The Department of Health and Human Services said Monday that it's on pace to hand out more than $20 billion in subsidies in 2015, which will go to millions of people who signed up for health insurance under the federal Obamacare website.
HHS said nearly 6.5 million people in the 37 states using the HealthCare.gov website will get an average subsidy of $268 per month. The subsidy is in the form of a tax credit, but it's used to immediately lower the cost of the enrollees' health insurance each month. A subsidy of $268 per month amounts to an annual subsidy of $3,216 per enrollee.
Those numbers can change dramatically, depending on changes in household income or other factors that happen throughout the year. But with about 6.5 million enrollees, an average annual subsidy of $3,216 has the potential to mean total subsidy payments of $20.9 billion in 2015.
The Congressional Budget Office estimated that total subsidy payments in 2014 would be about $17 billion, so today's HHS announcement indicates that number is expected to rise in 2015.
One potential obstacle to these payments, however, is a Supreme Court case over whether the federal government can offer these tax subsidies to people who buy plans on the federally run exchange. Plaintiffs in that case say the law does not allow these subsidies, and the high court is scheduled to hear arguments in this case next month.
For now though, HHS said the subsidies are helping to make health insurance affordable for "the middle class," although it's more likely that most of the subsidies are helping lower-income people find insurance. HHS said the average monthly premium for insurance in 2015 is now $374 per month before tax credits, but falls to $105 per month after those subsidies take effect.
"Consumers who sign up in states using HealthCare.gov are saving $268 a month on their premiums on average, and nearly 8 in 10 could select a plan with a premium of $100 or less with tax credits," HHS Secretary Sylvia Burwell said. "This is further proof that the Affordable Care Act is working for the middle class."
According to an Obamacare fact sheet, tax credits are available to people with income between 100 percent and 400 percent of the federal poverty level. The credits go up as income goes down.
While it's called a tax credit, the subsidy is received immediately, and is aimed at making sure lower-income people only have to pay a certain percentage of their income on their health insurance. The final annual amount of the subsidy is reconciled when people file their taxes each year.
The need to reconcile those subsidies has prompted the IRS to issue several new tax forms that many people will have to fill out each year. In late January, HHS said 9.5 million people had signed up for health insurance under Obamacare — enrollment this year ends on February 15.