If you’re shopping for health insurance in the Marketplace/exchange (in other words, an Obamacare health plan), you might find that your premiums for 2024 coverage will end up a lot lower than you expected, thanks to subsidy enhancements that were created by the American Rescue Plan in 2021 and extended through 2025 by the Inflation Reduction Act. Under these laws, some people who were previously ineligible for subsidies can now receive them, and people who were already subsidy-eligible can get larger subsidies.
Who’s eligible for ACA premium subsidies?
Since the American Rescue Plan temporarily eliminated the “subsidy cliff,” the number of people receiving premium subsidies in the Marketplace has increased. Of the 15.7 million people who were enrolled in private coverage through the exchanges as of early 2023, 91% were receiving premium subsidies.
How have the income limits for ACA premium subsidies changed?
Prior to 2021, Marketplace buyers were eligible for premium subsidies if their projected household income didn’t exceed 400% of the prior year’s federal poverty level. But from 2021 through 2025, this income limit does not apply. The American Rescue Plan changed the rules for 2021 and 2022, and the Inflation Reduction Act extended that rule change through 2025.
Instead of an income cap, the new rules make buyers eligible for premium subsidies if the cost of the benchmark plan – the second-lowest-cost Silver plan available in the Marketplace – would otherwise exceed 8.5% of their ACA-specific modified adjusted gross income (MAGI). (Note that the cost of the benchmark plan differs from one person to another. Each applicant’s subsidy calculation is unique, based on their household MAGI versus the benchmark plan’s premium for that particular applicant.)
On the lower end of the income spectrum, buyers are eligible for subsidies in most states that implemented ACA’s Medicaid expansion if their income is above 138% of the federal poverty level. In those states, applicants below that threshold are eligible for Medicaid.
In the states that haven’t yet expanded Medicaid eligibility (Alabama, Florida, Georgia, Kansas, Mississippi, South Carolina, Tennessee, Texas, Wisconsin, and Wyoming), buyers are eligible for premium subsidies if their income is at least equal to the federal poverty level. Because Medicaid expansion hasn’t yet been implemented in these states, eligibility for Medicaid is based on strict pre-ACA eligibility guidelines. (In nine states that have rejected Medicaid expansion, residents continue to face a coverage gap.)
Since 2023, premium subsidies have been newly available to some people who were impacted by the family glitch in previous years. Prior to 2023, families were ineligible for subsidies in the Marketplace if they had access to employer-sponsored coverage that was considered affordable for just the employee — regardless of how much it cost to add the family to the employer’s plan.
The IRS finalized new regulations to fix the family glitch in October 2022, allowing some employees’ family members to become newly eligible for subsidies in the Marketplace if the cost to cover them under an employer-sponsored plan is not considered affordable. The family glitch fix affects some families more than others.
How can I calculate my health insurance subsidy?
You can use the subsidy calculator on this page to see whether you’re eligible for a subsidy and to see your subsidy estimate.
Do premium subsidy amounts change each year?
Premium subsidy amounts fluctuate from one year to another, based on changes in the cost of the benchmark plan in each area.
Premium subsidies continue to be larger in most of the country than they were in 2017 and previous years, due to the way the cost of cost-sharing reductions (CSR) has been added to Silver plan premiums in most states, and due to the American Rescue Plan and Inflation Reduction Act.
Premium subsidy amounts are also linked to changes in benchmark premiums from one year to the next. If average benchmark premiums decrease (as they did in 2019, 2020, 2021, and 2022), average premium subsidy amounts will also decrease.
When benchmark premiums increase, as they did each year prior to 2019, and also for 2023 and again for 2024, average premium subsidy amounts will also increase.
However, averages only describe the big picture. Each enrollee’s subsidy amount will change based on their own specific circumstances, including potential income changes and how the benchmark premium is changing for them in particular.
For 2024, approximately 320 insurers have proposed median price increases of about 6%. From 2022 to 2023, average benchmark premiums in states that use HealthCare.gov increased by about 4%, and they’re increasing by another 4% for 2024. Across all states, including states that run their own Marketplaces, the average benchmark premium is 4.5% higher for 2024 than it was for 2023.
That increase in the average benchmark premiums will result in an overall increase in premium subsidy amounts for 2024, because subsidies change to keep pace with the benchmark premium (subsidy amounts are calculated based on keeping the after-subsidy premium for the benchmark plan at a specified percentage of the enrollee’s household income, so if the benchmark premium grows, the subsidy has to grow to keep the after-subsidy premium at the allowable percentage of income). But the specific details will vary significantly from one area to another.
Are there other types of ACA subsidies?
Yes. The ACA also provides cost-sharing reductions, which can reduce your out-of-pocket costs – as long as you enroll in a Silver plan. Nearly half of all Marketplace enrollees were receiving cost-sharing subsidies in early 2023.
Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about the Affordable Care Act for healthinsurance.org. Her state health exchange updates are regularly cited by media who cover health reform and by other health insurance experts.