plan, review it annually during open enrollment. Health insurance needs can change, and your current plan might have new options or changes that better fit your needs. It’s also a good opportunity to explore financial aid for health insurance or subsidy eligibility that may lower your premiums.
How to Handle Income Fluctuations During the Year
Here are some practical tips to help you stay financially stable and keep your health coverage.
- Create a Flexible Budget: Cover essentials first, then adjust discretionary spending when income is low.
- Save Extra Income: Set aside savings when you earn more to buffer lean months.
- Track Income and Expenses: Regularly monitor and adjust spending based on income changes.
- Consider Side Income: A side job or freelance work can help balance income fluctuations.
The marketplace is flexible and offers options that can adjust to your changing income throughout the year. You may apply for or change your health coverage during Special Enrollment Periods or SEPs triggered by income changes, ensuring you don’t lose health coverage during lean months.
FAQs About Student Health Insurance Subsidies
Do I need to update my income every time I get paid?
No, just report significant changes like starting or ending a job, a summer internship, or changes in hours worked.
What happens if I don’t report changes in income?
Failing to report income changes may result in paying too much for coverage or facing a tax penalty for receiving more subsidies than you were eligible for.
Can I keep my health insurance if I lose subsidies?
Yes, you can keep your plan but will need to pay the full premium if your income exceeds the subsidy eligibility. The plan may still be worth keeping, especially if you like the coverage.
How can I keep my health insurance affordable if I lose subsidies?
Explore Medicaid or short-term plans. Medicaid may be available if your income drops, while short-term plans are cheaper but may offer less coverage.
Can I switch my plan during the year?
Yes, you can change plans during a special enrollment period triggered by income or eligibility changes.
What happens if I underestimate my income?
If you receive too many subsidies, you’ll need to repay the difference when filing your taxes. Always keep your income estimates accurate and update the Marketplace as needed.