Would my 21-year-old’s subsidy be based on his income – or mine?

Q. My 21-year-old son is in college. I know he could stay on my employer’s plan until he is 26. But he might be able to get better coverage in the exchange. Would he be eligible for a government subsidy? Would it be based on his income or mine?

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A. If you claim him as a dependent on your income tax, then your income would be included in determining whether he gets a subsidy. Subsidies are tax credits, so eligibility for them is a function of total household income and the number of people in the household. So while your income would be counted, you (and any other members of your tax household) would also be counted as a member of the household.

Prior to the American Rescue Plan, which was implemented in the spring of 2021, premium subsidies only extended to incomes up to 400% of the poverty level. For 2021 coverage, that would have been an income of $51,040 for a single individual (in the continental US; poverty levels are higher in Alaska and Hawaii). For a household of two, it would have been $68,960. But the American Rescue Plan has eliminated this “subsidy cliff” for 2021 and 2022, meaning that premium subsidies can extend to people with income well above 400% of the poverty level, if the benchmark plan would otherwise cost more than 8.5% of their income.

But subsidy eligibility depends on how the cost of the benchmark plan compares with your household income, which means that an applicant may or may not qualify for a subsidy, depending on where they live, how old they are, and how much health coverage costs in their area.

It can also be counterintuitive to see how subsidy amounts change when members of a household are not all enrolled in the same plan. The short story is that the subsidy eligibility calculation is based on the cost of the benchmark plan for only the family members who are enrolling via the marketplace (in this case, just your son), versus how it compares with the whole tax household’s income.

If you don’t claim your son as a dependent, he might be eligible for Medicaid, depending on his income and whether he’s in a state that has expanded Medicaid under the Affordable Care Act (depending on your family’s total income and the state where he lives, he might be eligible for Medicaid even if you do claim him as a tax dependent; eligibility will be determined when he submits an application through the marketplace).

If he files his own income tax return and his income is high enough to be subsidy-eligible (in the continental U.S. in 2022, that’s at least $12,880 in states that haven’t expanded Medicaid, and at least $17,775 in states that have expanded Medicaid), he might qualify for a subsidy. Subsidies are larger and more widely available due to the American Rescue Plan.

He has the option to remain on your health insurance until he turns 26, regardless of whether or not you claim him as a dependent on your tax return. But depending on your plan and how far away from you he lives while he’s in college, he might find that he has little or no access to in-network providers. Getting his own plan—either in the exchange or from the college itself—would ensure that he has access to network providers where he’s going to school. That’s something to consider, even if he doesn’t qualify for subsidies in the exchange based on household income.

But keep in mind that he’ll only be able to enroll in his own plan during open enrollment (in most states, that’s November 1 to January 15) or during a special enrollment period triggered by a qualifying life event. If he’s eligible for Medicaid, however, enrollment is available year-round. And there are some state-run programs, such as the Basic Health Programs in New York and Minnesota, that have year-round enrollment.

Here’s an outline of the various coverage options available for college students, and what to keep in mind when you’re deciding.

Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about the Affordable Care Act for healthinsurance.org.