American Rescue Plan removes ACA subsidy cliff for two years starting 2021

U.S. President Joe Biden's COVID-19 relief bill passed in March 2021, also known as the American Rescue Plan (ARP), has effectively removed the Affordable Care Act's subsidy cliff for the years 2021 and 2022. The subsidy cliff refers to the steep drop off of health insurance subsidies for those who earn just slightly above 400% of the Federal Poverty Level. Above this income threshold, which varies depending on household size, an individual will have to pay the full amount for their insurance premium. This statistic shows that for example, the health premium for an individual of 60 years who earns more than 51,040 U.S. dollars (400% FPL) would skyrocket to roughly 20 percent of their income. The subsidy cliff affects older adults the most (and those in states with high premiums) because they have relatively high premiums compared to younger adults. With the ARP, annual Marketplace plan premiums are capped at 8.5 percent of household income and also increase the subsidies of those with low-income, with many plans available at zero U.S. dollars in premium. While the ARP is only effective temporarily for the years 2021 and 2022, some say the legislation is here to stay as benefits are difficult to take away once introduced.