What is the ACA Health Insurance Subsidy Cliff
The Affordable Care Act (ACA), commonly known as Obamacare, offers aid to help lower and middle-income individuals & families afford health insurance. Not everyone, however, qualifies for these subsidies – there are income limits referred to as the “subsidy cliff” that determine criteria.
The Subsidy Cliff marks the point at which individuals or families earning over 400% of the federal poverty level (FPL) no longer qualify for ACA subsidies. This means that once your income surpasses the threshold, you may lose access to your subsidies.
Exploring the history of the “Subsidy Cliff”
In 2022 the Inflation Reduction Act brought changes to ACA subsidy limits. These revisions extended the aid initially introduced during the COVID-19 crisis by capping how much individuals and families must contribute towards health insurance premiums at 8.5% of their household income.
Before this amendment, individuals and families making more than 400% of FPL ($58,320 for an individual or $120,000 for a family of four, in 2024) were obligated to cover their entire health insurance premium costs. The Inflation Reduction Act has made strides in tackling the issue of burdens by offering more affordable insurance options for individuals slightly above the previous subsidy cutoff.
State-by-State Impact on Enrollees
The effects of the ACA subsidy threshold can differ depending on your state of residence. Some states have set up their initiatives to assist those above the federal subsidy limits.
For instance, states such as California, New Jersey, and Massachusetts have extended subsidies to individuals earning up to 600% of the Federal Poverty Level (FPL). Residents in these states may access cost insurance choices even if their income exceeds the set thresholds.
Residents in states that solely rely on the federal healthcare.gov marketplace might not benefit from additional state-level support leaving them more susceptible to being affected by the subsidy limit.
How does the Subsidy Cliff impact you and your family?
Income Limits and Filing Status
The ACA Subsidy Cliff is determined based on your household earnings compared to the poverty level. Here are the income limits, as of 2024:
Single individuals: Up to 400% of the Federal Poverty Level ($58,320)
Family of four: Up to 400% of the Federal Poverty Level ($120,000)
Your filing status (filing jointly as head of household, etc.) can affect your eligibility for subsidies and how much you might lose due to the subsidy cliff.
What are some strategies to help avoid subsidy cliff?
If your income is near the subsidy cliff there are several tactics you can employ to prevent losing your subsidies.
Manage your income: Try to avoid increases in your earnings like receiving a one-time bonus or taking money out from retirement accounts. These situations could potentially push you over the threshold.
Opt for employer-provided coverage: If your employer offers health insurance options consider choosing an employer-sponsored plan or buying coverage through the individual marketplace.
Look into state-run programs: Some states have introduced their subsidy initiatives to assist individuals who fall above the federal thresholds.
Conclusion
If you fall within the FPL guidelines, use our online subsidy calculator to discover your subsidy amount. Just enter your household size, income & age to find out the subsidy amount that you qualify for. Subsidized healthcare can help lower out-of-pocket healthcare expenses, allowing more individuals & families who previously faced affordability challenges to access the coverage that they need.
