Disability income is counted differently depending on which health insurance program you're looking at

When you receive Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI), that money counts as income for some health insurance programs but not others. The rules depend on which program is calculating your income—the Affordable Care Act (ACA) marketplace, Medicaid, Medicare, or an employer plan. This matters because income thresholds determine whether you pay premiums, what your out-of-pocket costs are, and sometimes whether you're covered at all.

The short answer: SSDI counts as income for ACA marketplace subsidies and most employer plans. SSI has special rules that often keep it from counting. Medicare doesn't use income to determine coverage—you get it based on age or disability status, not how much money you have. Medicaid rules vary by state and program type.

Key Takeaways

  • SSDI counts as income for ACA marketplace premium subsidies and cost-sharing reductions, which means higher SSDI payments can reduce your tax credits.
  • SSI does not count as income for ACA subsidies in most states, and many states exclude it from Medicaid income calculations as well.
  • Medicare Part A and Part B do not use income to determine who gets coverage, but income does affect whether you pay higher premiums for Part B and Part D.
  • Medicaid income rules vary by state and by which Medicaid category you fall under—disability-based Medicaid, expansion Medicaid, and emergency Medicaid all count income differently.
  • Work incentives like the Plan to Achieve Self-Support (PASS) can exclude some of your income from SSDI calculations, which may lower your countable income for health insurance purposes.

How SSDI counts for ACA marketplace insurance

If you buy health insurance through the ACA marketplace (Healthcare.gov or your state's exchange), your SSDI payment counts as Modified Adjusted Gross Income (MAGI) for the purpose of calculating premium tax credits and cost-sharing reductions. This means the Social Security Administration sends you a 1099-SSA form each year showing your SSDI as income, and you report it when you explore for marketplace coverage.

Higher SSDI payments reduce the tax credits you receive. If your SSDI payment pushes your income above the threshold for your household size and state, you may receive smaller credits or none at all. You can still buy marketplace coverage, but you will pay the full premium yourself. If your income drops—because your SSDI was reduced, for example—you can update your process mid-year and receive credits retroactively.

The income limits for premium tax credits are based on the federal poverty level. For 2024, a single person with income up to about 400% of the federal poverty level (roughly $54,000 per year, though this varies by state) can receive some credit. Your actual credit depends on your income, your age, and the cost of the second-lowest-cost silver plan in your area.

How SSI is treated differently for health insurance income

Supplemental Security Income (SSI) is not counted as income for ACA marketplace subsidies in most states. This is a significant difference from SSDI. When you explore for marketplace coverage, you report your income, and SSI does not appear on that form. This means an SSI recipient with no other income can receive the maximum premium tax credit, even though they receive a monthly SSI payment.

Many states also exclude SSI from their Medicaid income limits. If you receive SSI, you are often automatically covered by Medicaid in your state—a process called "SSI-related Medicaid"—and your SSI payment does not count against income thresholds. However, some states have different rules, so you should contact your state Medicaid office to confirm how your SSI is treated.

The reason for this difference is that SSI is a needs-based program designed for people with very low income and resources. Congress decided that counting SSI as income for other programs would defeat the purpose of SSI. SSDI, by contrast, is an earned-benefit program based on work history, so it is treated more like regular income.

Medicare income rules and premium calculations

Medicare does not use income to determine whether you are covered. If you are 65 or older, or if you have received SSDI for 24 months, you are covered by Medicare Part A (hospital insurance) regardless of how much money you have. Income does not make you ineligible.

However, income does affect what you pay for Medicare. If your income is above a certain threshold, you pay higher premiums for Part B (medical insurance) and Part D (prescription drug coverage). These are called Income-Related Monthly Adjustment Amounts (IRMAA). For 2024, if your income is above $97,000 as a single person (or $194,000 married filing jointly), you pay a higher Part B premium. The exact amount depends on your income bracket.

SSDI counts as income for IRMAA calculations. SSI does not. If you receive both SSDI and SSI, only the SSDI is counted. You can appeal an IRMAA information if your income dropped during the year due to a life-changing event like loss of employment or a reduction in benefits.

Medicaid rules vary by state and category

Medicaid is a joint federal-state program, so income rules differ by state and by which Medicaid category you fall under. There are three main routes to Medicaid for people with disabilities:

SSI-related Medicaid: If you receive SSI, you are usually automatically covered by Medicaid. Your SSI payment does not count as income for Medicaid purposes. This is the simplest path and covers most people on SSI.

Disability-based Medicaid: Some states cover people with disabilities who do not receive SSI but have income and resources below the state's limit. These limits vary widely—some states use the federal poverty level (about $1,600 per month for a single person in 2024), while others use higher thresholds. In these programs, SSDI does count as income.

Medicaid expansion: States that expanded Medicaid under the Affordable Care Act cover adults with income up to 138% of the federal poverty level, regardless of disability status. SSDI counts as income for expansion Medicaid. If your SSDI payment is below the expansion threshold, you may be covered; if it is above, you are not.

To find out which Medicaid category applies to you, contact your state Medicaid office. Your state's rules determine whether your SSDI counts and by how much.

Work incentives that can reduce your countable income

If you work while receiving SSDI, you can use work incentives to exclude some of your earnings from the income calculation. The most important one for health insurance purposes is the Plan to Achieve Self-Support (PASS).

A PASS allows you to set aside income and resources for a specific work goal—like starting a business, getting training, or buying equipment. Money in your PASS is not counted as income for SSI purposes, and it does not count toward your resource limit. If you use a PASS, your countable SSI income is lower, which may affect your Medicaid coverage and your ACA marketplace income calculation if you also receive SSDI.

Other work incentives include the Student Earned Income Exclusion (excludes some earnings if you are under 22 and a student) and the Impairment Related Work Expenses (IRWE) deduction (excludes costs directly related to your ability to work). These reduce your countable SSDI income but do not directly affect ACA marketplace calculations, since the marketplace uses gross SSDI, not the amount Social Security pays you after work incentives.

How to report disability income when you explore for health insurance

When you explore for marketplace coverage through Healthcare.gov or your state exchange, you will be asked to report your income. You should report your SSDI as income. You do not need to report SSI in most states. If you are unsure, the process will tell you which income sources to include.

Social Security sends you a 1099-SSA form each January showing your SSDI for the previous year. You can use this form to verify your income when you explore. If your SSDI changed during the year, you can report the current amount and update your process if it changes again.

For Medicaid, the process is different. You explore through your state Medicaid office, not the marketplace. If you receive SSI, you may be automatically enrolled in Medicaid—you do not need to report income separately. If you are explore for disability-based or expansion Medicaid, you will report your income to Medicaid directly.

Frequently Asked Questions

If I get SSDI and my payment increases, will my health insurance costs go up?

If you have ACA marketplace coverage, yes—a higher SSDI payment increases your reported income, which reduces your premium tax credit. You should update your process when your SSDI changes so your credit is recalculated. If you have Medicaid, an increase in SSDI might push you over the income limit in some states, though SSI-related Medicaid is not affected by SSDI changes.

Can I get marketplace subsidies if I receive both SSDI and SSI?

Yes. You report only your SSDI as income for the marketplace. Your SSI does not count. This means your reported income is lower than if you received SSDI alone, so you may receive a larger premium tax credit.

Does my SSDI count as income for Medicare premiums?

Yes, SSDI counts toward the income thresholds for IRMAA, which determines whether you pay higher premiums for Part B and Part D. If your SSDI is high enough, you will pay more than the standard premium. You can appeal if your income dropped during the year.

What happens to my Medicaid if my SSDI increases?

If you receive SSI-related Medicaid, your Medicaid does not change—SSI-related Medicaid is not affected by SSDI. If you receive disability-based or expansion Medicaid, an increase in SSDI might push you over the income limit, and you could lose coverage. Contact your state Medicaid office to find out your specific limit.

Can I use a PASS to lower my income for health insurance?

A PASS lowers your countable SSI income, which may help with SSI-related Medicaid or affect your ACA marketplace calculation if you also receive SSDI. However, the marketplace uses your gross SSDI, not your countable amount after a PASS. Talk to a work incentives planning specialist to understand how a PASS affects your specific situation.