‘Subsidy cliff’ will return in 2026 if Congress doesn’t act – Healthinsurance.org

Report on the Potential Reinstatement of the Health Insurance “Subsidy Cliff” and its Implications for Sustainable Development Goals

Introduction: Health Affordability and Sustainable Development

A significant challenge to achieving key Sustainable Development Goals (SDGs), particularly SDG 3 (Good Health and Well-being), SDG 1 (No Poverty), and SDG 10 (Reduced Inequalities), is the potential return of the health insurance “subsidy cliff” in the United States. The expiration of enhanced subsidies, implemented under the American Rescue Plan (ARP) and Inflation Reduction Act (IRA), threatens to make health coverage unaffordable for hundreds of thousands of individuals, undermining progress toward universal health access and economic stability.

Analysis of the Health Insurance Subsidy Framework

Legislative Background: Temporary Subsidy Enhancements

To address healthcare affordability, the American Rescue Plan and the subsequent Inflation Reduction Act introduced temporary measures from 2021 through 2025. These legislative actions achieved two primary objectives:

1. They eliminated the abrupt termination of subsidy eligibility for households with incomes exceeding 400% of the Federal Poverty Level (FPL).
2. They capped the premium contribution for a benchmark health plan at a maximum of 8.5% of household income for all eligible enrollees.

These enhancements were critical in promoting SDG 3 by ensuring continuous and affordable access to health insurance. However, without congressional extension, these provisions will expire, leading to the reinstatement of the subsidy cliff in 2026.

The “Subsidy Cliff”: A Barrier to SDG 10 (Reduced Inequalities)

The term “subsidy cliff” describes the sharp, abrupt cut-off of financial assistance for health insurance premiums once a household’s income surpasses 400% of the FPL. This creates a significant inequality, where a marginal increase in income can result in a catastrophic loss of subsidies, amounting to thousands of dollars annually. This mechanism directly contravenes the principles of SDG 10 by creating a system where small economic gains lead to disproportionately large financial penalties, exacerbating income-based inequality in access to essential services.

Projected Impacts on Population Well-being and Economic Security

Disproportionate Risk for Older Demographics

The reinstatement of the subsidy cliff will disproportionately impact older enrollees, particularly those in their 50s and 60s. Due to age-based premium calculations, this demographic faces substantially higher baseline insurance costs. The loss of subsidies could force these individuals to allocate an unsustainable portion of their income—in some cases, over 50%—to health insurance premiums. This financial strain threatens both their health security (SDG 3) and their economic stability, increasing the risk of poverty (SDG 1).

Case Study: High-Premium Region (West Virginia)

An analysis of a 63-year-old couple in Charleston, West Virginia, with an annual income of $85,000 (402% of the 2025 FPL), illustrates the severe impact. The expiration of enhanced subsidies would result in the following premium increases:

• Gold Plan: The monthly premium would increase from approximately $300 in 2025 to an estimated $4,713 in 2026. This represents over two-thirds of their household income.
• Bronze Plan: A plan available for a $0 premium in 2025 would cost an estimated $3,817 per month in 2026, consuming more than half of their household income.

Such drastic cost increases make health coverage functionally inaccessible, directly impeding the achievement of universal health coverage as outlined in SDG 3.

Case Study: Lower-Premium Region (Idaho)

The negative impact persists even in regions with lower average insurance premiums. For a comparable 63-year-old couple in Boise, Idaho, earning $85,000, the consequences remain substantial:

• Bronze Plan: The monthly premium would rise from under $2 in 2025 to an estimated $1,527 in 2026.
• Gold Plan: The monthly cost would increase from $712 in 2025 to an estimated $2,354 in 2026.

Even in a more affordable market, the couple would be required to spend over one-fifth of their income on the least expensive plan, highlighting a systemic failure to ensure affordable healthcare and contributing to regional inequalities, a concern of SDG 10.

Conclusion: Policy Action Required to Uphold SDG Commitments

The potential return of the health insurance subsidy cliff in 2026 poses a direct threat to the advancement of multiple Sustainable Development Goals. By creating prohibitive costs for health coverage, it undermines SDG 3 (Good Health and Well-being). By imposing severe financial burdens that can lead to economic hardship, it works against SDG 1 (No Poverty). Finally, by creating a sharp divide in affordability based on a rigid income threshold, it exacerbates the challenges targeted by SDG 10 (Reduced Inequalities). Legislative action to extend the enhanced subsidy structure is imperative to maintain affordable healthcare access and continue progress toward a more equitable and healthy society.

Analysis of Sustainable Development Goals in the Article

1. Which SDGs are addressed or connected to the issues highlighted in the article?

• SDG 1: No Poverty

  The article connects to SDG 1 by discussing how high health insurance costs can impact household financial stability. The “subsidy cliff” is described as a point where a small increase in income can lead to a massive increase in essential expenditures, potentially pushing households towards financial hardship or poverty. The entire discussion is framed around the Federal Poverty Level (FPL), directly linking healthcare affordability to poverty measures.

• SDG 3: Good Health and Well-being

  This is the most central SDG to the article. The text focuses on the affordability and accessibility of health insurance, which is a critical component of achieving universal health coverage. The potential for enrollees to face premiums that consume “half or more of their income” directly threatens their ability to maintain health coverage, which in turn impacts their access to healthcare and overall well-being.

• SDG 10: Reduced Inequalities

  The article highlights several dimensions of inequality. It points out age-based inequality, noting that older enrollees face significantly higher premiums (“a person who is 64 will pay three times as much as a person who is 21”). It also details income-based inequality, where the “subsidy cliff” creates a sharp divide in affordability for those with incomes just above 400% of the FPL. Furthermore, it touches on geographic inequality, explaining that the impact is more severe in areas with higher average premiums, such as West Virginia compared to Idaho.

2. What specific targets under those SDGs can be identified based on the article’s content?

• Target 1.3: Implement nationally appropriate social protection systems and measures for all.

  The health insurance subsidies provided through the American Rescue Plan (ARP) and Inflation Reduction Act (IRA) are a form of a national social protection system. The article’s core subject is the potential discontinuation of these enhanced measures, which directly relates to the implementation and maintenance of such systems designed to protect households from financial shocks related to healthcare costs.

• Target 3.8: Achieve universal health coverage, including financial risk protection and access to affordable essential health-care services.

  The article is fundamentally about financial risk protection. The subsidies are designed to make health insurance affordable, thereby protecting individuals and families from catastrophic health expenditures. The “subsidy cliff” represents a direct threat to this financial protection, as the loss of subsidies would make coverage “unaffordable” for many, undermining the goal of universal health coverage.

• Target 10.4: Adopt policies, especially fiscal, wage and social protection policies, and progressively achieve greater equality.

  The discussion revolves around a specific fiscal and social protection policy—health insurance subsidies. The temporary elimination of the “subsidy cliff” by the ARP and IRA is presented as a policy that achieves greater equality by ensuring that subsidies “phased out slowly as income increased” rather than ending abruptly. The potential return of the cliff would be a policy change that increases inequality.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

• Indicator: Percentage of household income spent on health insurance premiums.

  This is the most prominent indicator in the article. It is used repeatedly to illustrate the impact of the subsidy cliff. Examples include the ARP’s cap on premiums at “no more than 8.5% of household income” for those above 400% FPL, and the projection that without subsidies, a couple could spend “two-thirds of their household income” or “more than half of their household income” on premiums. This directly measures financial risk protection (Target 3.8) and the effectiveness of social protection policies (Targets 1.3 and 10.4).

• Indicator: Affordability gap based on income level.

  The “subsidy cliff” itself is an indicator of inequality. The article provides a clear example: a couple earning $84,500 (just under 400% FPL) would have their premiums capped, while the same couple earning $85,000 (just over 400% FPL) would face premiums costing “more than 15 times as much.” This sharp difference based on a small income change is a direct measure of income-based inequality in access to affordable healthcare (Target 10.4).

• Indicator: Disparity in premium costs based on age.

  The article explicitly states that “a person who is 64 will pay three times as much as a person who is 21” for the same coverage without subsidies. This ratio serves as a clear indicator for measuring age-based inequality in the context of healthcare affordability (relevant to Target 10.4).

4. Table of SDGs, Targets, and Indicators

Source: healthinsurance.org