The Affordable Care Act (ACA) has provided premiums subsides, also known as Advanced Premium Tax credits (APTCs), to applicants who were within the designated income range since 2014. Originally, the income range was defined as percent to the Federal Poverty Level (FPL) and required the applicant to have a minimum level income of 150 percent of FPL and a maximum limit of 400 percent of FPL, as shown in the chart below. The number of family members in the tax household was also used to determine the income limits.
Since the beginning of the ACA, anyone with income below 150 percent FPL would not immediately be eligible for the subsidy, but would be forced to have their application reviewed by the respective state Medicaid office to determine eligibility for state-based Medicaid health coverage. This process continues today. Once an application is denied for state Medicaid, the applicant will then become eligible to apply for the federal premium subsidy. Also, until more recently, anyone with income at or above 400 percent FPL would be considered over the limit and ineligible for the premium subsidy.
In March of 2021, the American Rescue Plan (ARP) was implemented as an economic stimulus in response to the COVID pandemic. The ARP revised how the upper-income limit would be calculated in order to qualify for premium subsidy and the amount of subsidy available. Under new rules, instead of falling off the eligibility cliff at 400 percent FPL, the premium cost of the benchmark Silver plan in a given area could not exceed 8.5 percent of the applicant’s gross taxable household income. This greatly expanded the number of people with higher incomes who would now become eligible for the ACA subsidies.
For example, using the original ACA 400 percent FPL guidelines, a married couple in Ohio both age 60 would have been ineligible for the premium subsidy had their household income been at or above $73,240. Under the revised guidelines of the ARP, the same couple with a gross annual household income of $175,000 would be eligible for a subsidy amount of $499 per month to assist with out of pocket premium cost. The full monthly premium cost of the benchmark Silver plan in their area is $1,740.18. After subtracting the subsidy amount of $499, their net monthly out-of-pocket cost is $1,241.18
Originally, the expanded health benefits associated with the ARP were to continue until December 31, 2022. However, due to the overall inflationary climate in the county during 2021 and 2022, the Inflation Reduction Act was enacted in August of 2022. As a result, the new subsidy rule changes that occurred under the American Rescue Plan will remain in effect without change through 2025.
If you have any questions about whether or not you qualify for a premium tax credit, please contact your ARC client care advisor today!