What does "subsidy" mean in the context of health insurance?

In the context of health insurance, a "subsidy" refers to financial assistance provided to individuals or families to help reduce the cost of their insurance premiums. This financial support is designed to make healthcare coverage more affordable, especially for those with low to moderate incomes. Subsidies can come in various forms, such as tax credits or direct payments, and are particularly relevant under programs like the Affordable Care Act (ACA), where they are aimed at promoting access to healthcare by lowering the financial burden of insurance costs for eligible enrollees.

The other options present distinct concepts that do not align with the definition of a subsidy. A penalty for not having insurance pertains to financial charges associated with not carrying coverage, while a type of insurance plan refers to the specific policies available in the market. An employer contribution to health costs describes the financial support an employer provides towards worker healthcare expenses, rather than subsidies aimed at reducing premiums for individuals in the broader healthcare marketplace.