The American Rescue Plan or ARP has come as a big relief for millions of Americans who are either uninsured or who buy their health insurance plan in the individual market. ARP has significantly changed the rule and has improved American access to affordable comprehensive health insurance. President Biden signed legislation in the second week of March 2021 according to which premium subsidies are larger and are available to more people. Most of the people receiving unemployment benefits in 2021 will now become eligible for premium-free health insurance offering comprehensive benefits. Besides, people who received extra premium subsidies in 2020 will not have to repay that money to IRS while filing their 2020 tax return.
Though this is a temporary improvement but this bill was designed to help the country recover from the COVID pandemic. This bill has made it easier for most people to afford high-quality health insurance. However, ARP has created a great deal of confusion, especially among people who have already chosen their health plan for 2021. Now, these people are in a dilemma whether they should reconsider their plan choice for the year or stick to their previous decision. The changes in the health insurance market due to the passing of this bill coincides with a COVID-related enrollment period.
In most of the states, the COVID-related enrollment period continues through August 15 allowing residents to enroll in a new plan or switch from one plan to another. The health coverage takes effect the month after people enroll. The decision to enroll or make changes in a plan after the enactment of the ARP depends on the following conditions of the enrollees:
Individuals enrolled in Off-exchange ACA-compliant Plans
Though both on-exchange and off-exchange plans are essentially the same but people purchase off-exchange plans directly from the insurance carrier rather than buying through the health insurance marketplace. There is no harm in enrolling in off-exchange plans if people are sure that they are not eligible for a premium subsidy. But if people are eligible for a premium subsidy, then the only way to avail of the subsidy is to enroll through the exchange. Individuals with household income above 400% of the federal poverty level who were previously ineligible for a subsidy may now qualify for a subsidy due to the ARP. Though the subsidy amount will depend on where they live and their age. Thus, it is best in the interest of the individuals who are enrolled in off-exchange plans to check the on-exchange plan options available to them. Such individuals should also check that whether they qualify for a subsidy under the new rule or not.
The new subsidies and premium amounts will be available on the portal as of April 1 for people living in states that use HealthCare.gov. However, the 15 state-run marketplaces are also working on the new premium and the subsidy amounts and will be soon available for browsing. According to CMS, people need to enroll by the end of March to have coverage from April 1, and they can come back to the marketplace in April to activate their new subsidies. Nevertheless, the application submitted before April 1 will have pre-ARP subsidies but enrollees will be able to collect the new subsidy amount while filing their 2021 tax returns.
Individuals enrolled in off-exchange plans if decide to switch to an on-exchange version of their present plan, then their carrier may wish to transit any accumulated out-of-pocket expenses that they may have incurred till now this year. Individuals need to consult their insurance carriers to check whether if this will be allowed or not.
Individual enrolled in an off-exchange plan may not be able to switch to a similar on-exchange plan because depending on his/her living area, that particular plan may or may not be available on-exchange. However, if an individual switches to a different on-exchange plan, then the out-of-pocket spending will reset to $0 on the new plan.
Thus, switching to an on-exchange plan will not prove beneficial for everyone, as it depends on the availability of the plan, provider networks, the amount enrollees have already spent as out-of-pocket expenses and the amount of subsidy that a person will get on enrolling through the exchange.
Individuals Enrolled in Non-ACA-compliant Health Plan
Individuals enrolled in non-ACA-compliant health plans such as a fixed indemnity plan, short-term plan, a direct primary care membership, or a grandmothered or grandfathered health plan due to its low-price need to again check ACA-complaint health plan. Because of the American Rescue Plan, for 2021 and 2022 the subsidies are much larger and there is no longer a subsidy cliff, so individuals with income above 400% of the poverty level may now be eligible for premium subsidies and they get access to a low-cost health plan. Thus, before the end of the COVID-related enrollment window on August 15 in most states, individuals should check out their marketplace options. There are chances that individuals may be eligible for comprehensive ACA-compliant health insurance at least this year and next year at lower-premium.
Individuals Enrolled in a Bronze Plan through the Exchange
Individuals may have enrolled in a Bronze plan through the exchange because Bronze plans have lower premiums compared to Gold and Silver plans or the Bronze plans may have been completely free for them after subsidy. After the enactment of the American Rescue Plan, the Bronze plan may still be available for low of free or cost to those individuals but it will be better if they compare their current plans with the other available options during this COVID-related enrollment period. Individuals may now qualify for a low-cost or free Silver plan that offers more robust health benefits compared to the Bronze plan. This will be the case, especially for individuals who are eligible for cost-sharing reductions because these are free upgrades on the health coverage benefits. A single individual earning up to $31,900, and a family of four earning up to $65,500 are eligible to obtain CSR benefits in 2021.
Before switching a plan, people must pay attention to the maximum out-of-pocket limits for the plans at a higher metal level. This is vital because individuals who are not eligible for CSR as their income is above 250% of the poverty level then they may find that out-of-pocket limits of the available Silver plans are the same as of the out-of-pocket limits of their Bronze plan. Thus, the decision of upgrading the plan for such individuals will depend on how they assume to use their plan during the year. Upgrading their coverage may or may not make sense to them. Individuals who rarely require healthcare services should upgrade their plans because they will save money through a lower deductible and lower copays for office visits and prescription drugs. Thus, individuals need to consider factors like total premiums, out-of-pocket maximums, plan benefits if individuals fail to meet their out-of-pocket maximums during the year, before switching the plan.
Many times, individuals choose a Bronze plan just because they want to contribute to a Health Savings Account and prefer to enroll in an HSA-qualified high-deductible health plan. In such a case, then individuals need to check if there are any HDHPs available in their area at a higher metal level because in many areas Silver and GOLD HDHPs are not available. Since ARP has created new subsidies, individuals can still maintain their HSA eligibility while having a health plan with lower out-of-pocket costs that do not cost too much in terms of monthly premiums.
Individuals who have Lost or will Soon Lose their Job as well as Health Coverage
Individuals who have recently lost or will soon lose their job along with health coverage need to make some decisions. These individuals may get access to COBRA or state continuation coverage, and they will also have access to a special enrollment period during which they can sign up for an individual family health plan. As per the American Rescue Plan Section 9501, the entire costs for COBRA or mini-COBRA from April 1 through September 30, 2021, will be covered by the government.
Individuals who were either laid off or experienced an involuntary reduction in working hours that resulted in the loss of health coverage any time in the last 18 months and were COBRA-eligible but they either declined it or later terminated it, then they can again opt for COBRA to take benefit of the new subsidy. Individuals need to remember that the subsidy will not extend their initial COBRA termination date which in most cases is 18 months after their COBRA would have begun if they had opted it from the beginning. This means that individuals who were first eligible for COBRA on November 1, 2019, then their COBRA and COBRA subsidy will end on May 31, 2021, i.e., 18 months later.
- Individuals who at any point this year are receiving unemployment compensation will be eligible for a $0 premium Silver plan available in the marketplace with the robust level of cost-sharing reductions. Thus, the decision of obtaining the fully subsidized COBRA coverage or fully subsidized marketplace plan depends on the below-given factors:
- Individuals will need to decide that if they choose COBRA, then would they be able to pay the full price of the plan after the end of the government subsidy
- Though there have not been any federal guidelines on whether the end of the government-funded COBRA subsidy will trigger a special enrollment period or not, but considering that it will trigger SEP, individuals will need to decide that whether they will be willing to switch to a marketplace plan or not at that point.
- For individuals who have incurred out-of-pocket costs for their employer-sponsored plan in 2021, then COBRA may be the better choice for them, as they don’t have to again start their out-of-pocket costs for a new plan. Individuals need to decide about their course of action after September, whether it will be more cost-effective for them to pay full price for COBRA for the rest of the months of the year, or they should enroll in a new plan at that point.
- Individuals who decide to switch to a marketplace plan should pay attention to the healthcare provider networks along with the covered drug lists. Even if the marketplace plan is of the same carrier that was offering the employer’s plan, then also they need to check the details because benefits and provider network may differ on the individual plan.
- Individuals who are already enrolled in a marketplace plan and receiving or received unemployment compensation this year, then these individuals need to have a close look at their coverage options. If individuals are enrolled in a Bronze plan, then they should check out the $0 premium Silver plan with robust cost-sharing reductions that may be available to them under the ARP because of the unemployment compensation availed by them in 2021.
Individuals already enrolled in the Marketplace Plan and Satisfied with the Plan
Currently, around 15% of the marketplace enrollees pay full price for their health plan mainly because they earn more than 400% of the poverty level, and hence, they are not eligible for subsidy. However, under the ARP people of this group may also be eligible for a subsidy. Millions of enrollees are receiving premium subsidies and though their subsidy amounts may be larger under the ARP, they do not want to make any changes to their health plans.
Individuals who are enrolled in a marketplace plan and are satisfied with their plans don’t need to do anything at all. However, if they are eligible for an additional premium subsidy then it will be retroactive to January 2022 and they will be able to claim while filing their taxes.
Individuals also have the option to log back into their marketplace account and claim their new or additional subsidy amount that can either be paid to their insurer on their behalf each month for the rest of 2021.
For individuals living in a state that uses HealthCare.gov, CMS has confirmed that the premium subsidy amounts will not automatically update and they will need to return to the marketplace and provide their income proof or they can reselect their current plan and trigger the new subsidies. However, the 15 state-run marketplaces will have their own protocols.