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Biden and Democrats Save ACA Subsidy Improvements From Expiring

Great news for Californians and anyone in high-cost urban areas that are on individual and family (IFP) health insurance plans!

The Inflation Reduction Act that is on it’s way to Biden’s desk for signature includes a three-year extension of the massive improvements in federal subsidies for IFP health insurance coverage. The increased subsidies make people in high-cost areas eligible for much more generous subsidies than the original ACA subsidies. These big subsidies don’t put money in people’s pockets – they just don’t have to shell out as much for insurance that’s a lot more expensive than in other parts of the country.

The American Rescue Plan Act of 2021 (ARPA) included the largest expansion of the premium tax credit (PTC, commonly known as the federal subsidy) since the enactment of the Affordable Care Act (ACA), but only for calendar years 2021 and 2022. By extending the new subsidy levels now, everyone buying IFP plans for 2023 can see if they are eligible when they shop for next year’s coverage.

Without an extension of the ARPA’s expanded PTC, most of the 14.5 million people using Covered CA and other health insurance exchanges would have experienced a dramatic rise in premiums. As many as 3.1 million people were at risk of become uninsured, according to a recent report from the Urban Institute.

The improved subsidy system was a huge boon for California in general and high-cost areas like the Bay Area in particular, because the prior hard caps on eligible incomes became a floating formula based both on your income AND the cost of buying insurance in your area. As I like to say, the dollar goes a lot farther in Mississippi than in San Francisco, but under the old system, the gross income limits eligible for subsides were exactly the same.

By saving the more generous subsidies, Biden and the Democrats have ensured that millions of Americans will have the affordable coverage they need to keep their families health and safe. Thanks Obama and Biden!