American Rescue Plan Act – Maddox Insurance Agency

ARP puts more ‘affordable’ in the Affordable Care Act

June 9, 2021

The American Rescue Plan Act (or American Rescue Plan), signed into law by President Biden on March 11, provided many types of relief to Americans from the economic ravages of the COVID-19 pandemic. Among them, the American Rescue Plan (ARP) put the “affordable” in “Affordable Care Act” for millions of Americans.

Did ARP make coverage more affordable at all income levels?

The American Rescue Plan increased premium subsidies at all income levels for health plans sold in the ACA marketplaces, reducing the percentage of income that enrollees have to pay for the “benchmark” plan in their area – that is, the second-cheapest Silver plan.

At incomes up to 150% of the Federal Poverty Level ($19,140 for an individual, $39,300 for a family of four), the benchmark plan is free, and from 150% up to 200% FPL ($25,520 for an individual, $52,440 for family of four), benchmark Silver costs no more than 2% of family income. Silver plans at these income levels come with strong cost-sharing reduction (CSR) that reduces deductibles and out-of-pocket costs. Weaker CSR is available up to 250% FPL.

At the other end of the income scale – 400% FPL or higher ($51,040 for an individual, $104,800 for a family of four) – no citizen or legally present noncitizen who lacks access to other affordable insurance (e.g., from an employer or Medicare) will pay more than 8.5% of income for benchmark Silver. The ARP removed the ACA’s notorious subsidy cliff, which denied subsidies to applicants with incomes over 400% FPL.

In the in-between income brackets, the percentage of income required for a benchmark Silver plan has also been sharply reduced. See this post for illustrations of how ARP will reduce premiums for people at various income levels.

The American Rescue Plan also effectively made free high-CSR Silver plans free to anyone who received any unemployment insurance compensation in 2021 and lacked access to other affordable insurance.

The ARP subsidy boosts are temporary, running through 2022. But Democrats are widely expected to make them permanent in subsequent legislation. That’s the first and most basic item on their healthcare agenda, fulfilling a core promise President Biden made during the 2020 campaign.

ARP subsidies make it a great time to buy new health coverage

The ARP subsidy increases should induce millions of uninsured Americans who have been under the impression that health insurance is unaffordable to take a second look. According to estimates by the Kaiser Family Foundation (KFF), as of 2020, only about half of those who were eligible for marketplace subsidies and in need of insurance were enrolled. KFF estimates that 11 million uninsured Americans are eligible for premium subsidies in the marketplace – including 3.5 million with incomes over 400% FPL who were ineligible prior to the ARP.

How affordable is affordable? According to KFF, 6 million uninsured people are eligible for free plans. It’s true that for most of these (4.7 million), the free plan would be Bronze, with deductibles averaging in the $7,000 range. But for many of those eligible for free Bronze plans, Silver – and in some cases Gold plans – are available at very low cost or even no cost at all.

For solo enrollees in the 150-200% FPL income range (topping out at $25,520), benchmark Silver (with strong CSR) can’t cost more than $43 per month. In many cases, the cheapest Silver plan costs considerably less than the benchmark.

And in about 20% of all U.S. counties, the cheapest Gold plan is cheaper than the cheapest Silver. That’s a valuable discount at incomes above 200% FPL, where CSR, which attaches only to Silver plans, is weak (in the 200-250% FPL income range) or not available (at incomes above 250% FPL).

Biden administration opens the doors and sounds the horn

Prior to the American Rescue Plan’s passage – beginning on February 15 – the Biden administration opened an emergency special enrollment period (SEP), extending until August 15 in the 36 states that use the federal ACA exchange, HealthCare.gov.

The 15 state-run exchanges (including Washington, D.C.) followed suit, though the terms and length of the state SEPs vary somewhat. (See SEP deadlines for each exchange here.) The SEP offered by HealthCare.gov and in most states is akin to the annual open enrollment period: anyone who lacks insurance can enroll. Normally, a person seeking coverage outside of open enrollment has to apply for a personal SEP and document a qualifying “life change,” such as loss of employer-sponsored insurance.

After the ARP’s passage, HealthCare.gov further opened the SEP to enable current enrollees to switch plans – for example, to upgrade from Bronze to Silver in light of the enriched subsidies. The Center for Medicare and Medicaid Services (CMS) also earmarked $50 million to advertise the SEP.

The upgraded subsidies, retroactive to January 1, went live on HealthCare.gov on April 1, and on state-based marketplaces in subsequent weeks. All in all, doors to coverage for the uninsured were flung significantly wider this spring – and remain open.

Many consumers are capitalizing on the SEP and ARP

The emergency SEP and upgraded subsidies are having an impact. On May 6, CMS announced that new plan selections from February 15 through April 30 in 36 HealthCare.gov states was just shy of 940,000 – almost quadruple enrollment in the same period in 2019, the last “normal” year. (In 2020, the pandemic also stimulated increased enrollment, totaling 391,000 in the same time period.) A large percentage of new enrollees were apparently low-income and accessing free or near-free Silver plans with strong CSR, as the median deductible for new enrollees was just $50.

As of June 5, SEP enrollment in HealthCare.gov states had topped 1 million, and marketplace coverage is now at an all-time high. Including the 15 state-based marketplaces raises the SEP enrollment total this spring to 1.5 million, according to Charles Gaba’s estimate. The percentage of subsidy-eligible potential enrollees who actually do enroll may now be closer to 60% than the roughly 50% that KFF estimates indicate in 2020. How might enrollment be boosted further?

But millions still aren’t on board

Despite the substantial gains achieved in recent months, some 10 million of the still-uninsured are likely eligible for marketplace subsidies, and another 6 to 7 million eligible for Medicaid, according to KFF estimates.

Since the ACA’s programs were first implemented in 2014, many of the uninsured have claimed that they found coverage unaffordable, While some may have balked at subsidized premiums and available plans’ out-of-pocket costs, a lack of knowledge about what’s on offer has always been a major factor. In 2020, only 32% of people surveyed by KFF knew that the ACA was still law.

The Trump administration didn’t make it easier for consumers, cutting federal funding for enrollment assistance by nonprofit “navigators” by 84%, from a peak of $63 million in 2016 to $10 million by 2018, and cutting advertising by 90%. Navigator organizations, established by the ACA to be nerve centers in a constellation of nonprofit assistor groups, have operated on shoestrings since fall 2017, cutting back on outreach events, offices throughout their states, and in-person as opposed to phone or video assistance.

The Biden administration threw a quick $2.5 million to navigators this spring – which doesn’t go far – and has allocated $80 million for navigators in the 36 states using HealthCare.gov for 2022. (Navigator funding is drawn from user fees charged to participating insurers, so the 15 states that run their own exchanges have their own funding base for enrollment assistance). A KFF analysis suggests that the $80 million allocation for 2022 may be too modest: Trump administration underspending of the user fee revenue has left some $1.2 billion available to the Biden administration to boost enrollment efforts.

Promising strategies to boost enrollment

Going forward, further innovation might boost marketplace enrollment. Maryland, which has a state-based marketplace, has pioneered an enrollment jump-start tied to tax filing, whereby the uninsured whose reported income and insurance status indicate they are eligible for subsidized coverage can check a box on their tax return and receive information about their likely eligibility for “free or low cost coverage.” Colorado will debut a similar program next year.

On a national level, aligning the annual open enrollment period with tax filing season and porting information on the tax return to a marketplace application could streamline the enrollment process. Tax preparers could be a powerful resource to encourage enrollment and assist in the often complex application process. Integrating enrollment with tax preparation could also take some of the diceyness out of the income estimate that determines subsidy size.

Switching the OE period would entail a messy transition, as plans not resetting on January 1 as in the past would create problems with deductibles and out-of-pocket caps. An alternative would be to mirror Maryland and offer the uninsured an easy-to-obtain SEP at tax time.

The ARP hasn’t helped everyone

It should be acknowledged that the ARP did not ease the plight of poor and near-poor uninsured people in the 12 states that to date have refused to enact the ACA Medicaid expansion (or, in the case of Wisconsin, enact a more limited expansion). As first enacted, the ACA offered Medicaid to all citizens and most legally present non-citizens whose household income was below 138% FPL. In 2012, the Supreme Court made that expansion optional for states.

In states that refused to expand eligibility – including high-population states Texas and Florida – most adult residents with incomes below 100% FPL are eligible neither for Medicaid nor for marketplace subsidies. The ARP provided new financial enticements for the holdout states to implement the expansion, but offered no immediate relief to an estimate 2 million people in this “coverage gap.”

The ARP also did not fix the “family glitch,” which puts health coverage out of reach for several million Americans. If an employee has access to a comprehensive employer-sponsored health plan that meets the ACA affordability standard for single coverage, the other family members are not eligible for subsidies in the exchange — regardless of how much they have to pay to join the employer-sponsored plan.

Bottom line

While more remains to be done to make affordable coverage more universally available, comprehensive and easy to obtain, it’s fair to say that most Americans who lack coverage at present can find a health plan (marketplace or Medicaid) that’s worth having at a price they can afford. If you are uninsured, check out your options on HealthCare.gov or your state exchange or use this site’s free quote tool. You can also get a subsidy estimate by using this ACA subsidy calculator.

More likely than not, you will be pleasantly surprised.

Andrew Sprung is a freelance writer who blogs about politics and healthcare policy at xpostfactoid. His articles about the Affordable Care Act have appeared in publications including The American Prospect, Health Affairs, The Atlantic and The New Republic. He is the winner of the National Institute of Health Care Management’s 2016 Digital Media Award. He holds a Ph.D. in English literature from the University of Rochester.

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

March 25, 2021

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.

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How the COVID relief law will rescue marketplace plan buyers

March 10, 2021

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.

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