Lighter out-of-pocket expenses
Your insurance premium is only part of the financial equation of health insurance. There also are those expensive "cost-sharing" items, such as deductibles, copayments and coinsurance, which your health insurer requires you to pay on your own. It would defeat the purpose of the Affordable Care Act if you obtained health insurance but couldn't afford the out-of-pocket expenses to use it.
To avoid that scenario, health insurers offering plans through state marketplaces must reduce your out-of-pocket costs. There are savings if, for example, you're an individual earning $28,725 or less, or a family of four with income up to $58,875 (based on 2013 estimates).
"It's an arrangement with the carriers; (the government) reimburses the carrier for the unpaid cost-sharing," explains Chollet.
With the cost-sharing reduction, you get the out-of-pocket savings of the marketplace's higher-priced platinum- and gold-level policies, though you buy a lower-cost "silver" plan.
Dania Palanker, senior counsel for the National Women's Law Center in Washington, D.C., says if your income qualifies you for the cost-sharing discount, you're automatically eligible for the premium tax credit.
"Not only is your premium going to be less expensive, but your deductibles and copays will also be lower," she says.