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Affordable Care Act Updates

As of 2024, nearly 21.3 million people in the United States have health insurance coverage through the Affordable Care Act (ACA) and their local Marketplace. But changes in the political makeup of Washington are always at work to make changes to this law. In 2021, for example, there was a shift from Republican to Democrat which resulted in a major change to the ACA. The American Rescue Act of 2021 (Covid-19 Relief Law) eliminated the “subsidy cliff” under the Affordable Care Act and expanded Marketplace subsidies above the original 400% of poverty cutoff for two years (2021 and 2022). This change had a big impact on folks approaching retirement age who had income above the 400% mark. The following example demonstrates the impact.

For a household of two people who are age 64 each and too young for Medicare (Medicare starts at age 65), the cost of a Marketplace plan with the subsidy cliff in place was prohibitively expensive if their income is at all above the 400% of poverty level cutoff. In year 2021, the 400% of poverty level cutoff was $68,960 in annual income for a household of two people. For the 64 year old couple that makes just one dollar over that cutoff, the monthly premium for a middle of the road priced Marketplace plan would be $3,125 or a shocking $37,500 per year. That amounts to roughly 46% of their household income just for health insurance. However, if their household income was just one dollar less, the exact same insurance coverage would cost just $557 per month or $6,684 per year. That amounts to roughly 9.6% of their income which is high but much more reasonable.

The American Rescue Act of 2021 offered some great relief for folks over the income cutoff for a subsidy by limiting the cost of health insurance to no more than 8.5% of their household income. In the example above, the couple making just one dollar over the cutoff would have the $37,500 health insurance capped at a cost of no more than $5,862 per year or $489 per month which is a much more reasonable amount. A continuation of these subsidies was included in the Inflation Reduction Act of 2022 and will now last through year 2025.

As we head into another election year in 2024, another possible change on the horizon or at least a point of discussio4 is to lower the current age for Medicare eligibility from age 65 down to age 60. That change would help in the example above even more because the current price for enrolling in Medicare is just $174.70 per month per person. For the couple in the example, the total cost of Medicare would be $349.40 per month or $4,192.80 per year. Under current Medicare rates, the $174.70 per month per person amount applies so long as the couple’s household income is below $206,000. If it is above that amount, the Medicare rate is slightly higher. What we do not know at this point, however, is whether the current Medicare rates would be used for folks in the age 60 to 64 category if such legislation is passed. We will have to wait and see if this potential change actually happens and then look at the details.

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