If you’re shopping for health insurance in the Marketplace/exchange (in other words, an Obamacare health plan), you might find that your premiums for 2025 coverage will end up a lot lower than you expected, thanks to the American Rescue Plan’s (ARP) improvements to the ACA’s premium subsidies, which were extended through 2025 by the Inflation Reduction Act (IRA). As a result of the ARP and IRA, some people who were previously ineligible for ACA subsidies can now receive them, and people who were already subsidy-eligible can get larger subsidies. These subsidy enhancements will remain in effect at least through the end of 2025.
Who's eligible for ACA premium subsidies?
Since the American Rescue Plan temporarily eliminated the “subsidy cliff,” the number of people receiving premium subsidies in the health insurance Marketplace has increased. Of the nearly 21 million people who were enrolled in private plans through the exchanges as of early 2024, 93% were receiving premium subsidies.
How have the income limits for ACA premium subsidies changed?
Prior to 2021, Marketplace buyers were eligible for premium subsidies if their projected household income didn’t exceed 400% of the prior year’s federal poverty level. But from 2021 through 2025, this income limit does not apply. The American Rescue Plan changed the rules for 2021 and 2022, and the Inflation Reduction Act extended that rule change through 2025.
Instead of an income cap, the new rules make buyers eligible for premium subsidies if the cost of the benchmark plan – the second-lowest-cost Silver plan available in the Marketplace – would otherwise exceed 8.5% of their ACA-specific modified adjusted gross income (MAGI). (Note that the cost of the benchmark plan differs from one person to another. Each applicant’s subsidy calculation is unique, based on their household MAGI versus the benchmark plan’s premium for that particular applicant.)
Learn how ACA-specific MAGI is calculated.
On the lower end of the income spectrum, buyers are eligible for subsidies in most states that have implemented the ACA’s Medicaid expansion if their income is above 138% of the federal poverty level. In those states, applicants below that threshold are eligible for Medicaid.
In the states that haven’t yet expanded Medicaid eligibility (Alabama, Florida, Georgia, Kansas, Mississippi, South Carolina, Tennessee, Texas, Wisconsin, and Wyoming), buyers are eligible for premium subsidies if their income is at least equal to the federal poverty level. Because Medicaid expansion hasn’t yet been implemented in these states, eligibility for Medicaid is based on strict pre-ACA eligibility guidelines. (In nine states that have rejected Medicaid expansion, residents continue to face a coverage gap.)
Since 2023, premium subsidies have been newly available to some people who were impacted by the family glitch in previous years. Before 2023, families were ineligible for subsidies in the Marketplace if they had access to employer-sponsored coverage that was considered affordable for just the employee — regardless of how much it cost to add the family to the employer’s plan.
The IRS finalized new regulations to fix the family glitch in October 2022, allowing some employees’ family members to become newly eligible for subsidies in the Marketplace if the cost to cover them under an employer-sponsored plan is not considered affordable. The family glitch fix affects some families more than others.
How can I calculate my health insurance subsidy?
You can use the subsidy calculator on this page to see whether you’re eligible for a subsidy and to see your subsidy estimate.
Do premium subsidy amounts change each year?
Premium subsidy amounts fluctuate from one year to another, based on changes in the cost of the benchmark plan (second-lowest-cost Silver plan) in each area.
Premium subsidies continue to be larger in most of the country than they were in 2017 and previous years, due to the way the cost of cost-sharing reductions (CSR) has been added to Silver plan premiums in most states, and due to the American Rescue Plan and Inflation Reduction Act.
Premium subsidy amounts are also linked to changes in benchmark premiums from one year to the next. If average benchmark premiums decrease (as they did in 2019, 2020, 2021, and 2022), average premium subsidy amounts will also decrease.
When benchmark premiums increase, as they did each year prior to 2019, and also for 2023, 2024, and again for 2025,3 average premium subsidy amounts will also increase.
However, averages only describe the big picture. Each enrollee’s subsidy amount will change based on their own specific circumstances, including potential income changes and how the benchmark premium is changing for them in particular.
Across all states and all individual market plans, the semi-weighted average and median premium increase is in the range of 6% to 7% for 2025.
But the average benchmark premium in states that use HealthCare.gov is only increasing by 3% for 2025.3 (Again, that’s an average and there’s always considerable variation from one state to another.)
This is similar to 2024, when overall average full-price (before subsidies) premiums increased by about 6% in the individual/family markets nationwide,6 but average benchmark premiums in HealthCare.gov states only increased by 4%.7 Across all states, including states that run their own Marketplaces, the average benchmark premium was 4.5% higher for 2024 than it was for 2023.
An increase in benchmark premiums will result in an overall increase in premium subsidy amounts, because subsidies change to keep pace with the benchmark premium (subsidy amounts are calculated based on keeping the after-subsidy premium for the benchmark plan at a specified percentage of the enrollee’s household income, so if the benchmark premium grows, the subsidy has to grow to keep the after-subsidy premium at the allowable percentage of income).
But if your plan’s premium increases by more than the benchmark premium, your net (after-subsidy) premium will increase. The subsidy amount changes each year to keep pace with the cost of the benchmark plan, not your specific plan (assuming you’re not enrolled in the benchmark plan). This is why it’s so important to comparison shop each year during open enrollment.
If we look at 2023 to 2024, when the average benchmark premium increased by 4.5%, average subsidies grew by about $10/month. The average subsidy amount was $526/month in 20238 and $536/month in 2024.9 But the specific details vary significantly from one area to another, and subsidy amounts also depend on the income of each enrollee relative to the prior year’s federal poverty level.
Are premium subsidies available for any health plan?
Premium subsidies can be used with any metal-level plan (Bronze, Silver, Gold, or Platinum) available in the Marketplace. But they can’t be used to pay for plans purchased outside the Marketplace, even if the same plan is sold in the Marketplace. So it’s important to make sure you’re shopping on the Marketplace if you want to take advantage of any available financial assistance.
Subsidies can’t be used to pay for pediatric dental/vision plans that are sold in the Marketplace as a stand-alone plan – as opposed to being embedded in the medical plan – unless the available medical plans do not include embedded pediatric dental/vision.
Subsidies also can’t be used to pay for short-term health insurance (which is not ACA-compliant) or supplemental insurance coverage, including accident supplements, adult dental/vision plans, critical illness insurance plans, or stand-alone prescription drug insurance.
And although catastrophic health plans — which are ACA-compliant — are available via the Marketplace/exchange, subsidies cannot be used with catastrophic plans. So catastrophic plans are generally only a good choice for an applicant who isn’t eligible for subsidies.
Are there other types of ACA subsidies?
Yes. The ACA also provides cost-sharing reductions (CSR, also known as cost-sharing subsidies), which can reduce your out-of-pocket costs – as long as you enroll in a Silver plan. Nearly half of all the people who enrolled in Marketplace plans during the open enrollment period for 2024 coverage selected a plan that included cost-sharing subsidies.
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