Permanent Health Tax Credit Extension Removes Income Cap, Subsidizing Insurance for Higher Earners

This bill, the “Protecting Health Care and Lowering Costs Act,” is essentially a two-part deal. First, it completely wipes out a set of health-related rules that were put in place by a previous law, effectively snapping the regulations back to their prior state. Second, and much more significantly for your wallet, it permanently extends and enhances the premium tax credits used to buy health insurance on the marketplace (ACA exchanges), starting after 2025.

The End of the Subsidy Cliff

The biggest change here is the permanent enhancement of the premium tax credit under Section 36B of the tax code. If you’ve ever bought insurance through the marketplace, you know how crucial these subsidies are. Right now, there’s an income cap—if your household income crossed 400% of the Federal Poverty Line (FPL), your enhanced tax credit assistance dropped to zero. It was a massive financial cliff that forced many middle-income families to pay full price for coverage.

This bill permanently removes that 400% FPL cap. What does this mean in real life? If you’re a couple earning $100,000 to $120,000, you might currently lose all your subsidy help. Under this new rule, you would continue to receive assistance, ensuring that the cost of your benchmark plan remains capped at a certain percentage of your income. For the busy professional, the small business owner, or the freelancer whose income fluctuates, this means much more stable and predictable health insurance costs, regardless of how well you do in a given year.

A Smoother Ride for Premium Costs

Beyond removing the cliff, the bill changes how the subsidy is calculated. It updates the “applicable percentage” formula, which dictates the maximum share of your income you have to spend on premiums before the credit kicks in. Instead of a series of steps, the new calculation uses a linear, sliding scale. This means the amount you’re expected to pay increases smoothly as your income rises, rather than jumping suddenly. The goal is to make sure your net premium costs are always manageable relative to your earnings, providing a much smoother financial transition as you move up the income ladder.

Back to the Regulatory Drawing Board

Section 2 of the bill is less about consumer savings and more about regulatory cleanup. It completely repeals all changes made under a specific subtitle (Subtitle B of title VII of a specific reconciliation act). Since the bill doesn't specify what those changes were, the impact is a bit opaque, but the effect is clear: any health-related rule or provision that was established or modified by that subtitle is now gone. The law snaps back to whatever regulatory environment existed before those prior amendments were enacted. This kind of repeal can be a good thing if the previous changes were confusing or ineffective, but it’s worth noting that any consumer or regulatory protections established in that repealed subtitle are also wiped off the books.

The Bottom Line: Costs and Commitment

For most people buying coverage on the ACA marketplace, this bill is a huge win for affordability and stability. It removes the threat of the subsidy cliff, offering financial security to middle-class families who often struggle with high premiums. The main challenge, as always with permanent spending, is the cost. Making these enhanced tax credits permanent and uncapped represents a significant, long-term commitment of federal funds. While it lowers costs for consumers, it increases the expenditure for the federal government. This is the trade-off: lower monthly premiums for millions of people, financed by the federal budget.