Tax Credits Can Make Obamacare Dirt-Cheap

The marketplace gets a whole lot cheaper with tax credits.

Photo by Karen Bleier/AFP/Getty Images

Turns out that health insurance purchased on the federal marketplace can be dirt-cheap if the government is chipping in through tax credits. The average monthly premium for someone on any plan with tax credits falls to $82 from $346 after those credits kick in, according to a report released Wednesday by the Department of Health and Human Services. That’s an average decrease of 76 percent thanks to the government.

Tax credits are provided to people whose projected household income falls between 100 percent and 400 percent of the federal poverty line. At the low end in 2013, that would have been a single adult making $11,490 per year and at the high end $45,960. Particularly for those lower on the income ladder, these credits can equal hundreds of dollars a month toward a health insurance premium.

For those on silver plans—the most popular in the federal marketplace—tax credits can reduce monthly premiums to an average of $69. Ninety-four percent of people selecting silver plans received tax credits compared with 87 percent across all “metal levels” of plans. Silver plan buyers also got the biggest average reduction from their credits at 80 percent, a few percentage points ahead of the average decrease for bronze plan holders. Tax credits subsidized closer to 50 percent of the premium, on average, for those on gold and platinum plans.

On a state-by-state basis, tax credits go the furthest in Mississippi, where they take the average premium from $438 to $23 (a 95 percent reduction). In the majority of states, the average credits cover closer to 65 percent to 80 percent of the monthly premiums—still quite a lot.