How Marketplace Subsidies Work When You Age Off Your Parents' Plan

What marketplace subsidies are and who can get them

A marketplace subsidy is money the federal government sends directly to your insurance company to lower your monthly premium. You do not receive it as a check — it reduces what you owe each month. The amount depends on your income: the lower your income, the larger the subsidy. If your income is between roughly 100% and 400% of the federal poverty line, you may receive a subsidy when you buy insurance through the Health Insurance Marketplace.

The poverty line changes each year. For 2024, 100% of the poverty line for a single person is about $15,000 per year, and 400% is about $60,000. These numbers are higher in Alaska and Hawaii. You can find the current year's poverty guidelines on the Department of Health and Human Services website, but the Marketplace itself will calculate whether you may have access to based on your expected income.

The subsidy is only available if you buy insurance through the official Marketplace in your state — not through an insurance company's website directly, and not through a broker or agent, though agents can help you shop on the Marketplace itself. You must also be a U.S. citizen or lawfully present immigrant, and you cannot be locked into employer coverage.

Key Takeaways

• Marketplace subsidies reduce your monthly premium based on your income, and the lower your income, the larger the subsidy.
• You must buy insurance through the official Health Insurance Marketplace in your state to receive a subsidy — buying directly from an insurance company does not may have access to.
• You report your expected income for the year you are buying coverage, not your income from last year, so your subsidy amount can change if your circumstances shift.
• If your actual income ends up higher than you predicted, you may owe back some of the subsidy when you file taxes the following year.
• Open enrollment runs from November 1 to January 15 each year, but you can buy coverage outside that window if you have a may have access to life event like aging off your parents' plan.

How your income determines your subsidy amount

The Marketplace uses your expected household income for the year you are buying coverage — not what you earned last year. If you just turned 26 and are starting your first job, you report what you expect to earn for the rest of that year. If you are between jobs or your hours are uncertain, you estimate your best guess. The Marketplace then compares that number to the poverty line and calculates a subsidy.

The subsidy is designed so that you pay a percentage of your income toward the second-cheapest Silver plan available in your area. That percentage starts at about 2% of income for someone at 100% of poverty and rises to about 8.5% for someone at 400% of poverty. If the second-cheapest Silver plan costs more than that percentage, the subsidy makes up the difference. If it costs less, you pay the full price with no subsidy.

You can use a subsidy to buy any plan on the Marketplace — Bronze, Silver, Gold, or Platinum — not just Silver. But the subsidy amount is always calculated based on Silver, so buying a cheaper Bronze plan means you pay less out of pocket, and buying a more expensive Gold or Platinum plan means you pay more.

Reporting your income and updating it during the year

When you create a Marketplace account, you will enter your expected income for the current year. You can report it as a monthly amount, annual amount, or hourly wage — the Marketplace converts it to an annual figure. If you are unsure, you can use your most recent tax return as a starting point, but the Marketplace wants your actual expectation for the year ahead, not a historical number.

If your income changes during the year — you get a raise, lose hours, start a new job, or have a major life change — you can update your information on the Marketplace. The new subsidy amount takes effect the following month. This matters because if you underestimate your income and receive a larger subsidy than you should have, you will owe the difference back when you file taxes. If you overestimate and receive a smaller subsidy, you may get a refund.

You do not have to update your income if it changes slightly, but it is worth doing if the change is significant — more than a few hundred dollars per month. The Marketplace will ask you to verify your income at tax time anyway, so updating during the year keeps the numbers aligned.

When you can buy coverage outside open enrollment

Normally, you can only buy Marketplace insurance during open enrollment, which runs from November 1 to January 15 each year. But turning 26 and losing coverage through your parents' plan is a may have access to life event that lets you buy coverage at any time of year. You have 60 days from the date your parents' coverage ends to buy a plan on the Marketplace.

When you create your Marketplace account, you will report the date your coverage ended and select "loss of coverage" as your life event. The Marketplace will verify this and open your account to shop and buy immediately, rather than making you wait for the next open enrollment period. If you miss the 60-day window, you will have to wait until the next open enrollment to buy coverage without a may have access to event.

Other may have access to events include getting married, having a baby, moving to a new state, or losing employer coverage. Each event has its own 60-day window. If you experience more than one event, the windows do not stack — you use the most recent one.

How to find and compare plans on the Marketplace

Go to HealthCare.gov if you live in most states, or to your state's Marketplace website if your state runs its own (California, Colorado, Connecticut, Delaware, Florida, Illinois, Maryland, Massachusetts, Minnesota, Mississippi, Missouri, Nevada, New Mexico, New York, Oregon, Pennsylvania, Rhode Island, Texas, Vermont, Virginia, Washington, and Washington D.C. each have their own sites). You can search for your state's Marketplace by name if you are unsure.

Enter your zip code, expected household income, and household size. The Marketplace will show you all available plans, sorted by monthly premium. Each plan shows the premium before and after your subsidy, the deductible, copays for common services, and which doctors and hospitals are in the network. You can filter by metal level (Bronze, Silver, Gold, Platinum) or by specific features like prescription drug coverage.

The subsidy applies to whichever plan you choose, so a cheaper Bronze plan with a subsidy might cost less per month than a more expensive Silver plan, even though Silver is considered the "middle" option. Compare the total cost you will pay out of pocket — premium plus deductible plus copays for services you actually use — not just the premium alone.

What happens if your income changes after you buy coverage

If your income goes up during the year and you received a larger subsidy than you should have, you will owe the difference back when you file your taxes. The amount you owe is capped: if you are a single person with income under 200% of poverty, you owe back no more than $325 in 2024 (this number changes each year). If your income is higher, the cap is higher, but there is always a cap.

If your income goes down and you received a smaller subsidy than you should have, you will get a refund when you file taxes. You do not have to repay anything in this direction.

The Marketplace will ask you to verify your income when you file taxes, usually through the IRS. If the IRS finds a discrepancy, they will contact you. It is not automatic — you do not have to do anything extra beyond filing your tax return. But if you know your income will be significantly different from what you reported, updating it on the Marketplace during the year prevents a large bill at tax time.

Frequently Asked Questions

Can I get a subsidy if I am a student with no income?

Yes. If you have no income or very low income, you may receive a subsidy. The subsidy amount will be based on your actual expected income for the year. Some students may have access to for Medicaid instead, depending on their state and family situation — the Marketplace will tell you if you do when you enter your information.

What if I work part-time and my hours change every week?

Estimate your expected income for the full year based on your current hourly rate and typical hours. If you are unsure, use a conservative estimate — it is better to overestimate slightly and get a smaller subsidy than to underestimate and owe money at tax time. You can update your income on the Marketplace if your situation changes significantly.

Do I lose my subsidy if I get married or have a baby?

Your subsidy amount will change because your household size changed. You must update your Marketplace account within 30 days of the event. Your new subsidy takes effect the following month. Getting married or having a baby are both may have access to life events, so you can buy new coverage outside open enrollment if you need to.

What if my employer offers coverage but it is very expensive?

If your employer's plan costs more than about 8.5% of your household income, you may be able to turn it down and buy Marketplace coverage with a subsidy instead. You will need to report that you have access to employer coverage when you apply on the Marketplace — do not lie about it. The Marketplace has rules about when employer coverage is considered "unaffordable," and it will tell you whether you may have access to for a subsidy.

Can I use my subsidy to buy coverage from an insurance company directly?

No. Subsidies only work through the official Marketplace. If you buy directly from an insurance company's website or through a private broker, you will pay the full premium with no subsidy, even if you would have may have access to. Always buy through HealthCare.gov or your state's Marketplace.