As part of the Inflation Reduction Act, the U.S. Congress passed a three-year extension, through 2025, of enhanced subsidies for individuals who purchase their own health coverage on the marketplaces established by the Affordable Care Act (ACA).
These temporary subsidies were originally scheduled to last two years (2021 and 2022) and were passed as part of the American Rescue Plan Act (ARPA).
The goal was to increase the amount of financial assistance available to those already eligible, as well as to middle-income individuals, many of whom previously had no subsidized coverage.
Before ARPA, subsidies to help pay monthly health coverage premiums were only available to people earning between 100% and 400% of the federal poverty level (between $13,590 and $54,360 annually for an individual).
Those who earned more had to pay the full cost of their health plan. With ARPA, the criteria changed from an annual amount to the annual percentage needed to pay for health insurance. Anyone who had to use more than 8.5% of their income for health coverage could qualify for subsidies, regardless of their income.
This broadened the spectrum of people with subsidized plans to an income range of $52,000 to $106,000 per year.
According to the Department of Health and Human Services (HHS), in 2021, 14.5 million people signed up for health insurance through HealthCare.gov and state-based platforms, and 90 percent of them received assistance in the form of subsidies to pay for premiums.
This assistance has been and will continue to be essential, given that inflation has caused premiums and overall health care costs to rise by as much as 50% in some cases.
HHS has estimated that if the government had not extended these subsidies, approximately 3 million people would have lost their health coverage. And around 10 million people would have seen their assistance dramatically reduced or would have lost their subsidies entirely.