To address the turmoil caused by the COVID-19 pandemic and the accompanying economic disruption, President Biden enacted a $1.9 trillion American Rescue Plan Act on March 11, 2021. A significant issue that was brought to light by this pandemic is that millions of U.S. residents are uninsured and government needs to make effort to provide coverage to more people. This act enhances premium assistance eligibility for the millions of Americans buying their coverage through the ACA marketplace. This further makes 3.7 million people newly eligible for financial assistance to purchase marketplace health coverage. Monthly premiums for plans purchased through healthcare.gov on average will be $50 less per person. 80% of the uninsured population will be able to purchase a health plan for $10 per month or less with financial assistance and over 50% of the enrollees can enroll in a silver plan for $10 per month or less.
To bring more and more people under health insurance coverage, the American Rescue Plan has made the following three changes:
- The government has expanded funding for Medicaid and the Children’s Health Insurance Program
- COBRA subsidies have been increased
- Subsidies for marketplace coverage has also been expanded
Though the changes made to the ACA’s tax credits are done for 2021 and 2022 but will significantly enhance affordability for millions of Americans. Some of the vital points of these changes include:
- Enrollees having income between 100% and 150% of the FPL will be able to obtain benchmark silver-plan for free. The plan will be available for a $0 premium and very low deductible.
- For the first time, people having incomes above 400% of the Federal Poverty Level will also get subsidies. This means that an individual with an annual income of $51,040, or a family of 4 with an annual income of $104,800 will qualify for the financial assistance that will lower their monthly premiums.
- People of every income group will be eligible for financial assistance and will require to contribute only 8.5% of their household income toward a benchmark silver plan.
People receiving unemployment compensation for at least a week will qualify for more generous financial assistance that will significantly reduce their monthly premiums and out-of-pocket costs.
Starting from April 1, residents of the 36 states that use healthcare.gov will have access to enhanced subsidies. The special enrollment period that runs through August 15, gives uninsured residents a chance to enroll in marketplace coverage, and they also have access to financial assistance. These enrollees will have access to more generous financial assistance and if required they can even change plans.
In-depth Overview on Enhanced Subsidies
Subsidies on COBRA Coverage
COBRA coverage is designed for employees losing their employer-based coverage and it allows them to continue with the coverage by paying monthly premium themselves. They can continue their COBRA coverage for up to 18 months. Generally, COBRA is very expensive, and the employees are required to pay a premium of up to 102% of its total cost that also includes the amount earlier paid by their employers. This allows individuals who have lost employer coverage to continue to see their doctors and they also don’t require meeting their deductible under a new plan.
The American Rescue Plan Act provides a federal subsidy of 100% of COBRA premiums for people who lost coverage because either they were laid off or their hours were reduced. The subsidies will be available from April to September 2021 and will be paid through tax credits to employers with self-insured plans and insurers for insured plans. Premium subsidies do not come as taxable income for the recipients.
Both insurers and employers are supposed to provide notice of the coverage subsidies to the beneficiaries on becoming eligible and also when it ends. People who did not enroll in COBRA earlier on losing jobs in the pandemic or dropped the coverage after enrolling, then these people now have the opportunity to enroll in subsidized coverage within 60 days of it becoming available or on receiving the notice from their employer. This means that people who avoided COBRA due to its exorbitant price last year or early this year can now enroll in the heavily subsidized COBRA benefits. Around 2.2 million people are expected to enroll in this coverage as per the Congressional Budget Office estimate.
Enhanced Marketplace Subsidies
American Rescue Plan has also enhanced the marketplace subsidies by reducing the percentage of income that individuals should pay for health coverage to qualify for subsidies. This has further increased the subsidies amount as well as the number of people potentially covered. The impact of these changes is discussed below:
- People having income between 100% and 150% of the FPL will get a benchmark silver plan for free.
- People having income above 400% of the FPL for the first time will receive subsidies.
- In many states, Bronze plans will be available for free and Gold plans will be affordable to enrollees.
- During this Special Enrollment Period, enrollees of states that use healthcare.gov can change their health plans, as better coverage has become more affordable.
- The legislation is supposed to be helpful to seniors and to people who live in areas where premiums are high, even if they earn more than 400% of the FPL.
- The enhanced premium support is only available for two years and is retroactive to the beginning of 2021.
Not anything is done by the American Rescue Plan to reduce cost-sharing. The marketplace Silver plan has high cost-sharing that will make health care services financially burdensome for all. As per the CBO estimate, the premium reduction will increase marketplace coverage by 1.7 million people out of which around 1.3 million people would otherwise be uninsured.
Two of the American Rescue Plan provisions deal with premium tax credits. For people who have experienced income loss or fluctuation in 2020 and people who received unemployment compensation, the rescue plan has free them from the obligation to pay taxes on unemployment compensation and if they have already paid then IRS will determine the way to return their money.
The ARP also allows people receiving unemployment compensation at any point during 2021 and is not otherwise eligible for health coverage to receive the maximum subsidies for marketplace coverage and cost-sharing reductions. This provision is not only for people earning more than 100% of the FPL unlike the ACA’s general premium tax credits, so this will be beneficial for people residing in states that have not expanded Medicaid. As per the CBO estimate, this provision will help 1.4 million people, and 900,000 of these people would have received marketplace coverage with higher premiums.
Though implementing these provisions will take time but will significantly expand access to health care for many of the U.S. nationals.