Health Care Subsidies for Canadians Moving to the US

For Canadians moving to the US, the cost of US health care can be daunting. US residents who don’t have access to an employer group plan must typically find an individual policy on the health care marketplace.

These plans can be expensive, depending only on three factors: age, smoking status (in some states), and location.

The good news is that under the Affordable Care Act, commonly known as “Obamacare,” there can be no discrimination based on pre-existing conditions – no one can be denied coverage or charged more due to their health status.

Another source of welcome relief is generous government subsidies, technically known as Premium Tax Credits (PTCs), which significantly bring down the cost of individual health plan premiums for eligible Americans. According to the Kaiser Family Foundation, the average monthly subsidy in 2023 was $527 USD. These PTCs are paid upfront to the insurance company on behalf of eligible policy holders, thus bringing down the net monthly premium cost immediately.

Subsidy eligibility is based purely on income for US taxpayers – there is no net worth test. This means that wealthy Canadians moving to the US can still benefit from generous government subsidies as long as their taxable income in the US is modest. The income qualification is based on the current year’s income, which relies on a best efforts estimate, which then ends up getting reconciled on the US tax return due by April 15^th of the following year (before any extensions).

The formula to qualify for subsidies used to be restricted to those earning no more than 400% of the Federal Poverty Level (FPL). For 2024, the FPL for a single individual based on 2023 figures, is $14,580 USD for a single individual, or $19,720 USD for a family of 2. This means that, under the old rules, any single individual with income exceeding $58,320 or family of 2 with income exceeding $78,880 would have been denied eligibility for subsides.

Fortunately, as a result of COVID relief legislation passed under President Biden, the eligibility criteria was expanded so that far more middle-income Americans would qualify for subsidies:  under the current rules, if your income exceeds 400% of the FPL, you won’t pay more than 8.5% of your income toward health plan premiums. So, let’s say a single individual earns $100,000 USD, their monthly premium is capped at $708.33, with any excess premium being credited to them in the form of subsidies.

The legislation that expanded this subsidy eligibility was originally set to expire at the end of 2022, but was then extended to the end of 2025. It is unknown if new legislation will come out in the interim to extend this expanded subsidy eligibility beyond 2025, but for now, the relief these subsidies provide is most welcome.

Canadians moving to the US can benefit from these subsidies. We work with our clients to help them with acceptable income estimates to be provided to the government marketplace to establish their eligibility for subsidies. There can be interesting strategies for Canadians moving to the US to reduce their taxable income on the US side in order to cement their eligibility for subsidies, at least through 2025. We can also work with you to explore alternative US health care options such as Global Health Insurance or potential US Medicare qualification at age 65 depending on your situation. Should you be contemplating a move to the US, or should you want to discuss your cross-border health care plan, please reach out to schedule a consultation.