How To Maximize Your Health Coverage with Covered California Subsidies
The Affordable Care Act helps people across the United States get cheap, reliable healthcare coverage. In many cases, people applying through Covered California will be able to get financial help through government subsidies. Thanks to these health insurance subsidies, the government helps pay costs for people in lower income brackets, so they can maximize health coverage and find affordable health insurance in California.
There are multiple ways the government subsidizes ACA marketplace plans, so many Californians can get a great policy at a low price.
What Are Covered California Subsidies and How Do They Work?
Covered California health insurance subsidies are types of government-provided financial support that are specifically designed to make your health insurance from the Covered California marketplace more affordable.
There are two main forms of healthcare subsidies in California: premium tax credits, which you can apply toward your premium, and cost-sharing reductions, which are designed to put a cap on your premiums. Both programs provide variable assistance depending on your income and are based on the Federal Poverty Guidelines, which for 2025 are:
- 1-person household: $15,650
- 2-person household: $21,150
- 3-person household: $26,650
- 4-person household: $32,150
- 5-person household: $37,650
- For each additional household member beyond eight, add approximately $5,500.
The Different Types of Subsidies Available: Premium Tax Credits and Cost-Sharing Reductions
The government funds marketplace health insurance in multiple ways. This is to give people options other than Medi-Cal if they make too much money to qualify but still have trouble paying for standard premiums.
The first type of subsidy is called the premium tax credit. The government offers premium tax credits on a sliding scale, with lower incomes getting more of a credit and higher incomes getting less of a credit. You can choose to apply your projected credit to your monthly premiums throughout the year based on your projected income, or you can pay your full premium up front, then get your tax credit as part of your yearly tax refund. It’s important to keep in mind that if you end up earning more than you thought, you may have to pay back some or all of your tax credit.
California also offers state-specific cost-sharing reductions. Essentially, these reductions ensure that you will only ever pay up to a certain percentage of your income on your healthcare policy, as long as you choose eligible California health plans. The state will provide health coverage subsidies to offset the rest of the cost.
Who Is Eligible for Covered California Subsidies?
Anyone who qualifies for marketplace insurance can get a subsidy as long as they meet income limits. Both types of subsidies in California are linked to your income, and the amount you make determines how much of a subsidy you will get.
Additionally, you need to sign up for a Silver plan, which is the mid-tier marketplace option, in order to qualify for cost-saving reductions, but those who take advantage of premium tax credits instead may sign up for any tier level: Bronze, Silver, Gold, or Platinum.
Understanding Your Household Income and Family Size for Subsidy Eligibility
When you apply for health insurance through Covered California, you may qualify for two different kinds of financial help:
1. Premium Tax Credits – Help With Your Monthly Payment
Premium tax credits lower the monthly premium you pay for your health insurance. You can use them on any metal tier plan (Bronze, Silver, Gold, or Platinum). The amount you pay is capped as a percentage of your income.
- 0–150% FPL → $0 premiums for eligible plans
- 150–200% FPL → 0%–2% of income
- 200–250% FPL → 2%–4% of income
- 250–300% FPL → 4%–6% of income
- 300–400% FPL → 6%–8.5% of income
- Over 400% FPL → maximum 8.5% of income
For 2025, here’s the cap by income level (based on Federal Poverty Level – FPL):
2. Cost-Sharing Reductions (CSRs) – Help with Your Out-of-Pocket Costs
Cost-sharing reductions don’t lower your premium. Instead, they reduce your deductibles, copays, and coinsurance when you get care. To qualify, your household income must be less than or equal to 250% of the FPL. You must choose a Silver plan through Covered California.
Depending on your income, you may qualify for Enhanced Silver plans (Silver 73, 87, or 94), which cover more of your care costs.
Quick Example: A family at 180% of the FPL might pay just a few percent of their income in monthly premiums and qualify for a Silver 87 plan with much lower deductibles and copays. Someone at 320% of the FPL won’t get cost-sharing reductions, but their premium is still capped at no more than 8.5% of household income.
The bottom line:
- Premium tax credits = lower monthly bill (available up to and beyond 400% FPL).
- Cost-sharing reductions = lower deductibles and copays (only if you earn ≤ 250% FPL and choose a Silver plan).
Tips for Maximizing Your Subsidy Benefits
There are a few things you can do to make sure you’re taking full advantage of your health benefits as a California resident. Keeping up with your finances and getting support during enrollment from a knowledgeable Freeway agent can help you maximize your savings.
Keep Your Household Income Updated to Avoid Losing Eligibility
Your subsidies are directly linked to your income, so it’s important to keep track of your household earnings. If you don’t keep them updated and provide proper documentation, you may miss out on your full tax credit and premium limits.
How To Appeal If You Don’t Qualify for a Subsidy
Cost-sharing reductions and premium tax credits depend on your income. If you were denied even though you think your income should qualify, you can submit an appeal online on the Covered California website to have your application reviewed.
Utilizing Covered California’s Resources for Assistance and Guidance
Figuring out health insurance, tax credits, and subsidies can be confusing. If you make a mistake during enrollment, you could miss out on some savings. Luckily, Freeway offers a free service where you can work with independent agents who are familiar with all the nuances of insurance and premium costs.
Navigating Covered California Health Plans: How To Choose the Right Plan for You
Once you understand how subsidies work, it’s important to pick a plan that makes sense for your health needs and fits in with your financial situation. By exploring the different types of health coverage options available on the marketplace and considering how they work with government subsidies, you can ensure you make the right choice.
Understanding the Tiers of Coverage: Bronze, Silver, Gold, and Platinum Plans
There are multiple levels of marketplace plans, and they all have their own benefits. Bronze plans have the cheapest premiums, but they provide the lowest level of coverage. Platinum plans have the highest premiums, but they also offer the highest level of coverage when you seek care.
While you can choose any tier that works for your situation, only Silver plans are eligible for cost-saving reductions, so they’re one of the most popular options. If you’re considering another type of plan, it’s important to do the calculations to see if it makes financial sense.
Comparing Health Plans to Maximize Value and Coverage
When picking out your policy, carefully compare coverage to find the best plan for you. Consider premiums, deductibles, and regular copays to estimate how much you might pay on each plan. Don’t forget to factor in cost-sharing reductions and premium tax credits.
How Freeway Insurance Can Help You Maximize Your Health Coverage
Were you aware that one in five Californians qualifies for free or very low-cost health insurance? Covered California subsidies make quality health insurance more affordable and accessible to millions of people in various income brackets. If you think healthcare coverage is out of reach for your financial situation, it’s important to check out available subsidies and tax credits. Thanks to premium tax credits and cost-sharing reductions, a good plan may actually be cheaper than you think.
Need help navigating the complex world of insurance premiums, deductibles, subsidies, and tax credits? The Freeway team is here to answer all your questions and walk you through the entire process for free. Get started by giving us a call at 877-423-1508 to find a budget-friendly marketplace plan and make sure you’re maximizing your subsidy savings.
FAQs
Want to learn more? Explore these frequently asked questions about health insurance and the details of Covered California.
Can I Change My Plan After I’ve Enrolled in Covered California?
Once you enroll in a marketplace plan, you can typically only make changes during open enrollment, which starts every year in November. However, you may be able to change plans if you qualify for a special enrollment period due to a qualifying life event, such as losing your job or getting married. Additionally, although you can’t switch plans midway through the year, you can cancel your Covered CA plan at any point; all you have to do is give 14 days’ notice.
How Often Should I Review My Subsidy and Health Plan?
You should review your health plan and any eligible subsidies every year during open enrollment. This ensures that you get a policy that meets your health needs while also saving money on health insurance.
