What Is a Subsidy for Health Insurance?
According to the U.S. Census Bureau, 70.2 percent of American workers got insurance through their jobs, and 4.8 percent of them got it from a public health insurance program in 2010. All of them received some form of direct or indirect health insurance subsidy, or monetary assistance. At the same time, many of the 7.1 percent of people who bought their own insurance also got some form of subsidy. Help paying for health insurance comes in many different forms.
Health insurance subsidies for employer-provided insurance come in two forms. Many employers bear a portion of the cost of the health insurance coverage that they provide to their employees, which is a private subsidy. The government also indirectly subsidizes the coverage, because the money employers spend on insurance for their employees isn't subject to payroll taxes and is also a tax-deductible expense. What employees spend on their share of the insurance premium is also sheltered from tax.
Public Insurance Subsidies
The government offers all sorts of subsidized insurance programs. Medicare pays the cost of many treatments for senior citizens, while Medicaid and related programs offer insurance to many of the poorest Americans. States also offer other subsidized or free programs, like the Children's Health Insurance Program or programs that help small businesses pay the cost of providing insurance for their employees.
Self-employed people get a subsidy to help them defray the cost of buying health insurance. Their insurance premiums are deductible as an adjustment to their income. While this doesn't shelter them from self-employment tax on that income, it does allow them to claim the deduction even if they don't itemize. Self-employed people can also benefit from the deduction even if they have high incomes and might otherwise be subject to the alternative minimum tax or to other limitations on their deductions.
Affordable Care Act Subsidies
The Patient Protection and Affordable Care Act, commonly referred to as Obamacare, also will have subsidies that take effect on Jan. 1, 2014. People who don't get health insurance through an employer or who can only get extremely expensive coverage through their employers will be eligible for subsidies if their household income is no higher than 400 percent of the federal poverty level. They will get even more generous subsidies if they make 250 percent or less of that benchmark. Small businesses that offer health insurance even if they aren't required to -- for instance, they have fewer than 50 employees -- can also benefit from additional tax credits.
- United States Census Bureau: Employment-Based Health Insurance -- 2010
- NPR: Accidents of History Created U.S. Health System
- USA.gov: Health Insurance
- National Conference of State Legislatures: State Programs to Subsidize or Reduce the Cost of Health Insurance for Small Businesses
- IRS: Don’t Miss the Health Insurance Deduction if You’re Self-Employed
- PBS: Will You Qualify for an Obamacare Subsidy?
Steve Lander has been a writer since 1996, with experience in the fields of financial services, real estate and technology. His work has appeared in trade publications such as the "Minnesota Real Estate Journal" and "Minnesota Multi-Housing Association Advocate." Lander holds a Bachelor of Arts in political science from Columbia University.