In 2021, employers paid 73% of the average $22,221 in annual premiums for health insurance for a family of four, but that still left $5,969 for the employee to pay. Costs for the independently insured can be even more daunting.
No wonder so many Americans rely on some form of financial assistance to meet their healthcare needs. As of June 2022, 82.3 million people were enrolled in Medicaid. And, according to the Kaiser Family Foundation, nearly 9.1 million people received financial assistance for Marketplace health plans in 2020.
Health insurance is expensive, but also essential, which is why it is important to know what types of financial assistance exist to help pay premiums and lower out-of-pocket costs.
- The ACA Health Insurance Marketplace maintains a search tool to help people identify available premium savings programs, based on their state and income level.
- Medicaid and the Children’s Health Insurance Program reduce healthcare costs for millions of low-income Americans every year.
- People who buy their own private health insurance may qualify for a premium tax credit or cost-sharing reductions.
- There are special health coverage protections for Alaska Natives and American Indians.
- Typically, cities, states, and even some government-run hospitals have their own financial assistance application to help residents access all available local, state, and federal programs for which they qualify.
What Kind of Financial Help Is Available
The Affordable Care Act (ACA) makes it more affordable than ever to get insured, especially for people with pre-existing conditions. Medicare, Medicaid, the Children’s Health Insurance Program (CHIP), tax credits, and cost-sharing tools combine to create a network of assistance for individuals and families hoping to reduce the cost of health insurance. Eligibility for these programs is based on location, age, income, and family size.
Medicare is a federal health insurance program that covers people 65 and over, as well as some younger people with disabilities, and people living with End-Stage Renal Disease or ALS (Lou Gehrig's Disease). Medicare has 4 parts:
- Part A (hospital insurance) covers hospital and nursing home stays, and at-home care for people who are homebound. Part A is free for anyone who has earned 40 Social Security credits, which is about 99% of beneficiaries. Even so, it comes with a $1,600 deductible for the first hospital admission during each new benefit period and sizeable co-payments for stays over 60 days.
- Part B is optional medical insurance with a standard monthly premium of $164.90 and an annual deductible of $226 in 2023. The monthly premium is higher for individuals with income above $97,000 and couples whose income exceeds $194,000.
- Part C, or Medicare Advantage, is Medicare Parts A and B coverage provided by private insurers. Premiums, deductibles, and copayments vary with each plan.
- Part D covers prescription drugs. Monthly premiums vary based on the plan and the beneficiary’s income, but deductibles are capped at $505 for 2023.
Last, Medicare Supplement Insurance (Medigap) helps cover the costs for some Part A & B services and may include extra benefits, like international coverage, though it comes with its own premiums that vary by plan and personal circumstance.
There is no annual limit on how much an Original Medicare beneficiary pays out of pocket unless they enroll in a Medigap K or L plan.
Though Medicare coverage can be costly, several assistance programs exist to help. Medicare Savings Programs are income and resource-restricted programs that help pay Parts A & B premiums, as well as deductibles, copayments, and coinsurance in some cases. These programs are administered by state medical assistance (Medicaid) offices, but they are not the same program as Medicaid. To apply, contact your state’s medical assistance office.
Assistance programs also exist for people with specific medical needs. For example, the Program of All-Inclusive Care for the Elderly (PACE) helps people 55 and over get care outside of a nursing home, and Medicare Special Needs Plans lower costs for people who need long-term care (at home or in a facility) or have a chronic condition like dementia, cancer, or diabetes.
Some people qualify automatically for Extra Help, a program to help people with limited resources pay for Medicare Part D coverage and costs. Those who don’t automatically qualify can still apply. And some pharmaceutical companies offer additional assistance to help people with Part D prescription drugs.
Medicaid is a state program, administered in accordance with federal requirements, that assists low-income people of all ages with medical expenses. Because Medicaid is administered by states, eligibility and costs vary widely, but federal rules mandate coverage for children and pregnant people in low-income families, seniors and people with disabilities who collect Social Security Insurance, and certain caretakers and adults with very low incomes. Nonetheless, the majority of states have adopted the Affordable Care Act's expansion of eligibility to all adults with income up to 138% of the federal poverty level.
While states can charge some Medicaid recipients premiums and out-of-pocket costs, the beneficiary’s savings can be significant. For some people, these benefits can bring down the cost of drugs to just $8.00 and a visit to a physician to just $4.00.
Children's Health Insurance Program (CHIP)
The Children's Health Insurance Program (CHIP) provides health coverage to children in families who earn too much to qualify for Medicaid. CHIP, like Medicaid, is administered by states according to federal guidelines; some states run separate CHIP programs while others include it as part of Medicaid. Eligibility varies by state, but CHIP affords kids and teens free or low-cost dental and medical insurance. InsureKidsNow.com is a key resource to determine eligibility and find local providers.
Children qualify for CHIP coverage up until 19 years old.
Premium Tax Credits
The premium tax credit (PTC) is a refundable credit that helps cover the premiums for health insurance purchased through state or federal Health Insurance Marketplaces. Before 2021, households with income above 400% of the federal poverty level did not qualify for the premium tax credit, but that rule has been suspended until 2025.
When you apply for coverage through the Marketplace, it calculates a tax credit estimate on your behalf. You have the option to claim the credit in full when you file taxes or have monthly payments sent directly to your insurer as an advance credit. If you choose the latter, you need to reconcile your estimated and actual credit on Form 8962 when you file taxes in April. That's why it's important to notify the Marketplace of life changes—like those to income, family size, or your eligibility for non-ACA coverage—that could affect the size of your credit and result in a bigger-than-expected tax bill.
Cost-sharing reductions, also called “extra savings,” lower deductibles, coinsurance, and copayments on private health insurance purchased through the Marketplace. Like the premium tax credit, eligibility for cost-sharing reductions is automatically calculated by the Marketplace when you apply. To claim reductions, though, you must enroll in a Silver health plan.
Members of a federally recognized American Indian tribe or shareholders of an Alaska Native Claims Settlement Act (ANCSA) Corporation may be eligible for additional cost-sharing reductions.
How to Qualify for Financial Aid
Eligibility criteria for Medicaid, some Medicare programs, and other public assistance programs vary from state to state. Consult your state’s Medicaid office to learn more. For additional Medicare assistance or questions, you can contact a live person 24/7 via live chat or phone.
If you’re considering declining or canceling job-based insurance to sign up for a Marketplace plan, think twice. If an employment-based plan is "affordable" and meets the minimum value standard, you will not qualify for Marketplace savings even if your income would make you otherwise eligible.
Each hospital or clinic’s financial assistance programs are found on their websites. Many have applications available in Spanish, Arabic, Mandarin, and other commonly spoken languages.
How to Apply for Health Insurance Financial Aid
Applying for most health insurance financial aid starts with the Marketplace. Although some states run their own marketplaces, the federal website will redirect users to those marketplaces when appropriate. Medicare beneficiaries in need of assistance should contact their state's Medicaid office.
To apply for assistance, you may need to provide documentation supporting your claims, including confirmation of immigration status, citizenship, social security number, household income, and American Indian or Alaskan Native status.
If you're at risk of taking on medical debt even with insurance, individual hospitals have financial assistance or charity care programs to defray unexpectedly high bills. Many hospitals use charity care applications to determine if a patient qualifies for one or more of the government programs above, and others—like Ohio Health—offer interest-free loans to patients who do not qualify for other discounts.
The Bottom Line
The rising cost of healthcare in America keeps many people up at night. However, federal and state programs like Medicare, Medicaid, and CHIP provide millions of Americans with low-cost insurance, and the Affordable Care Act inaugurated several insurance subsidies and cost-saving measures, like the premium tax credit. And for people who are caught with a medical bill that is bigger than they expected, charity care programs can help both uninsured patients and those whose insurance does not cover the full cost of care.