Subsidy Cliff Visualizer

Under the original Affordable Care Act (2010), premium tax credits (APTC) were available only to households earning between 100% and 400% of the Federal Poverty Level. At exactly 400% FPL, subsidies abruptly dropped to $0 — creating a “cliff” where earning a small amount more could increase annual healthcare costs by thousands of dollars.

For example, a single adult earning $60,000 (just below 400% FPL) might receive $200+/month in subsidies, while earning $61,000 (just above) would receive nothing.

The Inflation Reduction Act of 2022 eliminated the 400% FPL cliff by capping premium contributions at 8.5% of household income for all eligible enrollees, regardless of FPL percentage. This means:

• No household pays more than 8.5% of income for the benchmark Silver plan
• Subsidies phase out gradually instead of dropping to zero
• Households above 400% FPL now qualify for assistance if premiums exceed 8.5%
• Lower-income households receive even larger subsidies than under the original ACA

The IRA-enhanced subsidies were initially authorized through 2025 and are projected to continue through 2026. If Congress does not extend them:

• An estimated 4.4 million Americans above 400% FPL would lose all marketplace subsidies
• Average premiums for subsidized enrollees could increase by $700-$900/year
• The “cliff” effect would return, creating perverse incentives for income management near the 400% FPL threshold
• Marketplace enrollment could decline by an estimated 3-4 million people

Sources: Congressional Budget Office (2022), Kaiser Family Foundation (2023), HHS Office of Health Policy (2023).