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American Rescue Plan drives health insurance costs down for ‘young invincibles’

March 25, 2021/in American Rescue Plan Act, Blog, costs of coverage, health insurance premiums /by wpmaddoxins

For generations, one of the transition points for young adults has been the process of leaving their parents’ health insurance and enrolling in their own coverage (assuming they were fortunate enough to be covered under a parent’s health plan in the first place).

The Affordable Care Act (ACA) ushered in some important changes that made coverage much more accessible for young adults, including the provision that allows them to remain on a parent’s health plan until age 26. Now, the American Rescue Plan (ARP) is making coverage even more affordable, albeit temporarily.

For 2021 and 2022, the ARP provides enhanced premium subsidies (aka premium tax credits). And in most cases, those who are receiving unemployment compensation at any point in 2021 are eligible for premium-free coverage that includes robust cost-sharing reductions.

By the time they need to secure their own coverage, some young adults already have access to their own employer’s health plan. But what if you don’t? Maybe you’re working for a small business that doesn’t offer coverage, or striving to fulfill your entrepreneurial dreams, or working multiple part-time jobs. Let’s take a look at your options for obtaining your own health coverage, and the points you should consider when you’re working through this process:

Individual-market plans more affordable than ever

Purchasing an individual plan in the marketplace has always been an option for young adults, and the ACA ensures that coverage is guaranteed-issue, regardless of a person’s medical history (that is, you can’t be denied coverage or charged a higher premium due to a pre-existing medical condition). The ACA also created premium subsidies that make coverage more affordable than it would otherwise be. But the ARP has increased the size of those subsidies for 2021 and 2022.

Previously, healthy young people with limited income sometimes found themselves having to make a tough choice between a plan with a very low (or free) premium and very high out-of-pocket costs, versus a plan with more manageable out-of-pocket costs but a not-insignificant monthly premium. In some circumstances, the new subsidy structure under the ARP helps to eliminate this tough decision by reducing premiums for the more robust coverage.

How much can ‘young invincibles’ save on coverage?

The exact amount of a buyer’s subsidy will depend on how old they are and where they live. But some examples will help to illustrate how the ARP’s subsidy enhancements make coverage more affordable and allow young people to enroll in more robust health plans:

Let’s say you’re about to turn 26, you live in Chicago, and you expect to earn $18,000 this year working at two part-time jobs – neither of which offer health insurance benefits. You’re losing coverage under your parents’ health plan at the end of June, and need to get your own plan in place for July.

  • According to HealthCare.gov’s plan comparison tool, the benchmark plan in that area has a full-price cost of about $277/month for a 26-year-old.
  • Under the normal rules (ie, before the American Rescue Plan), the after-subsidy amount for the benchmark plan would be about $54/month. (That’s 3.59% of the person’s $18,000 income. Here’s the math on how that’s all determined.)
  • Under the American Rescue Plan, that policy is free at this income level. Zero premium. It’s got a $200 deductible, $5 copays for primary care visits and generic drugs, and an $800 out-of-pocket maximum. These robust benefits are thanks to the built-in cost-sharing reductions. (Note that this option –a $0 premium plan with robust cost-sharing reductions – is also available if you’re receiving unemployment compensation in 2021, regardless of your total income.)

Those cost-sharing reductions are always available. But without the American Rescue Plan, a healthy 26-year-old might have been tempted to get one of the less-expensive Bronze plans. (In this particular case, one plan was available for under $2/month, and others were available for under $30/month.) But those come with deductibles of at least $7,400, and out-of-pocket maximums of $8,550. (Cost-sharing reductions are only available on Silver plans. The benchmark plan is always a Silver plan, and its price is used to determine the amount of a person’s subsidy.)

A young, healthy person with a limited income might have enrolled in that $2/month plan because the premiums fit their budget. But they would likely have struggled to pay the out-of-pocket costs if they experienced a significant medical event during the year. Thanks to the expanded premium subsidies created by the ARP, there’s no longer a tough decision to make, since the benchmark plan, with robust cost-sharing reductions, has a $0 premium for people with income up to 150% of the federal poverty level (for a single person, that’s $19,140 in 2021).

Although the dollar amounts of the ARP’s subsidy increases are larger for older people (because their pre-subsidy premiums are so much higher), it’s really significant that the new law helps to make it easier for “young invincibles” with limited incomes to enroll in plans with cost-sharing reductions. The Bronze plans that come with much higher out-of-pocket costs won’t be such an appealing alternative when Silver plans are made much more affordable – or free, as in the case we just looked at.

What about young people with higher incomes?

But what if you’re a young person with an income that’s too high for cost-sharing reductions? The American Rescue Plan still makes coverage more affordable, and makes it easier to afford a better-quality plan. Let’s say our 26-year-old in Chicago is earning $40,000 in 2021 – about 313% of the federal poverty level.

  • The benchmark plan is still $277/month without any premium subsidies.
  • Without the American Rescue Plan, no subsidies are available for this person at this income level (despite the fact that their income is under 400% of the poverty level). The benchmark plan is $277/month and the cheapest available plan is $215/month (it’s a Bronze plan with a $7,400 deductible, $60 primary care copays, and an out-of-pocket cap of $8,550).
  • Under the American Rescue Plan, this person would be eligible for a premium subsidy that would reduce the cost of the benchmark (Silver) plan to $211/month (because the percentage of income that people are expected to spend on the benchmark plan has been reduced). The lowest-cost plan would drop to about $149/month.

The take-away here? Buying your own health insurance is much more affordable in 2021 and 2022 than it would normally be. Depending on your income, you might be eligible for robust health coverage with $0 premiums, or you might be eligible for premium subsidies even if you weren’t prior to the American Rescue Plan.

Switching to your own plan: Things to keep in mind

If you’re switching to your own self-purchased health insurance plan after having coverage under a parent’s health plan, there are several things to be aware of as you make this change, particularly if your previous health coverage was offered by an employer:

  • You may have far more plan options than you and your family are used to having. If your parents’ plan is offered by an employer, it’s likely one of only a few options from which they can choose each year. But when you’re shopping for your own coverage in the individual market, you might see dozens of available plans. If the plan selection process feels overwhelming, here are some considerations to keep in mind as you go about picking a plan.
  • There might not be any PPO options. PPOs, which provide some coverage for out-of-network services and also tend to have broader provider networks, are widely available in the employer-sponsored market. But they tend to be much less available in the individual market. When you’re shopping for your own coverage, you’re more likely to encounter plans that only cover care received in-network. This makes it particularly important to understand what doctors and facilities are in-network before you enroll.
  • The provider network might be very different, even if the health insurance company is the same one you had before. For example, your parents’ plan might be provided or administered by Anthem Blue Cross Blue Shield, and you might decide to enroll in a marketplace plan offered by the same insurer. But most insurers have different provider networks for their individual and group health plans, so you’ll want to double-check to see if your medical providers are in-network with the plans you’re considering.

Low income? Medicaid may be an option

If you’re in Washington, DC or one of the 36 states (soon to be 38) where Medicaid eligibility was expanded as a result of the ACA, you might find that you’re eligible for Medicaid. For a single person in the continental U.S., Medicaid eligibility extends to an annual income of $17,774 in 2021. (It’s higher in Alaska and Hawaii, and DC also has a higher eligibility limit, allowing people to enroll in Medicaid with an income as high as $25,760.)

Medicaid eligibility is also based on current monthly income, meaning you won’t need to project your total annual income the way you do for premium subsidy eligibility. In a state that has expanded Medicaid eligibility under the ACA, a single individual can qualify for Medicaid with a monthly income of up to $1,482 in 2021. So if you’re going through a time period when your income is lower than normal, Medicaid can be a great safety net.

In most cases, Medicaid has no monthly premiums, and out-of-pocket costs are generally much lower than they would be with a private insurance plan.

In Minnesota and New York, Basic Health Program coverage is also available. These plans have modest premiums and provide robust health coverage. They’re available to people who earn too much for Medicaid but no more than 200% of the poverty level (which amounts to $25,520 for a single person in 2021).

COBRA: Access remains unchanged, but might be expensive

If you’re aging off your parents’ health plan, COBRA or mini-COBRA (state continuation coverage) might be available. This can be a good option if you’re able to afford it, as it allows you to keep the same coverage you already have for up to 18 additional months. You won’t have to start over with a new plan’s deductible and out-of-pocket maximum, nor will you need to worry about switching to a different provider network or selecting a plan with a different covered drug list.

The American Rescue Plan provides a one-time six-month federal subsidy that pays 100% of COBRA premiums, but this is only available to people who are eligible for COBRA due to an involuntary job loss of involuntary reduction in hours, and it’s only available through September 2020.

Aging off a parent’s health plan is a qualifying event that will allow you to continue your coverage via COBRA (assuming it’s available), but it’s not an event that will trigger the COBRA subsidy. (The details for in ARP Section 9501(a)(1)(B)(i), which references other existing statutes, all of which pertain to people who lose their jobs or have their hours reduced; the legislation notes that this must be involuntary in order to trigger the subsidies).

So depending on the circumstances, it may make more sense to switch to an individual plan in the marketplace.

Student health plans: Most are compliant with the ACA

If you’re in school and eligible for a student health plan, this might be an affordable and convenient option. Thanks to the ACA, nearly all student health plans are much more robust than they used to be, and provide coverage that follows all of the same rules that apply to individual market plans.

Check with your school to see if coverage is offered, and if so, whether it’s compliant with the ACA (some self-insured student health plans have opted to avoid ACA-compliance; if your school offers one of these plans, make sure you understand what types of medical care might not be covered under the plan).

If you do have an option to enroll in a high-quality student health plan, you’ll want to compare that with the other available options, including self-purchased individual market coverage, or remaining on a parent’s plan if you’re under 26 and that option is available to you.


Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about the Affordable Care Act for healthinsurance.org. Her state health exchange updates are regularly cited by media who cover health reform and by other health insurance experts.

The post American Rescue Plan drives health insurance costs down for ‘young invincibles’ appeared first on healthinsurance.org.

https://www.maddoxinsured.com/wp-content/uploads/2020/12/maddox-insurance.png 512 512 wpmaddoxins https://www.maddoxinsured.com/wp-content/uploads/2020/12/maddox-insurance-agency.png wpmaddoxins2021-03-25 15:37:392021-03-26 15:00:52American Rescue Plan drives health insurance costs down for ‘young invincibles’

How the COVID relief law will rescue marketplace plan buyers

March 10, 2021/in American Rescue Plan Act, health reform, premium subsidies, tax /by wpmaddoxins

Stressed about having to pay back some or all of the premium subsidy that was paid on your behalf last year? You’re in luck: Under the American Rescue Plan Act (H.R. 1319) – passed by Congress on March 10 and expected to be signed into law by President Biden on March 12 – excess premium subsidies for 2020 do not have to be repaid to the Internal Revenue Service.

This is a one-time provision that’s being granted as part of the federal government’s massive COVID relief measure – which is also significantly increasing premiums subsidies for 2021 and 2022 – and it will come as a great relief to many of the Americans who enrolled in individual and family health plans through the health insurance marketplace /exchange last year.

Although the Affordable Care Act’s premium tax credits (premium subsidies) make health insurance affordable for millions of people, they can be a bit complicated. Unlike other tax credits, they’re available to be used up front, paid directly to your health insurance company throughout the year. (This is called APTC – advance premium tax credit – since it’s paid in advance.)

You can always opt to pay full price for a plan purchased through the exchange and then claim the whole premium tax credit on your tax return, but hardly anyone does that. Instead, most people provide the marketplace with a projection of what they think their income will be for the year, and their estimated premium tax credit is then sent to their insurer throughout the year, reducing the amount they have to pay in premiums.

The catch is that it all has to be reconciled with the IRS when policyholders file their tax returns. Depending on the circumstances, the IRS might give you additional money at that point (if your subsidy was too small), or they might make you repay some or all of the subsidy that was paid on your behalf during the year.

How the law will head off a tax-time subsidy repayment crisis

This issue was shaping up to be particularly significant for the 2020 tax year. The combination of additional federal unemployment compensation and erratic employment made it more difficult than usual for people to accurately project their income for 2020. And, as is always the case, folks whose income ended up over 400% of the federal poverty level were facing the prospect of paying back their entire premium subsidy to the IRS – repayments which could be in the thousands or even tens of thousands of dollars, depending on the circumstances.

An income boost that pushed a household over the 400% federal poverty level threshold might have happened because a person received more unemployment benefits than they expected, or because they got a new job later in the year that put their total income above the subsidy eligibility threshold. In normal years, this would mean the entire subsidy has to be repaid, regardless of how low policyholders’ income was during the months they were receiving a premium subsidy through the marketplace.

And even for people whose income stayed under 400 percent of the poverty level, there was the possibility of having to repay as much as $2,700 in excess premium subsidies, depending on the actual income and tax filing status.

Provision applies only to the 2020 tax year

But thanks to the American Rescue Plan Act, no marketplace plan buyer will have to worry about repaying excess premium subsidies for 2020. If your subsidy amount was too small, you can still claim the additional amount that you’re owed when you file your taxes. But if your subsidy ended up being too large – even if your income ended up exceeding 400% of the poverty level – you won’t owe any of it back to the IRS.

This is a one-time provision for the 2020 tax year only. So it’s still important to project your income for this year as accurately as possible, and keep the exchange updated if your income changes later this year.

How will the provision apply if you’ve already filed your taxes?

It’s not yet clear exactly how the IRS will handle excess premium tax credits for people who filed their 2020 tax returns earlier this year and already repaid some or all of their premium tax credit for 2020. Amended tax returns can always be used to make a change, but the IRS may provide other ways of recouping this money in guidance or FAQs issued in the near future. (We’ll update this if and when the IRS issues guidance and clarification.)

It’s also not yet clear how quickly tax software will reflect the fact that excess premium subsidies for 2020 do not have to be repaid. Karen Pollitz, a Senior Fellow at Kaiser Family Foundation, notes that “the forms and tax software already provide for repayment, so it will take a while to straighten all this out. And it will probably be very confusing for people who file their tax returns over the next four to five weeks.”

You’ll want to check with your tax preparer or call your tax software company to see if they have any guidance for you. The tax filing deadline is April 15, 2021, but it’s also possible to request an extension if you need it, giving you until October 15 to file your return.


Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about the Affordable Care Act for healthinsurance.org. Her state health exchange updates are regularly cited by media who cover health reform and by other health insurance experts.

The post How the COVID relief law will rescue marketplace plan buyers appeared first on healthinsurance.org.

https://www.maddoxinsured.com/wp-content/uploads/2020/12/maddox-insurance.png 512 512 wpmaddoxins https://www.maddoxinsured.com/wp-content/uploads/2020/12/maddox-insurance-agency.png wpmaddoxins2021-03-10 18:25:412021-03-11 14:01:13How the COVID relief law will rescue marketplace plan buyers

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