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.

ACA subsidy cliff: health insurance premiums as percent of income among U.S. adults of 60 years with average Silver Plan under the ACA vs COVID-19 Relief Law in 2021

Income in thousand U.S. dollars	ACA	COVID-19 Relief Law
$15K	1.7%	0%
$20K	4.3%	0.2%
$25K	6%	1.7%
$30K	7.7%	3.4%
$35K	8.9%	4.9%
$40K	9.7%	6.3%
$45K	9.7%	7.3%
$50K	9.8%	8.3%
$51K	9.8%	8.5%
$52K	20.1%	8.5%
$60K	18.2%	8.5%
$70K	15.8%	8.5%
$80K	14%	8.5%
$90K	12.4%	8.5%
$100K	11.2%	8.4%
$120K	9.3%	8.1%
$140K	8%	7.6%
$160K	7%	7%

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Release date

March 2021

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Region

United States

Survey time period

2021

Supplementary notes

Alaska and Hawaii are excluded from this chart because these states have different poverty guidelines, and thus different subsidy cutoffs, from the rest of the U.S. This analysis includes plans that are offered on exchange. ACA premiums account for additional financial assistance provided to enrollees in California and Vermont. The $15,000 income scenarios (118%FPL) reflect weighted average premiums in states that have not yet expanded Medicaid.

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