Obamacare Subsidies Expanded for Canadians Moving to the US

Canadians moving to the U.S. who don’t have access to an employer-provided group healthcare plan or who aren’t immediately eligible for U.S. Medicare typically purchase individual private U.S. healthcare plans via the federally regulated health insurance marketplace under the Affordable Care Act (“ACA”), often referred to as Obamacare.

Middle-income Canadians moving to the U.S. who will be enrolling or who are already enrolled in these ACA plans can rejoice thanks to President Biden’s recently passed Inflation Reduction Act (IRA) of 2022. The IRA, which was signed into law on August 16, 2022, expands the generous upfront subsidies that are available to those who enroll in ACA plans.

These subsidies, known as premium tax credits (PTCs), are technically advance tax credits that are paid upfront to health insurance companies, directly reducing the cost of monthly insurance premiums for eligible members. The subsidy amounts are based on the taxpayer’s estimated US taxable income for the year, which then gets reconciled at tax time.

For some background context, these PTCs have been around for quite some time as part of the ACA.   Before 2021, they were much harder to qualify for, requiring taxable income of no more than 400% of the Federal Poverty Level (FPL), which for a single person in 2022, amounts to $54,360 USD. Before 2021, anyone with income over the threshold didn’t qualify for any subsidies, resulting in a steep eligibility cliff after the 400% of FPL threshold.

President Biden’s previous coronavirus relief legislation, the American Rescue Plan Act of 2021, greatly expanded the eligibility criteria for PTCs from the previous 400% of FPL cutoff to a far more generous criterion: anyone who would have to pay more than 8.5% of their income for health coverage would qualify for subsidies, regardless of their income level. According to the U.S. Department of Health and Human Services, 14.5 million people signed up for health insurance through the federal (healthcare.gov) and state-based marketplaces in 2021.  Of those, more than 90% qualified for some type of subsidy, with savings averaging $67 per person per month.

These expanded subsidies were set to expire at the end of 2022 and revert to the previous 400% of FPL cutoff, but in a major win for lower- and middle-income Americans, as well as for Canadians moving to the U.S. with modest taxable incomes, the IRA has extended the subsidies through the end of 2025.

To illustrate the potentially dramatic effect of these expanded subsidies, take the example of a Canadian couple moving to Florida in 2022 with an expected combined taxable income for the year of $100,000 USD. A sample Florida Blue plan with a monthly premium that would have cost $1,886 USD per month before the subsidy, is slashed down by nearly 60% to only $800 after a total subsidy of $1,086 USD per month. The subsidy is even higher for incomes below that level (joint income of $50,000 USD qualifies for a subsidy of over 80%) and drops off, in this example, around the $250,000 USD income level.

Clearly, the fact that these generous subsidies have been expanded through 2025 is great news for Canadians moving to the U.S. who plan to enroll in a marketplace healthcare plan, reducing the cost of their healthcare premiums dramatically over the next 3 years.

If you are considering a move to the U.S. and want to know more about healthcare options and how the new subsidies could benefit you, don’t hesitate to schedule a consultation with us today.  Here at MCA, we understand how important it is to get medical care coverage right.  Let us help guide you in finding the coverage you need, while ensuring you take advantage of available programs and subsidies.