The Health Care Affordability Act of 2025 expands eligibility for premium tax credits and adjusts contribution requirements to lower health insurance costs for more households.
Jeanne Shaheen
Senator
NH
The Health Care Affordability Act of 2025 expands access to premium tax credits by removing the current income eligibility cap, allowing more households to qualify for financial assistance. The bill also introduces a new sliding scale for premium contributions to ensure health insurance costs remain more manageable for families. These changes are set to take effect for taxable years beginning after December 31, 2025.
Health Care Affordability Act of 2025 Removes Income Caps for Insurance Tax Credits Starting in 2026.
Starting in tax year 2026, the Health Care Affordability Act of 2025 fundamentally changes who gets a discount on health insurance. Under Section 2, the bill eliminates the 'subsidy cliff'—a rigid rule that previously cut off all premium tax credits for any household earning more than 400% of the federal poverty line. By striking multiple parts of Section 36B of the Internal Revenue Code, the legislation ensures that even if you earn a solid middle-class or upper-middle-class income, you won't be forced to pay an unlimited percentage of that income toward health coverage. Instead, everyone becomes eligible for a credit if their insurance premiums exceed a certain portion of their earnings.
Breaking the Subsidy Cliff
For a long time, the 400% poverty line cap meant that a single dollar of extra income could cost a family thousands in lost tax credits. This bill replaces that hard cutoff with a sliding scale. Imagine a self-employed graphic designer or a small business owner making just over the old limit; under the current rules, they might pay 15% or 20% of their gross income just to keep a silver-level plan. This bill amends the 'applicable percentages' table, creating a linear scale that ensures premiums stay within a predictable percentage of a household's total income, regardless of how much they earn. It’s a move toward making sure that as you work harder and earn more, you aren't immediately penalized with massive healthcare bills.
The New Math of Monthly Premiums
The bill doesn't just open the door for more people; it changes the math for everyone inside. By deleting obsolete rules like Section 36B(c)(1)(E), the legislation shifts the focus from 'who is poor enough to qualify' to 'how much of your paycheck is reasonable to spend on health.' This is a big deal for families in high-cost-of-living areas where a $100,000 salary doesn't go as far as it used to. Because the changes apply to taxable years beginning after December 31, 2025, you’ll see the impact when you sign up for coverage during the late 2025 open enrollment period for the following year.