By Martha Heberlein

A primary reason many people lack insurance coverage is that they cannot afford it. For the last decade, growth in premiums has far outpaced growth in wages and the cost of private coverage is often out of reach for low- and moderate-income families. One goal of health reform is to provide subsidies for these families who are unable to afford coverage on their own.

As the negotiations continue and the costs of reform are considered, the income level at which subsidies should end has become a point of debate; the House would provide subsidies to 400% of the FPL, while the Senate Finance Committee has proposed limiting subsidies to those making up to 300% of the FPL.

A recent issue brief from the Economic Policy Institute focuses on the impact of reducing subsidies to levels promoted by the Finance Committee.

The authors find that when premium subsidies are capped at 300%, the median family in 18 states would no longer be eligible for financial support and families in five states would spend at least 19% of their income on premiums. (An important note – this 19% reflects spending on premiums alone and does not take into account other out-of-pocket spending, such as deductibles and co-payments, thereby underestimating the full financial burden these families would face.) However, if subsidies were instead capped at 400%, the median family in all but three states would be eligible for some level of assistance.

Forty-two million individuals have incomes between 300% and 400% of the FPL. Cutting subsidies for them would make coverage less affordable, undermining one of the fundamental goals of health reform and leaving many without coverage.