Legislation Would Tie Subsidies to Cost of Living

U.S. Reps. Mike Thompson (CA-5) and Anna Eshoo (CA-18) introduced H.R. 3986, the Fair Access to Health Care Act. The legislation would tie health insurance subsidies to the cost of living of a geographic area instead of to the national federal poverty level.

Under the ACA, those earning 138% to 400% of the federal poverty level qualify for premium tax credits to purchase health insurance through the exchanges. A person who earning up to $45,960 and a family of four earning up to $94,200 qualify for premium tax credits.

However, the income threshold doesn’t take into account the cost of living in different geographic areas. A family living in New York City or San Francisco is treated the same as a family living in a small town in South Carolina or Texas.

Thompson explained, “In some California cities, the cost of living is far higher than the national average…Some hard working families in high-cost areas like ours don’t qualify for subsides and therefore can’t get affordable insurance. This bill will help make affordable health insurance a reality, no matter where someone lives.”

Under the bill, the federal poverty level threshold will increase proportionally based on an area’s cost of living above the national average. The cost-of-living is determined using the Census Bureau’s Supplemental Poverty Measure. Using this calculation would yield the following results:
• In San Francisco-Oakland-Freemont, Calif., a family of four earning up to $125,757 and individuals earning up to $61,356 could qualify for premium tax credits to purchase health insurance through the ACA’s exchanges.
• In tVallejo-Fairfield, Calif., a family of four earning up to $109,743 and an individual earning up to $53,543 could qualify for premium tax credits.
• In the Napa, Calif., a family of four earning up to $116,808 and individuals earning up to$56,990 could qualify for premium tax credits.
• In the Santa Rosa-Petaluma, Calif., a family of four earning up to $113,746 and individuals earning up to $55,496 could qualify for premium tax credits.

There is precedent for such cost-of-living adjustments. The ACA accounts for the cost-of-living differences in Alaska and Hawaii by using a higher income threshold to determine subsidy eligibility. The Fair Access to Health Care Act would provide similar adjustments to the other 48 states. Individuals and families from low-cost geographical areas would not be affected by this legislation. Those earning up to 400% of the FPL would still be eligible for subsides and no region would see a reduction from their current subsidy level.

Last Updated 11/25/2020

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