What Are Health Insurance Subsidies for Low-Income Students

Understanding Health Insurance Subsidies

In this post, we will explore health insurance subsidies for low-income students. This will also include tips on how to maximize affordable healthcare plans.

The United States has the most expensive healthcare in the world. In 2021, the U.S. spent $12,318 per person on healthcare, far more than any other country. For example, Germany, the second-highest spender, spent $7,383 per person, 40% less than the U.S. spends.

Fortunately, the U.S. offers health insurance subsidies to help make coverage more affordable. Under the Affordable Care Act (ACA), the government provides financial help for health insurance plans bought through the Health Insurance Marketplace. This assistance can lower monthly premiums and reduce out-of-pocket costs. It can also decrease deductibles, depending on a person’s income.

These subsidies are designed to make healthcare more accessible and ensure people don’t have to go without coverage because they can’t afford it. For many families, these subsidies can make a big difference in managing the cost of premiums and unexpected medical bills.

As a college student, you still have other expenses to worry about. You have tuition, room and board, textbooks, and the day-to-day costs of living. With all these financial pressures, adding health insurance to the list might feel like one more thing to stress about. The good news is that you may qualify for the subsidized healthcare insurance plans.

Related Articles:

• Are Graduate Students Eligible for Health Insurance Subsidies?
• How to Qualify for Premium Tax Credits as a Low-Income College Student
• Online Colleges with Student Health Insurance: Low-Cost Options

How Do Health Insurance Subsidies Work?

Health insurance subsidies are financial assistance programs designed to enable people to pay for health insurance coverage. In the United States, they’re most often associated with the Affordable Care Act (ACA). Essentially, these subsidies help reduce your monthly premiums, giving you easy access to healthcare services without draining your budget.

Financial assistance for student health insurance is a big deal. Health insurance premiums can be quite expensive, especially if you’re young and don’t yet have a stable income.

On average, health insurance in the United States costs $7,739 yearly for an individual. If you’re a student earning the average median wage of $60,000 annually, paying for health insurance premiums could take up a significant portion of your income.

Without Affordable Care Act subsidies for students, you could face the difficult choice of either paying for health insurance or going without it. The ACA offers support to lower the financial burden of having health insurance.

The most common form of subsidy people hear about is the premium tax credit, which directly reduces the cost of your monthly premium. How much you get depends on your income and household size. If you earn a little above the poverty line, these credits can help lower your premiums to a manageable level. The goal is to make affordable healthcare for students more accessible, even for people just starting out in life, like college students.

Another type of ACA health insurance for college students is cost-sharing reductions. These are designed to lower your out-of-pocket costs when you go to the doctor or need medical care. If you qualify, you may have lower copays, deductibles, and coinsurance, which means less money out of your pocket when you need healthcare. However, CSRs are available only to people who pick a Silver plan in the Health Insurance Marketplace.

Eligibility for Health Insurance Subsidies as a Student

Qualifying for health insurance subsidies for low-income students can seem a little complicated. However, understanding the main eligibility factors can be pretty straightforward. Here are the three key requirements for eligibility for health insurance subsidies:

Income Requirements

Your income is crucial to determining whether you’re eligible for subsidies. To qualify for most ACA subsidies, your income generally needs to be between 100% and 400% of the federal poverty level (FPL). Here’s a quick breakdown of how the FPL affects your health coverage:

• Above 400% FPL: You may qualify for tax credits to lower your Marketplace premium.
• 100% to 400% FPL: You qualify for tax credits to reduce your premium.
• At or below 150% FPL: You may qualify for a Special Enrollment Period if not eligible for Medicaid or CHIP.
• Below 138% FPL: If your state expanded Medicaid, you qualify for it.
• Below 100% FPL: You likely won’t qualify for Marketplace savings or Medicaid.

It can get a little tricky for students who may not have a full-time job or a steady income. However, if you work part-time, have a stipend, or have another source of income, you still need to report that.

The good news is that your eligibility is based on your projected income for the year, not necessarily what you made in the past. So, if you’re a student who expects to earn less than usual due to school commitments, you may qualify for subsidies.

Enrollment Status

You must be enrolled in a health insurance plan through the Health Insurance Marketplace to access these subsidies. If you’re covered under a parent or school plan, you might not qualify for any ACA subsidy.

In some cases, you should also be enrolled full-time. If you’re a full-time student, insurance companies usually see you as having a lower risk of needing a lot of medical care. Since you’re not working full-time and might not be exposed to as many risks, insurers tend to offer lower premiums or more tailored plans for full-time students.

That said, even if you’re a part-time student, you may become eligible for a subsidy based on your income. Check the specific eligibility requirements for any plan you’re looking at.

Dependent Status

Another thing to consider is whether you’re claimed as a dependent on others’ tax return (like your parents). If you’re under 26, you can stay on a parent’s health insurance plan, which may make subsidies unnecessary. However, if you’re not claimed as a dependent (for instance, if you’re 24 or older or provide more than half of your financial support), you can apply for coverage and subsidies.

If your parents still consider you dependent, their income could impact the subsidies you qualify for. Be mindful of this when looking at your eligibility.

Types of Health Insurance Subsidies Available to Students

As mentioned, two main types are used in health insurance subsidies for low-income students: premium tax credits and cost-sharing reductions.

Premium Tax Credits (PTC)

Premium tax credits are a key way to lower your monthly health insurance premium. These credits are based on your income—lower income means bigger subsidies—but they also depend on your household size.

Here are a couple of scenarios to show how this works:

Scenario 1: A Single College Student

Say you’re a single college student in California making $20,000 per year. The 2024 Federal Poverty Level (FPL) for a single person is $14,580, so you’re at about 137% of the FPL. This means you qualify for a significant premium reduction. If a Silver plan costs $400 a month, your tax credit could drop to about $100 a month, saving you $3,600 annually.

As your income increases, your subsidy decreases, but you may still qualify for some help.

Scenario 2: A Student with a Part-Time Job and Dependents

Imagine you’re a 23-year-old student with a child earning $30,000 a year. This puts you around 200% of the FPL. Your premium for a family health plan might be $700, but with the subsidy, it could drop by about $300, leaving you with a $400 premium. That’s $3,600 in savings for the year.

Cost-Sharing Reductions (CSR)

These health insurance options for low-income college students reduce costs like deductibles, copays, and coinsurance. To qualify, your income must be between 100% and 250% of the federal poverty level. These are only available with Silver plans.

Here’s how they can help:

Scenario 1: A Healthy Student

If you’re a healthy 22-year-old student making $22,000, you might qualify for both premium tax credits and CSRs. Your deductible could drop from $2,500 to $1,000, and copays might decrease from $40 to $20, making your healthcare more affordable.

Scenario 2: A Student with Ongoing Health Needs

If you have a chronic condition like asthma, CSRs can make a big difference. With a $22,000 income, your deductible could be as low as $500, and your prescription copay could drop from $40 to $10, making regular health care much more affordable.

How to Apply for Health Insurance Subsidies

Applying for health insurance subsidies through the Affordable Care Act (ACA) is easier than it sounds. Here’s a thorough step-by-step guide on how to apply for health insurance subsidies:

1. Visit the Health Insurance Marketplace. Start by visiting the HealthCare.gov website (or your state’s marketplace, if applicable). This is where you’ll apply for subsidies and compare health plans.
2. Create an Account or Log In. If you’re new to the marketplace, you’ll need to create an account. If you’ve used it before, simply log in with your credentials.
3. Enter Personal Information. You’ll be asked to provide details about your household, income, and where you live. This helps the system determine the subsidies you qualify for based on your family size and financial situation.
4. Gather Required Documentation. Before applying, have your income documentation (like pay stubs or tax returns) ready and any other documents that may be required (e.g., proof of citizenship or residency).
5. Review Available Plans and Subsidies. Once you’ve entered your information, you’ll see a list of health insurance plans in your area. The marketplace will show how much you might save with the subsidy on each plan.
6. Select Your Plan. After reviewing your options, choose the health insurance plan that fits your needs and budget.
7. Submit Your Application. Submit your application, and if everything looks good, your subsidy will be applied to your plan, and you’ll be all set!

Remember, the Health Insurance Marketplace has open enrollment periods, so be sure to apply during these times to get coverage.

Tips for Maximizing Your Health Insurance Subsidy as a Student

Here are a few tips on how to maximize health insurance for low-income college students:

1. Understand how subsidies work. Your subsidy depends on your income and household size. The less you earn, the more you might get.
2. Pick the right plan. If you’re healthy, go for a Bronze or Silver plan (lower premiums). Need more care? A Gold or Platinum plan might be better, even with a higher premium.
3. Report income correctly. Report all income—part-time jobs, internships, and work-study wages. And remember, if you’re a dependent, your parent’s income counts too.
4. Use special enrollment periods. Losing coverage, graduating, or other life changes can qualify you for a special enrollment outside of the usual sign-up period.
5. Check for Medicaid. If your income is really low, you might qualify for Medicaid—it’s free or low-cost coverage, so definitely check.
6. Update for income changes. If your income goes up or down during the year (like a summer job), update your subsidy to match.
7. Look at Student Health Plans. Some schools offer their own insurance plans. Compare them to marketplace plans—they might be cheaper.
8. Watch for tax issues. If you get too much subsidy, you’ll have to pay it back when you file taxes, so keep your info updated.

Conclusion: Making Informed Decisions About Health Insurance as a Student

As a student, balancing tuition, rent, and groceries can make healthcare costs seem overwhelming. Fortunately, student financial aid for healthcare exists through the Affordable Care Act (ACA), which lowers your premiums and out-of-pocket costs.

Eligibility depends on your income, household size, and dependent status. If you qualify, you will no longer have to choose between your health and your education.