When discussing health insurance, we often hear the term “subsidy cliff.” A subsidy is a financial assistance provided by the government to lower the cost of health insurance for people who qualify. The subsidy cliff refers to a phenomenon where people who earn slightly more than a certain income level can suddenly lose their eligibility for subsidies, resulting in a sharp increase in their health insurance premiums.

The Affordable Care Act (ACA) and the Subsidy Cliff

The ACA, also known as Obamacare, expanded access to health insurance for millions of Americans by providing subsidies to help people afford coverage. However, the ACA also has an income limit for subsidy eligibility. For 2024, the income limit for receiving subsidies is 16,383% of the federal poverty level (FPL). This means that individuals who earn more than this amount will not qualify for subsidies.

Here is a table containing the FPLs for different family sizes in 2024 as per the U.S. Department of Health & Human Services:

Family Size Federal Poverty Level (FPL)
— 1 13,590
2 18,550
3 23,510
4 28,470
5 33,430
6 38,390

Implications of the Subsidy Cliff

The subsidy cliff can have significant implications for people who earn slightly more than the income limit. Without subsidies, they may have to pay the full cost of their health insurance premiums, which can be thousands of dollars per year. This can make it difficult for people to afford health insurance, especially if they have low incomes or have high medical expenses.

Purchasing Health Insurance with High Income – What to do?

If you earn more than the income limit for subsidies, you still have several options for obtaining health insurance. You can:

Purchase health insurance on the open market: You can buy health insurance directly from an insurance company without receiving any subsidies. However, this can be expensive, especially if you have a pre-existing condition.

Explore employer-sponsored health insurance: If you are employed, you may be able to obtain health insurance through your employer. Employer-sponsored health insurance can be more affordable than purchasing insurance on the open market.

Consider a health insurance high-deductible plan (HDHP): HDHPs have lower monthly premiums but higher deductibles. This means you will have to pay more out-of-pocket costs before your insurance coverage begins. However, HDHPs can be a good option if you are healthy and do not anticipate having high medical expenses.

Look into Medicaid: Medicaid is a government health insurance program for low-income individuals and families. If you qualify for Medicaid, you may be able to obtain health insurance for free or at a low cost.

Consult a licensed agent: You can also seek the assistance of a licensed health insurance agent. They can help you compare plans and find the most affordable option for your needs.

It is important to note that the information provided in this blog should not be construed as professional guidance and does not replace the advice of a qualified licensed insurance agent.

Conclusion

The subsidy cliff can be a challenge for people who earn slightly more than the income limit for subsidies. However, there are still several options available for obtaining health insurance. By exploring your options and seeking professional advice, you can find an affordable health insurance plan that meets your needs.