What will happen if ARP’s insurance subsidies expire?

Key takeaways


During the open enrollment period for 2022 health coverage, more than 14.5 million Americans enrolled in private health plans through the health insurance marketplaces nationwide. That was a record high, and a 21% increase over the number of people who enrolled the previous year.

The open enrollment period for 2022 was a month longer in most states, and the federal government spent significantly more money on outreach and enrollment assistance. But the primary factor driving the enrollment growth was affordability. Thanks to the American Rescue Plan (ARP) – which took effect last spring – self-purchased coverage is a lot more affordable for most people than it used to be.

Unfortunately, the improved affordability is currently set to expire at the end of 2022. Unless Congress takes action to extend the subsidy enhancements made by the ARP, the subsidy structure will revert to the basic Affordable Care Act subsidies as of January 1, 2023.

Health insurance would again become unaffordable for many

Although the Congressional Budget Office projected last year that the enhanced subsidies would increase marketplace enrollment by 1.7 million Americans in 2022, enrollment actually grew by 2.5 million people. Again, some of that was due to the longer open enrollment window and the additional federal funding for enrollment assistance and outreach. But the improved affordability of marketplace coverage is the primary reason for the enrollment growth.

If the ARP subsidy enhancements are not extended, nearly everyone with marketplace coverage will have to pay higher premiums next year. And the 2.5 million additional enrollees who signed up this year may no longer be able to afford their coverage in 2023.

The subsidy cliff would return, as subsidies would no longer be available to households that earn more than 400% of the federal poverty level. As we’ve explained here, some Americans with household income a little over 400% of the poverty level had to pay a quarter – or even half – of their annual income for health insurance before the ARP’s subsidy structure was implemented.

That’s untenable, obviously. (Before the ARP, people in that situation often went uninsured or relied on less expensive options that are not comprehensive coverage – such as a health care sharing ministry plan or short-term health insurance.)

If the ARP’s subsidy enhancements expire, coverage will also become less affordable for people with income below 400% of the poverty level. Although most of them will continue to be subsidy-eligible, their subsidy amounts will drop, leaving them with higher net premiums each month. This chart shows some examples of how the ARP increased subsidies; those subsidy boosts will disappear at the end of this year unless Congress passes legislation to extend them.

HHS: ARP is saving consumers $59 a month on premiums

Across the 10.3 million people who enrolled through the federally run exchange (HealthCare.gov, which is currently used in 33 states), the average net premium this year is $111/month. HHS noted that without the ARP’s subsidy enhancements, the average net premium would be $170/month, so the ARP is saving the average enrollee $59 per month in 2022. At ACA Signups, Charles Gaba has some alarming graphs showing just how much more people will be paying for their health insurance if the subsidy enhancements aren’t extended.

And across all 14.5 million exchange enrollees this year, 66% are enrolled in Silver or Gold plans, versus 63% in early 2021 (prior to the ARP). Some of the people who were previously enrolled in Bronze plans have shifted to more-robust Silver and Gold plans this year.

Although those percentages are still in the same ballpark, we also have to remember that enrollment is considerably higher this year. The result is that 2 million additional people have coverage under robust Silver and Gold plans this year (9.6 million, versus 7.6 million last year). This is a direct result of the additional affordability created by the ARP’s subsidy enhancements. People generally prefer the most robust coverage that they can realistically afford, and the ARP made it easier to afford better coverage.

It’s particularly important to point out that the ARP subsidies allow people with income up to 150% of the poverty level to enroll in the benchmark Silver plan for free (for 2022 coverage, 150% of the poverty level is $19,320 in annual income; for a family of four, it’s $39,750). For these enrollees, robust cost-sharing reductions make these Silver plans better than a Platinum plan, with very low out-of-pocket costs. Prior to the ARP, people in this income range had to pay premiums of up to about 4% of their income for the benchmark plan. And without the ARP’s subsidy enhancements, many of these people would be unable to afford the coverage they have this year.

The availability of free Silver plans for this population has proven to be especially important in the dozen states that have not expanded Medicaid, since people in those states are eligible for marketplace premium subsidies with income as low as 100% of the poverty level (in states that have expanded Medicaid, Medicaid is available to people with income up to 138% of the poverty level, resulting in a much smaller segment of low-income enrollees being subsidy-eligible). Although enrollment in marketplace plans grew by 21% nationwide in 2022, the most significant growth tended to be concentrated in the states that have not expanded Medicaid, where it grew by an average of 31%.

If Congress doesn’t take action to extend the ARP’s subsidies, all of these gains will be lost. Millions of people will lose their coverage or be forced to shift to less robust coverage, because their current coverage will no longer be affordable in 2023.

Special enrollment for low-income households would expire with ARP’s subsidies

It’s also worth noting that the new special enrollment period for people with income up to 150% of the poverty level would expire at the end of 2022 if the ARP’s subsidies are not extended. When HHS created this special enrollment period, they clarified that it will only remain in effect as long as people in that income range can enroll in the benchmark plan without paying any premiums.

Without the ARP’s subsidy enhancements, that would no longer be the case.

Will Congress extend the ARP’s subsidy structure?

Last fall, the U.S. House of Representatives passed the Build Back Better Act, which called for a temporary extension of the ARP’s subsidy enhancements. Under that legislation, the larger and more widely available subsidies would have continued to be in place through 2025 (instead of just through 2022), and the legislation also called for a one-year extension of the ARP’s subsidy enhancements for people receiving unemployment compensation.

Unfortunately, the legislation stalled in the Senate, after being opposed by all 50 Republican Senators, as well as Sen. Joe Manchin, a Democrat from West Virginia. So the subsidy enhancements for Americans receiving unemployment compensation expired at the end of 2021, and the rest of the ARP’s subsidy enhancements are currently slated to expire at the end of 2022.

The Build Back Better Act is a massive piece of legislation, addressing a wide range of issues and costing more than $2 trillion. But Sen. Manchin supports the extension of the ARP’s subsidies, which means a smaller piece of legislation addressing just this issue would be likely to garner his support.

How will the ARP subsidy extension uncertainty affect 2023 premiums?

Technically, Congress could take action to preserve the current subsidy structure at any time between now and the end of 2022 (or even in 2023, with subsidy enhancements retroactive to the start of 2023, as was the case with ARP subsidy enhancements in 2021). But health insurers are already starting to sort out the details for 2023 plan designs and pricing, and subsidy structure plays a large role in that process.

If the ARP’s subsidies remain in place for 2023, enrollment will continue to be higher than it would otherwise be, and healthy people — who might otherwise forego coverage if it was less affordable — will stay in the insurance pool. Health insurance actuaries take all of this into consideration when determining whether to remain in (or enter) various markets, what plans to offer, and how much they have to charge in premiums in order to cover their costs.

Since the extension of the ARP’s subsidy enhancements is still up in the air, states and insurers will have to be flexible in terms of how they handle this issue over the coming weeks and months. The ARP was enacted on March 11 last year, so insurers knew by then what the subsidy parameters would look like for 2022. But we’re already a few weeks past that point this year, and there is no such clarity for 2023.

States can have insurers file two sets of rates for 2023, or file a single set of rates that explain whether they’re assuming the ARP subsidies will expire or be extended (Missouri is an example of a state taking this approach). Some states will tell insurers to simply base their rate filings on the current situation — ie, that the ARP subsidies will not exist in 2023 — and deal with potential revisions later on (Virginia is an example of a state that has instructed insurers to file rates based on the assumption that the ARP subsidies will expire at the end of 2023; this was clarified in a recent teleconference hosted by the Virginia Bureau of Insurance).

States and insurers have previously demonstrated the ability to turn on a dime, as we saw with the rate revisions that were implemented in many states in October 2017, after federal funding for cost-sharing reductions was eliminated at the eleventh hour. So if the ARP subsidies are extended mid-way through the rate filing/review process, insurers will be able to revise their rates accordingly, even at the last minute.

The sooner ARP’s subsidy structure is extended, the better

But for everyone involved, this process will be smoother if legislation to extend the ARP subsidies is enacted sooner rather than later. This would help consumers — particularly those with income a little over 400% of the poverty level — plan ahead for next year. It would help insurers nail down their rate proposals and coverage areas. And it would make the rate review process simpler for state insurance departments.

If you buy your own health insurance, you can reach out to your members of Congress about this, asking them to extend the subsidy enhancements that have likely made your coverage more affordable than it used to be.

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.

ACA sign-ups hit all-time high – with a month of open enrollment remaining

Key takeaways

The Biden administration announced last week that enrollment in ACA marketplace plans had reached an all-time high of 13.6 million* as of December 15, with a month still to go in the open enrollment period (OEP) for 2022 in most states.

That’s an increase of about 2 million (17%) over enrollment as of the same date last year, according to Charles Gaba’s estimate, and well above the previous high of 12.7 million recorded as of the end of open enrollment for 2016, which lasted until January 31 in most states. When OEP ends this coming January, enrollment in marketplace plans will exceed 14 million.

92% of marketplace enrollees in HealthCare.gov states received health insurance subsidies

In the 33 states using the federal exchange, HealthCare.gov (for which the federal government provides more detailed statistics than in the 18 state-based exchanges), almost all enrollees (92%) received premium tax credits (subsidies) to help pay for coverage – including 400,000 who would not have qualified for subsidies prior to passage in March of this year of the American Rescue Plan (ARP). That bill not only increased premium subsidies at every income level through 2022, but also removed the previous income cap on subsidies, which was 400% of the federal poverty level (FPL) ($51,520 per year for an individual and $106,000 for a family of four). In 2022, no enrollee who lacks access to other affordable insurance pays more than 8.5% of income for a benchmark Silver plan (the second cheapest Silver plan in each area), and most pay far less.

The enrollment increase is tribute to the huge boost in affordability created by the ARP subsidies. A benchmark Silver plan with strong Cost Sharing Reduction (CSR, attached to Silver plans for low-income enrollees) is now free at incomes up to 150%FPL ($19,320 for an individual, $39,750 for a family of four in 2022) and costs no more than 2% of income ($43/month for an individual) at incomes up to 200% FPL. The percentage of income required for the benchmark Silver plan  was reduced at higher incomes as well.  The ARP also provided free high-CSR Silver coverage to anyone who received any unemployment insurance income in 2021.

The American Rescue Plan boosted enrollment throughout 2021 and into 2022

The enrollment gains during OEP build on the enrollment surge triggered by the emergency special enrollment period (SEP) opened by the Biden administration on February 15 of this year, which ran through August 15 in the 33 states using HealthCare.gov, and for varying periods in the 15 states that ran their own exchanges in 2021. (There are now 18 state-based exchanges, as Kentucky, Maine and New Mexico launched new ones for 2022.)

The ARP subsidies came online in April (or May in a few state marketplaces). From February to August, 2.8 million people enrolled during the SEP, and total enrollment increased by 900,000 on net from February to August (as people also disenrolled every month, and many enrollees doubtless regained employer-sponsored coverage during a period of rapid job growth).

In addition, once the ARP subsidy increases went into effect, 8 million existing enrollees saw their premiums reduced by an average of 50%, from $134 to $67 per month. Enrollees’ premiums in 2022 should be similar to those of the SEP.

Enrollment growth was concentrated in states that have not expanded Medicaid

Enrollment increases during open enrollment – as during the SEP and the OEP for 2021 – were heavily concentrated in states that have not enacted the ACA expansion of Medicaid eligibility. There were 14 such states during most of the SEP and 12 during the (still current) OEP, as Oklahoma belatedly enacted the Medicaid expansion starting in July of this year, and Missouri in October.

In non-expansion states, eligibility for ACA premium subsidies begins at 100% FPL, while in states that have enacted the expansion, marketplace subsidy eligibility begins at 138% FPL, and Medicaid is available below that threshold. In non-expansion states, the marketplace is the only route to coverage for most low-income adults, and those who report incomes below 100% FPL mostly get no help at all – they are in the notorious coverage gap. In those states, about 40% of marketplace enrollees have incomes below 138% FPL – that is, they would be enrolled in Medicaid if their states enacted the expansion.

During OEP, these 12 non-expansion states account for 81% of the enrollment gains in the 33 HealthCare.gov states, and about two-thirds of enrollment gains in all states. The table below also shows gains over a two-year period, encompassing the effects of the COVID-19 pandemic.

Total plan selections in non-expansion states**
Dec. 15 open enrollment snapshots 2020-2022
State 2020 2021 2022 Increase 2021-2022 % increase 2021-2022 Increase 2020-2022 % increase 2020-2022
Alabama 159,820 168,399 205,407 37,008 22.0% 45,587 28.5%
Florida 1,912,394 2,115,424 2,592,906 477,482 22.6% 680,512 35.6%
Georgia 464,041 541,641 653,999 139,358 27.1% 189,958 40.9%
Kansas 85,880 88,497 102,573 14,076 15.9% 16,693 19.4%
Mississippi 98,868 110,519 132,432 21,913 19.8% 33,564 33.9%
North Carolina 505,159 536,270 638,309 102,039 19.0% 133,150 26.4%
South Carolina 215,331 230,033 282,882 52,849 23.0% 67,551 31.4%
South Dakota 29,330 31,283 39,292 8,009 25.6% 9,962 34.0%
Tennessee 200,723 211,474 257,778 46,304 21.9% 57,055 28.4%
Texas 1,117,882 1,284,524 1,711,204 426,680 33.2% 593,322 53.1%
Wisconsin 196,594 192,183 205,991 13,808 7.2% 9,397 4.8%
Wyoming 24,665 26,684 33,035 6,351 23.8% 8,370 33.9%
Non-expansion states 5,010,687 5,509,931 6,855,808 1,345,877 24.4% 1,845,121 36.8%
All HC.gov states 7,533,936 8,053,842 9,724,251 1,670,409 20.7% 2,190,315 29.1%

In the 39 states that have enacted the ACA Medicaid expansion (21 on HealthCare.gov and 18 running their own exchanges), far fewer enrollees are eligible for free Silver coverage. In expansion states, eligibility for marketplace subsidies begins at an income of 138% FPL, as people below that threshold are eligible for Medicaid. Nevertheless, enrollment growth in non-expansion states during the current OEP is substantial, increasing by about 755,000 year-over-year, or 13%.

The marketplace has been a pandemic ‘safety net’

The marketplace has been a bulwark against uninsurance during the pandemic, among low-income people especially and in the non-expansion states in particular. As shown in the chart above, enrollment in these 11 states increased by 1.8 million from Dec. 15, 2019 to Dec. 15, 2021 – a 37% increase. For all states, the two-year increase is in the neighborhood of 25% and will approach 3 million (from 11.4 million in OEP for 2020 to above 14 million when OEP for 2022 ends in January). That’s in addition to an increase of more than 12 million in Medicaid enrollment during the pandemic.

While millions of Americans lost jobs when the pandemic struck, and millions fewer are employed today than in February 2020, the uninsured rate did not increase during 2020, according to government surveys, and may even prove to have downticked during 2021 or 2022 when the data comes in.

While the government has not yet published detailed statistics as to who has enrolled during the current OEP, they did do so in the final enrollment report for the emergency SEP. During the emergency SEP, out of 2.8 million new enrollees, 2.1 million were in the 33 HealthCare.gov states. In those states, 41% of enrollees obtained Silver plans with the highest level of CSR, which means that they had incomes under 150% FPL (or received unemployment income) and so received free coverage in plans with an actuarial value of 94% – far above the norm for employer-sponsored plans.

The median deductible obtained in HealthCare.gov states was $50, which makes sense, as 54% of enrollees obtained Silver plans with strong CSR, raising the plan’s actuarial value to either 94% (at incomes up to 150% FPL) or to 87% (at incomes between 150% and 200% FPL). Two-thirds of enrollees in HealthCare.gov states paid less than $50 per month for coverage, and 37% obtained coverage for free.

At higher incomes, as noted above, 400,000 enrollees who received subsidies in HealthCare.gov states would not have been subsidy-eligible before the ARP lifted the income cap on subsidies (previously 400% FPL). The same is also doubtless true for several hundred thousand enrollees in state-based marketplaces. The SBEs account for a bit less than a third of all enrollment, but in those states, all of which have expanded Medicaid, the percentage of enrollees with income over 400% FPL is almost twice that of the HealthCare.gov states (12% versus 7% during the emergency SEP).

ARP: a patch for the coverage gap?

The strong enrollment growth in non-expansion states – an increase of 37% in two years – indicates that during the pandemic, some low-income people in those states found their way out of the coverage gap (caused by the lack of government help available to most adults with incomes below 100% FPL).  In March 2020, the CARES Act (H.R.748) provided supplementary uninsurance income of $600 per week for up to four months to a wide range of people who had lost income during the pandemic, likely pushing many incomes over 100% FPL. In 2021, anyone who received any unemployment income qualified for free Silver coverage, and during the emergency SEP, 84,000 new enrollees took advantage of this provision (along with 124,000 existing enrollees). That emergency provision is not in effect in 2022, however.

Marketplace subsidies are based on an estimate of future income. For low-income people in particular, who are often paid by the hour, work uncertain schedules, depend on tips, or are self-employed, income can be difficult to project. The desire to be insured during the pandemic may have spurred some applicants to make sure their estimates cleared the 100% FPL threshold. (Enrollment assisters and brokers can help applicants deploy every resource to meet this goal.)

For OEP 2022, the Biden administration raised funding for nonprofit enrollment assistance in HealthCare.gov states to record levels, enough to train and certify more than 1,500 enrollment navigators. This past spring, in compliance with a court order, the exchanges stopped requiring low-income applicants who estimated income  over 100% FPL to provide documentation if the government’s “trusted sources” of information indicated an  income below the threshold.

Comparatively weak enrollment growth in Wisconsin may support the hypothesis that under pressure of the pandemic, some enrollees in other non-expansion states are climbing out of the coverage gap. Alone among non-expansion states, Wisconsin has no coverage gap, as the state provides Medicaid to adults with incomes up to 100% FPL (rather than up to the 138% FPL threshold required by the ACA Medicaid expansion, which offers enhanced federal funding to participating states). In Wisconsin, those whose income falls below the 100% FPL marketplace eligibility threshold have access to free coverage. Wisconsin is the only non-expansion state that did not experience double-digit enrollment growth in OEP 2022 or from 2020-2022.

The future of increased subsidies is unclear

The American Rescue Plan was conceived as emergency pandemic relief, and its increased subsidies run only through 2022. President Biden’s Build Back Better bill, which passed in the House of Representatives but is currently stalled in the Senate, would extend the ARP subsidies through 2025 or possibly further.

The large increase in enrollment this year should add pressure on Congress to extend the improved subsidies into future years. Consumer response to the increased subsidies has proved immediate and dramatic. The ARP subsidy boosts brought the Affordable Care Act much closer than previously to living up to the promise of “affordable” care expressed in its name. Going backwards on that promise should not be seen as a politically viable or ethical path.

* * *

* Another million people are enrolled in Basic Health Programs established under the ACA by Minnesota and New York – low-cost, Medicaid-like programs for state residents with incomes under 200% FPL. Enrollment in these programs is on track to increase by 13% this year, according to Charles Gaba’s estimate.

** HealthCare.gov all-state totals are for the 33 states using the federal exchange this year. Source: Charles Gaba, OE snapshots as of mid-December, 2021-22, 2020-2021; see also CMS end-of-OEP snapshots for 2020, 2021, 2022

 

 

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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Four reasons to not wait until January to enroll in an ACA health plan

Reasons to enroll in an ACA health plan by December 15?

  1. If you’re currently uninsured, delaying your enrollment will mean no coverage in January.
  2. If you’re uninsured or enrolled in a non-marketplace plan, delayed enrollment might mean missing out on free money.
  3. If you’re auto-renewing your 2021 plan, you could by surprised on January 1.
  4. Out-of-pocket expenses under your 2021 plans won’t transfer in February and March.

Open enrollment for 2022 individual/family health coverage began on November 1. The enrollment window is longer this year, continuing until at least January 15 in nearly every state. (For now, Idaho still plans to end the open enrollment period on December 15.)

The longer open enrollment period does give people some extra wiggle room during the busy holiday season. But for most people, December 15 is still the soft deadline you’re going to want to keep in mind. In most states, that’s the last day you can enroll in coverage that will take effect January 1.

Which states have open enrollment dates past December 15 – but still have January 1 effective dates?

There are some exceptions, however. The following state-run exchanges are giving people extra time to sign up for a plan that takes effect January 1:

But in the rest of the country, you need to enroll by December 15 to have your plan start on January 1. And that’s important for several reasons.

1. Currently uninsured? Delaying your enrollment will mean no coverage in January.

If you’re not already enrolled in ACA-compliant coverage in 2021, the current open enrollment period is your chance to change that for 2022.

But if you wait until the last minute to enroll, you won’t have coverage in place when the new year begins. Instead, you’ll be waiting until February 1 — or March 1 – if you enroll at the last minute in a few states with longer enrollment windows.

2. Currently uninsured or enrolled in a non-marketplace plan? Delayed enrollment might mean missing out on free money.

If you considered marketplace coverage in the past and found it to be unaffordable, you might currently be uninsured or enrolled in a plan that isn’t regulated by the ACA. Or you might have opted to buy ACA-compliant coverage outside the exchange, if you weren’t eligible for premium tax credits (subsidies) the last time you looked.

But thanks to the American Rescue Plan, many people who weren’t eligible for subsidies in previous years will find that they are now. Those subsidies are only available if you’re enrolled in a marketplace/exchange plan, and the current open enrollment period is your chance to make the switch to a marketplace plan.

In addition to being more widely available, premium subsidies are also larger than they were last fall. People who didn’t enroll last year due to the cost may find that coverage now fits in their budget.

Four out of five people shopping for coverage in the 33 states that use the federally-run marketplace (HealthCare.gov) will find that they can get coverage for $10/month or less. And millions of uninsured Americans are eligible for premium-free coverage in the marketplace, but may not realize this.

Waiting until the last minute to enroll in coverage will mean that you leave all that money on the table for January. You can use our subsidy calculator to get an idea of how much your subsidy will be for 2022. Then, make sure you enroll by December 15 so that you’re eligible to claim the subsidy for all 12 months of the year.

3. Letting your plan auto-renew? You might be in for a surprise.

If you already have coverage through the marketplace in 2021 and are planning to just let it auto-renew for 2021, you might wake up on January 1 with coverage and a premium that aren’t what you expected.

Even if you’re 100% happy with the plan you have now, you owe it to yourself to spend at least a little time checking out the available options before December 15. The premium that your insurer charges is likely changing for 2022. And your subsidy amount might also be changing, especially if there are new insurers joining the marketplace in your area.

Your insurer might also be making changes to your benefits, provider network, or covered drug list — or even discontinuing the plan altogether and replacing it with a new one. In short, the plan and price you have on January 1 might be quite different from what you have now.

This is part of the reason HHS opted to extend the open enrollment period – in order to give people a chance for a “do-over” if their auto-renewed plan isn’t what they expected. In nearly every state, you’ll have until at least January 15 to pick a new plan. But that plan selection won’t be retroactive to January 1.

4. Out-of-pocket expenses won’t transfer in February or March.

What if you’re enrolled in a marketplace plan in 2021, let it auto-renew for 2022, and then decide after December 15 that you’d rather have a different plan? Thanks to the extended open enrollment period, you can do that, and your new plan will take effect in February (or potentially March, if you’re in one of the state-run exchanges with the latest enrollment deadlines).

But it’s important to understand that you’ll be starting over with a new plan in February or March. This means the out-of-pocket costs counted against your deductible and out-of-pocket maximum will reset to $0, even if you ended up with out-of-pocket expenses in January.

Out-of-pocket expenses reset to $0 on January 1 for all marketplace plans, so your auto-renewed policy will start over with a new deductible at that point. But if you need medical care in January (and have associated out-of-pocket costs) before your new plan takes effect in February, you’ll potentially have a higher out-of-pocket exposure for the whole year than you would have if you’d picked your new plan by December 15 and had it start January 1.

All of this is a reminder that while most enrollees have until at least mid-January to sign up for 2022 coverage, it’s in your best interest to get your plan selection sorted out by December 15.

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 Four reasons to not wait until January to enroll in an ACA health plan appeared first on healthinsurance.org.

Congress boosted ACA subsidies. An enrollment surge followed.

The American Rescue Plan, signed into law by President Biden on March 11 of this year, included major boosts to the affordability of health plans sold in the ACA marketplace for people of all incomes.

Effective through 2022 and likely to be made permanent by pending legislation, the ARP improvements to affordability were as follows:

  • A benchmark Silver plan (the second least expensive Silver plan) with strong cost sharing reduction (CSR) subsidies became free to enrollees with household income up to 150% of the Federal Poverty Level (FPL) and costs no more than 2% of income for enrollees with income up to 200% FPL. That’s a maximum of $43 per month for a single person with an income of $25,520.
  • The previous income cap on subsidy eligibility was removed, so that no one who lacks access to affordable coverage elsewhere (i.e., from an employer) has to pay more than 8.5% of income for a benchmark Silver plan (less at lower incomes). The eliminated cap was 400% FPL ($51,040 for an individual, $104,880 for a family of four), and some households with income well above that level now qualify for subsidies.
  • The percentage of income required to buy a benchmark Silver plan was reduced at all income levels.
  • Anyone who received any unemployment insurance income during 2021 was eligible for free high-CSR Silver coverage. (Note that the pending legislation calls for this subsidy enhancement to be extended by several years, but not necessarily made permanent.)
open enrollment 2021

Our 2022 Open Enrollment Guide: Everything you need to know to enroll in an affordable individual-market health plan.

Preceding and then coinciding with these major subsidy boosts, the Biden administration had opened an emergency Special Enrollment Period (SEP) running from February 15 through August 15 in the 36 states that use the federal ACA exchange, HealthCare.gov.

The SEP, implemented to help Americans get covered during the pandemic, functioned like a second open enrollment period: anyone who lacked access to affordable coverage from other sources (e.g., employers) could enroll in a marketplace plan. The 15 state-based exchanges also opened emergency SEPs, with somewhat different durations and conditions, summarized here.

ARP prompted an enrollment surge during the 2021 SEP

The enhanced subsidies were posted on HealthCare.gov on April 1, and in the state-run exchanges within a few weeks of that date. Existing enrollees were encouraged to update their information and get the new subsidies credited, and were allowed to switch plans if they chose.

Americans responded with a major surge in new enrollment and enrollment upgrades. From February 15 through August 15:

  • More than 2.8 million people enrolled in new health coverage. Of new enrollees, 91% qualified for premium subsidies.
  • Of new enrollees, 44% obtained coverage for less than $10 per month. Most of these enrollees (41% in HealthCare.gov states) received free coverage with the highest level of CSR. As a result, the median deductible fell from $750 in 2020 to $50 this year – meaning that half of enrollees obtained a plan with a deductible at or below that level (most of them in high-CSR Silver plans).
  • The average premium paid by new consumers during the SEP (Feb. 15 – Aug. 15) fell 30%, from $117 in 2020 to $81 in 2021.
  • Marketplace enrollment in August 2021, at 12.2 million, was 15% higher than in August 2020, the previous August high, and 22% above the pre-pandemic August high (see p. 14 here) recorded in 2016.
  • More than 200,000 new and existing enrollees qualified for free high-CSR Silver plans because they had received unemployment insurance income in 2021.

Savings were also dramatic for existing marketplace enrollees:

  • 8 million existing enrollees reduced the premiums on their existing plans or obtained new plans after ARP implementation.
  • Existing enrollees reduced their premiums by 50%, or by $67 per month, on average.

My premium went down how much?

To get a sense of the extent to which the ARP reduced enrollee costs (or encouraged people who might previously have considered coverage too expensive to enroll), consider these examples:

  • In November 2020, a 40-year-old in Miami with an income of $24,000 per year would have paid $115 per month for the least expensive available Silver plan, with a $1,500 deductible, and $119 per month for the second-cheapest Silver plan, with a $0 deductible. Thanks to the ARP, those plans would now cost this person $26 and $30 per month, respectively.
  • In November 2020, a pair of 60-year-olds in Dallas, Texas with an income of $70,000 – slightly over the income cap for premium subsidies, which the ARP eliminated – would have had to pay $1,669 per month for the lowest cost Gold plan, with a $2,300 deductible (Gold plans are cheaper than Silver Plans in Dallas), or $1,228 for the lowest cost Bronze plan, with an $8,550 deductible.
    Now, this couple can choose to pay $393 per month for the Gold plan (which includes free doctor visits and generic drug prescriptions, neither subject to the deductible), or consider two free Bronze plans with deductibles over $8,000, a $2/month Bronze plan with a $6,100 deductible, and other options. A BlueCross Silver plan available for $420 per month might also be in the mix, if, say, the provider network is preferable.

Which states saw the biggest gains in new enrollees?

The new enrollment surge – and the savings – was particularly strong in twelve states that had not enacted the ACA Medicaid expansion as of June 2021. Due to their failure to expand Medicaid, these states have a “coverage gap” for people who earn too little to qualify for marketplace coverage (less than 100% FPL, or $12,760 for an individual in 2021) but mostly also don’t qualify for Medicaid because of their states’ restrictive Medicaid eligibility. (That excludes Wisconsin, which has not enacted the ACA expansion but grants Medicaid eligibility to adults with income up to 100% FPL. Oklahoma, which expanded Medicaid beginning in July 2021, and Missouri, which will begin covering new Medicaid expansion enrollees in October, are included.)

These twelve states – Alabama, Florida, Georgia, Kansas, Missouri, Mississippi, North Carolina, Oklahoma, South Carolina, South Dakota, Tennessee, Texas and Wyoming – accounted for 1.55 million new enrollees during the SEP, or 55% of all new enrollees nationally.

In the non-expansion states, eligibility for marketplace subsidies begins at 100% FPL, as opposed to 138% FPL in Medicaid expansion states, where adults below that threshold qualify for Medicaid. Accordingly, in these states, about half of enrollees qualified for free high-CSR coverage, reporting incomes between 100% and 150% FPL. In these states, enrollment as of August 2021 (6.0 million) was 44% above enrollment in August 2019, the last pre-pandemic year (4.2 million).

More than 2 million people in non-expansion states are estimated to be stuck in the coverage gap – ineligible both for Medicaid and for ACA premium subsidies. For people in these states, reporting an income just below or just above 100% FPL ($12,760 for an individual, $26,200 for a family of four) is the difference between receiving no help at all and having access to free Silver coverage with high CSR and low out-of-pocket costs.

It’s important to keep in mind that the application for marketplace coverage requires an income estimate – and many people, unaware of the minimum income requirement, underestimate their potential income. For tips on how to make sure you leave no stone unturned in seeking help paying for coverage, see this post.

What do these numbers mean for 2022 open enrollment?

As open enrollment for 2022 approaches (it begins on November 1), the subsidies enhanced by the ARP remain in place for 2022. As Congress hashes out new investments for coming years in a pending budget bill, the pressure is intense to keep this good thing going in future years.

As of now, with the sad exception of those stuck in the coverage gap in states that still refuse to enact the ACA Medicaid expansion, any citizen or legally present noncitizen who lacks access to other forms of affordable coverage should be able to find it in the marketplace. If you need coverage, make sure to check out your options on HealthCare.gov or your state exchange.

The word that ACA marketplace plans are more affordable than ever has not yet reached many of the people who need coverage and qualify for premium subsidies. The Kaiser Family Foundation estimated in May that nearly 11 million uninsured people were subsidy-eligible. ACA enrollment assisters consistently report that many people who are eligible for coverage have no idea what’s on offer.

The Biden administration is trying to change that: after years of radical cuts in federal funds for enrollment assistance, the administration this year has allocated a record $80 million to fund nonprofit enrollment “navigator” groups charged with outreach as well as enrollment assistance. The Urban Institute forecast that if the ARP subsidies are made permanent – solidifying the perception that truly affordable coverage is here to stay — enrollment would increase by more than 5 million in 2022.

The emergency SEP provided a jump start, boosting coverage as of August more than 1.5 million above the August 2020 level. In a fraught and complex legislative session, Congress will most likely – though not certainly – do its part and extend the subsidies beyond 2022. There is certainly room for enrollment to run higher in the open enrollment season that begins on November 1.

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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What to expect when you’re expecting health insurance premium subsidies

If you buy your own health insurance – or don’t have health insurance at all – you might have been pleased to hear that the American Rescue Plan (ARP) has increased premium subsidies for 2021 and made them available to more people.

But receiving those premium tax credits isn’t necessarily automatic: when and how you get them depends on where you live and other factors, including whether you’re already enrolled in a marketplace plan and whether you’re receiving unemployment compensation at any point in 2021.

The early bird gets the premium subsidy

Although the current COVID/ARP enrollment window extends through August 15 in most states, it’s in your best interest to enroll as soon as possible in order to maximize the number of months you get the extra subsidies.

If you’re receiving unemployment compensation at any point in 2021, the American Rescue Plan gives you access to substantial premium subsidies and full cost-sharing reductions. That means you’ll be eligible for a Silver plan that’s upgraded to better-than-platinum benefits, and you won’t have to pay any monthly premiums. But in most states, this benefit isn’t yet available. (Note that in some states, you may still have to pay a dollar or two, even for the lowest-cost Silver plans. And it’s worth noting that even if you’re eligible for a premium-free Silver plan, you might find that you prefer to upgrade to a Silver plan that has at least a nominal premium in trade for a more extensive provider network.)

Regardless, you’ll still want to enroll – or change your plan – as soon as possible so that when subsidies are available, you’ll receive credit for them.

Your state’s marketplace affects how and when you receive your subsidies

For starters, you should be aware that when it comes to how the ARP’s extra subsidies are being handled, there’s one process in the states that use HealthCare.gov, and 15 slightly different approaches in the other states. Thirty-six states use HealthCare.gov as their marketplace, while Washington, DC and the other 14 states operate their own state-run marketplaces (Covered California, New York State of Health, Your Health Idaho, etc.).

How and when will you receive your premium subsidy in a HealthCare.gov state?

If you’re in a state that uses HealthCare.gov, your additional subsidies will not be automatically added to your account, even if you already have financial information on file with the marketplace. You’ll need to log back into your account and follow the instructions to get your subsidy amount updated. (You can do this directly through HealthCare.gov or through an enhanced direct enrollment entity if you use one – or your broker or agent can help you sort it out). Once the new subsidy is determined, you can choose to either apply it to your current plan or pick a different plan.

If you’re uninsured or enrolled in an off-exchange plan, you can switch to the marketplace anytime between now and August 15. But the sooner you enroll, the sooner you’ll start receiving subsidies.

HealthCare.gov rolled out most of the ARP’s new subsidies as of April 1, but CMS has said it will be July before the enhanced subsidies are available to people who receive unemployment compensation in 2021.

It’s important to understand that regardless of the reason for the additional premium subsidy (including unemployment compensation), the subsidy itself is retroactive to January 1, 2021 in every state, as long as you’ve had coverage through the marketplace for the whole year. So even if your enhanced subsidy due to unemployment compensation doesn’t take effect until August, you’ll be able to claim the rest of it when you file your 2021 tax return. However, the full cost-sharing reductions for people who receive unemployment compensation in 2021 can only be provided in real-time, and won’t take effect until the marketplace can process them, starting this summer.

How will premium subsidies be treated in states that run their own marketplaces?

In the District of Columbia and the other 14 states, the deadlines, subsidy availability dates, and even eligibility rules differ from state to state. In most of these states, the current special enrollment window is functioning like an open enrollment period, with people allowed to newly enroll or switch plans – though there are some exceptions, detailed below. And in contrast to HealthCare.gov, nearly all of the state-run exchanges will be automatically updating subsidy amounts for current enrollees over the next several weeks, as long as the enrollee has financial information on file with the exchange.

Here’s a summary of what each state with a state-run marketplace is doing:

California

  • Residents can enroll in an ACA-compliant plan through December 31.
  • Subsidies are currently available for most people, but subsidy eligibility based on unemployment compensation won’t be available until July or August.
  • For current enrollees, subsidies will be automatically updated in May.

Colorado

  • Residents can enroll in an ACA-compliant plan through August 15.
  • Subsidies will not be automatically updated, but are currently available for both new and existing enrollees. The process will be more streamlined by mid-May.

Connecticut:

  • Residents can enroll in an ACA-compliant plan between May 1 and August 15.
  • Subsidies will be available to most people starting May 1, although subsidy eligibility based on unemployment compensation will be available by July.
  • Subsidies will be automatically updated by July, for current enrollees who don’t manually update their accounts before then.

District of Columbia:

  • Residents can enroll in an ACA-compliant plan any time through the end of the pandemic emergency period.
  • Extra subsidies are currently available to anyone eligible, including people who are eligible due to unemployment compensation in 2021.
  • Subsidies will be automatically updated in May, for current enrollees who don’t manually update their accounts before then.
  • For people who have been enrolled through the marketplace since January, the full amount of the additional premium subsidy will be spread across the remaining months of 2021 (as opposed to having to wait to claim the subsidy for the first few months of 2021 on their tax returns).

Idaho:

  • Residents can enroll in an ACA-compliant plan through April 30.
  • Updated subsidies are currently available, and have been automatically updated for existing enrollees who had already provided financial information to the exchange.
  • Current enrollees can change plans, but only to another plan offered by the same insurance company (unless they have a qualifying event).

Maryland:

  • Residents can enroll in an ACA-compliant plan through August 15.
  • Updated subsidies are currently available, and will be automatically added to existing accounts as of May, for enrollees who have opted to receive the maximum available subsidy.
  • Current enrollees with bronze or catastrophic plans can upgrade their coverage; current enrollees with Silver plans can switch to a more expensive Silver plan.

Massachusetts:

  • Residents can enroll in an ACA-compliant plan through July 23.
  • Updated subsidies are currently available, and will be automatically updated for existing subsidized enrollees as of May. Enrollees who are newly eligible for subsidies will be able to access them in May, for June coverage.
  • As soon as possible, enrollees who have received any unemployment compensation in 2021 will become eligible for ConnectorCare Plan Type 2A, which has no monthly premiums and low out-of-pocket costs.

Minnesota:

  • Residents can enroll in an ACA-compliant plan through July 16.
  • Updated subsidies are currently available, and MNsure will automatically update existing enrollees’ subsidy amounts if they have financial information on file.
  • MNsure’s current enrollment window is only available to people who are uninsured or enrolled in a plan outside the exchange (it’s necessary to transition to the exchange in order to get premium subsidies). Current MNsure enrollees cannot use this window to switch plans unless they have a qualifying event. Minnesota and Vermont are currently the only states in the country with this restriction (Vermont plans to allow people to change plans in July).

Nevada:

  • Residents can enroll in an ACA-compliant plan through August 15.
  • Updated subsidies are currently available, and Nevada Health Link will start automatically updating existing enrollees’ subsidy amounts in June.

New Jersey:

  • Residents can enroll in an ACA-compliant plan through December 31.
  • As of May, New Jersey is expanding its state-funded subsidies to include enrollees with household income up to 600% of the poverty level (this was previously capped at 400% of the poverty level)
  • Updated subsidies are currently available. Existing enrollees can follow these steps to update their account, and new enrollees can follow these steps.
  • The exchange will automatically update subsidy amounts this summer, for existing enrollees who haven’t yet taken action to update their subsidies.

New York:

  • Residents can enroll in an ACA-compliant plan through December 31.
  • Updated subsidies are currently available. This video shows how existing enrollees can update their subsidy amounts. New subsidy amounts will automatically be applied to eligible enrollees’ accounts as of June, if they haven’t taken action by then.

Pennsylvania:

  •  Residents can enroll in an ACA-compliant plan through August 15.
  • Updated subsidies are currently available. Pennie will apply them automatically by June, for existing enrollees who haven’t taken action to update their accounts by then.

Rhode Island:

  • Residents can enroll in an ACA-compliant plan through August 15.
  • HealthSourceRI has already automatically updated subsidy amounts for current enrollees with income up to 400% of the poverty level (ie, people who were already receiving subsidies are now receiving larger subsidies).
  • For people with income above 400% of the poverty level, as well as people who are receiving unemployment compensation in 2021, the new subsidy amounts will be updated in June.

Vermont:

  • Residents can enroll in an ACA-compliant plan through May 14.
  • For now, Vermont’s marketplace is encouraging people who are uninsured or enrolled off-exchange to sign up for coverage through the marketplace as soon as possible.
  • People who are receiving unemployment compensation are encouraged to call Vermont’s marketplace in order to begin the process of receiving additional subsidies.
  • This summer, people will be able to log back into their accounts and update their subsidy amounts.
  • Vermont, like Minnesota, is currently limiting the COVID/ARP-related enrollment window to people who are uninsured and people who have off-exchange coverage and need to transition to the exchange. A plan change for current on-exchange enrollees requires a qualifying event. But Vermont Health Connect confirmed that they plan to allow existing enrollees to make plan changes in July.

Washington:

  • Residents can enroll in an ACA-compliant plan through August 15.
  • The additional subsidy amounts will be available by early May. Washington’s marketplace will automatically update existing enrollees’ accounts so that the new premium amounts take effect in June.
  • People who enroll before May will not see the new subsidy amounts when they enroll, but their subsidies will be updated in May as long as they provide financial information to the marketplace when they enroll.
  • Enrollees who do not currently receive tax credits may want to switch plans once they start receiving tax credits. They can log back into their account after May 15 to pick a different plan, as long as it’s offered by their current insurance company.

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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My wife and I each make about $40,000 a year. If we file our taxes separately, can we each qualify for an exchange subsidy?

Q.  My wife and I each make about $40,000/year.  If we file our taxes separately, can we each qualify for an exchange subsidy?

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A.  No. The guidelines for eligibility are determined by total household income and the number of people in the household. For a single individual purchasing coverage with a 2021 effective date, the 400 percent mark is $51,040 in annual income (this is based on 2020 poverty level numbers, as the prior year’s numbers are always used). For two people, it’s $68,960. This makes sense, as it’s less expensive for two people to maintain one household than to maintain two separate households.  Taxpayers whose filing status is married filing separately are explicitly ineligible to receive subsidies in the exchange, regardless of their income. (See this IRS publication for more details).

Premium subsidies have to be reconciled on your tax return, using Form 8962. If you receive a premium subsidy during the year and then end up using the married filing separately status, the full amount of the subsidy that was paid on your behalf would have to be repaid to the IRS with your tax return.

In March 2014, the IRS issued a special rule with regards to married people who are unable to file a joint return because of domestic abuse. If a taxpayer files as married filing separately, premium tax credits are still available as long as (1.) the spouses are not living together, (2.) the taxpayer is unable to file a joint return because of domestic violence, and (3.) the taxpayer indicates this information on his or her tax return.

For everyone else, the rules are clear that married couples must file a joint tax return in order to qualify for subsidies in the exchanges.

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 My wife and I each make about $40,000 a year. If we file our taxes separately, can we each qualify for an exchange subsidy? appeared first on healthinsurance.org.

What happens if my income changes and my premium subsidy is too big? Will I have to repay it?

Q: What happens if my income changes and my premium subsidy is too big? Will I have to repay it?

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A: Monthly premium subsidy amounts (ie, the advance premium tax credit – APTC – that’s paid to your insurer each month to offset the cost of your premium) are estimated based on prior-year income and projections for the year ahead, but the actual premium tax credit amount to which you’re entitled depends on your actual income in the year that you’re getting subsidized health insurance coverage.

If recipients end up earning more than anticipated, they could have to pay back some of the subsidy. This can catch people off guard, especially since the tax credits are paid directly to the insurance carriers each month, but if overpaid, they must be returned by the insureds themselves.

The issue of reconciling APTCs was explained in a 2013 IRS publication (see the final column on page 30383, continued on page 30384) which clearly explains that they do expect people to pay back subsidies that are in excess of the actual amount for which the household qualifies.

But the portion of an excess subsidy that must be repaid is capped for families with incomes up to 400 percent of federal poverty level (FPL). Details regarding the maximum amount that must be repaid, depending on income, are in the instructions for Form 8962, on Table 5 (Repayment Limitation). These amounts are adjusted annually, but for the 2020 tax year, the repayment caps range from $325 to $2,700, depending on your income and your tax filing status (single filer versus any other filing status). GOP lawmakers considered various proposals in 2017 that would have eliminated the repayment limitations, essentially requiring anyone who received excess APTC to pay back the full amount, regardless of income. But those proposals were not enacted.

There are some scenarios in which repayment caps do not apply:

  • If a person projected an income below 400 percent of the poverty level (and received premium subsidies during the year based on that projection) but then ends up with an actual income above 400 percent of the poverty level (ie, not eligible for subsidies), the entire subsidy amount that was paid on their behalf has to be repaid to the IRS.
  • If a person projected an income at or above 100 percent of the poverty level (and received premium subsidies) but then ends up with an income below the poverty level (ie, not eligible for subsidies), none of the subsidy has to be repaid. This is confirmed in the instructions for Form 8962, on page 8, in the section about Line 6 (Estimated household income at least 100% of the federal poverty line). But there are new rules as of 2019 that make it less likely for people with income below the poverty level to qualify for premium subsidies based on income projections that are above the poverty level. This is explained in more detail here.

Is there any help for me if I have to repay premium subsidies?

The IRS noted that they would “consider possible avenues of administrative relief” for tax filers who are struggling to pay back excess APTC, including such options as payment plans and the waiver of interest and penalties for people who must return subsidy over-payments. If you find yourself in a situation where you must pay back a significant amount of the premium subsidies you received during the prior year, contact the IRS to see if you can work out a favorable payment plan/interest arrangement.

It’s also worth noting that contributions to a pre-tax retirement account and/or a health savings account will reduce your ACA-specific modified adjusted gross income, which is what the IRS uses to determine your premium tax credit eligibility. If you had HSA-qualified health coverage during the year, you can make HSA contributions up until the tax filing deadline the following spring. And IRA contributions can also be made up until the tax filing deadline. You’ll want to talk with your tax advisor to see what makes the most sense given your specific circumstances, but you may find that some pre-tax savings end up making you eligible for a premium subsidy afterall, or reduce the amount that you’d otherwise have to repay.

The COVID pandemic caused widespread financial uncertainty and employment upheavals throughout much of 2020. Additional federal unemployment benefits were provided to millions of people, but there are concerns that the premium tax credit reconciliation could be particularly challenging during the 2021 tax filing season, with many people having to repay subsidies that were paid on their behalf during a time they were unemployed in 2020.

In December 2020, insurance commissioners from 11 states sent a letter to President-elect Biden, recommending various immediate and long-term actions designed to improve access to health coverage and care. One of the short-term recommendations is to provide relief from subsidy claw-backs for the 2020 tax year. Even in the best of times, it can be challenging to accurately project your income for the coming year, but the uncertainty caused by the COVID pandemic made this much more challenging than usual. So it’s possible that the Biden administration and/or Congress might be able to take action to provide some relief in this area, for at least the 2020 tax year.

What if you get employer-sponsored health insurance mid-year?

Most non-elderly Americans get their health coverage from an employer. Individual health insurance is great for filling in the gaps between jobs, but what happens if you start off the year without access to an affordable employer-sponsored health insurance plan, and then get a job mid-year that provides health coverage?

If a premium subsidy was paid on your behalf during the months you had individual market coverage, you may end up having to repay some or all of the subsidy when you file your tax return. It all depends on your total income for the year, including income from your new job. If your total income still ends up being in line with the estimate you provided when you applied for your subsidy, you won’t have to pay that money back. But if your actual income for the year ends up being substantially higher than you initially projected, you may end up having to repay some or all of that subsidy when you file your taxes.

It doesn’t matter that your income was lower when you were covered under the individual market plan. In the eyes of the IRS, annual income is annual income — it can be evenly distributed throughout the year, or come in the form of a windfall on December 31. (As noted above, insurance commissioners have urged the Biden administration to consider ways of providing relief on this issue for the 2020 tax year, given that it was even more challenging than normal to accurately project an annual income during the COVID panemic).

Once you become eligible for an affordable health insurance plan through your employer that provides minimum value, you’re no longer eligible for premium subsidies as of the month you become eligible for the employer’s plan. But premium tax credit reconciliation is done on a month-by-month basis, so as long as your total income for the year is still in the subsidy-eligible range, you’ll almost certainly still be eligible for at least some amount of subsidy for the months when you had a plan that you purchased through the exchange.

Finally, if you’re offered health insurance through an employer that you feel is too expensive based on the share you have to pay, you can’t just opt out, buy your own health plan, and attempt to snag a subsidy. The fact that an affordable plan (by IRS definitions) is available to you renders you ineligible for money toward your premiums. Unfortunately, the cost of obtaining family coverage is not taken into consideration when determining whether an employer-sponsored plan is affordable, which leaves some families stuck without a viable coverage option.

How many people have to repay premium subsidies?

For 2015 coverage, subsidies were reconciled when taxes were filed in early 2016. The IRS reported in early 2017 that about 3.3 million tax filers who received APTC in 2015 had to repay a portion of the subsidy when they filed their 2015 taxes; the average amount that had to be repaid was about $870, and 60 percent of people who had to pay back excess APTC still received a refund once the excess APTC was subtracted from their initial refund. [IRS data for premium tax credit reporting is available here; as of 2019, data had only been reported for the 2014 and 2015 tax years.]

But on the opposite end of the spectrum, about 2.4 million tax filers who were eligible for a premium tax credit ended up receiving all or some of it when they filed their return. These are people who either paid full price for their exchange plan in 2015 but ended up qualifying for a subsidy based on their 2015 income, or people who got an APTC that was less than the amount for which they ultimately qualified. The average amount of additional premium tax credit paid out on tax returns for 2015 was $670.

[The IRS noted that it was very uncommon for people to pay full price for their coverage and wait to claim their full refund on their return: 98 percent of the people who claimed a premium tax credit on their return had received at least some APTC during the year.]

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 What happens if my income changes and my premium subsidy is too big? Will I have to repay it? appeared first on healthinsurance.org.

Did health insurance premiums go up or down for 2021?

Q. I’ve seen a lot of differing headlines about health insurance rates for 2021 – some say rates increased, some say they decreased. Can you shed some light on this? Do these rate changes apply to everyone?

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A. The vast majority of Americans get their health insurance either from an employer or from the government (Medicare, Medicaid, CHIP, TRICARE, VA, IHS). The rate changes that have been making headlines each fall for the last few years are for the individual market, which only accounts for about 4.2 percent of the population.

Do rate change headlines apply to all types of health insurance coverage?

When you see headlines about health insurance premium increases or decreases, the stories are typically about individual-market – and ACA-compliant – health insurance. The headlines aren’t referring to government coverage, or pre-ACA plans still in force.

More specifically:

  • If you get your health insurance through your employer or from the government, the subsidies, exchanges, and the individual market health insurance rates that you’re seeing in media reports don’t apply to you. Employer-sponsored insurance rates change annually, and your employer will provide you with information related to your plan options for the coming year, including how your plan, premiums and/or cost-sharing might be changing.
  • If you have Medicare, Medicaid, or CHIP coverage, you’ll receive information from the government or from your private insurer (if you’re enrolled in a Medicare Advantage, Medigap, Medicare Part D, or a Medicaid/CHIP managed care plan), letting you know how your coverage and/or costs might be changing for the coming year.
  • If your health insurance plan is grandfathered or grandmothered, you’re in a separate risk pool from the ACA-compliant plans offered by your health insurer, which means your rate increases for 2021 won’t necessarily match the rate increases you might be seeing in media reports about ACA-compliant plans issued by your insurance company. (There’s no requirement that carriers continue to renew grandfathered and grandmothered plans. They can decide to cancel them instead, and replace them with ACA-compliant plans.)

Headlines about rate increases (or decreases)

If you have an individual/family major medical health insurance plan, purchased on-exchange or off-exchange, that became effective January 2014 or later, it’s compliant with the ACA. The annual rate changes for these plans have been making headlines for the last several years, but the actual rate changes that apply to each enrollee’s premiums differ significantly because there are so many factors involved.

Here are some things to keep in mind:

  • When you see headlines about rate changes, they almost always apply to full-price premiums, before any premium subsidies are applied. But 86 percent of the people who get their coverage via the exchanges are receiving premium subsidies (and the majority of the entire individual market population has coverage via the exchanges). These subsidies make a huge difference in terms of how much people actually pay for their coverage and how much their after-subsidy premiums change from one year to the next.
  • Average full-price premiums increased significantly in 2017 and 2018. But they increased by less than 3% in 2019, decreased slightly for 2020, and increased slightly for 2021. But that’s doesn’t mean the rate changes were uniformly small: Average rates increased by more than 10 percent in Indiana, and decreased by more than 13 percent in Maine (and again, that’s for people who pay full-price premiums; changes in after-subsidies premiums can be very different).
  • CMS put out a press release in October 2020, noting that premiums in the exchanges were dropping for the third year in a row, and that benchmark premiums were decreasing by an average of 2 percent for 2021. This was widely reported in the media, but this 2% average rate decrease only applies to the average benchmark plans (second-lowest-cost silver plan) available via HealthCare.gov. That means it doesn’t apply to the vast majority of plans sold on HealthCare.gov, and it doesn’t apply to any of the plans sold in the 15 fully state-run exchanges.
  • You might have seen articles about very stable overall rates for 2021 — on the heels of rates that have been quite stable ever since 2018. Or about significant rate increases in places like Indiana. Or about significant rate decreases in Maine and Maryland. And sometimes, rates can decrease for people who don’t get premium subsidies while simultaneously increasing for people in the same area who do get premium subsidies. It’s no wonder people are confused.

What’s the biggest factor when it comes to premium increases?

The biggest factor is whether or not you get premium subsidies. If you don’t get a subsidy (which is the case for about 14 percent of exchange enrollees nationwide – plus everyone enrolled in off-exchange plans), your rate changes are pretty straightforward and just depend on how much your insurer is changing the premium for your plan next year.

Of course, you also have the option to shop around during open enrollment and select a different plan with a different premium.

But if you do get a subsidy, your rate change depends on multiple factors: How much your plan’s price changes, how much your area’s benchmark plan price changes (keeping in mind that the benchmark plan isn’t necessarily the same plan from one year to the next), as well as things like changes in your income and family size.

Because average benchmark premiums decreased for 2021, average premium subsidies are a little smaller in 2021 than they were in 2020 (and since the average benchmark premiums have decreased three years in a row, average premium subsidies have also decreased three years in a row). But that doesn’t mean your subsidy is smaller, since there’s a lot of variation from one area to another, and because your specific subsidy also depends on your own income, which can change from one year to the next.

And it’s important to keep in mind that although average benchmark premiums (on which subsidy amounts are based) decreased slightly for 2021, average premiums across the whole individual market increased slightly. So it was common for 2021 to see people who get premium subsidies ending up with an small overall average increase in their premiums for 2021 – assuming they weren’t enrolled in the benchmark plan in both years (the subsidies are designed to closely offset rate changes for the benchmark plan) or willing to switch to a lower-cost plan for 2021.

If you’re in an area where the benchmark premium decreased significantly, you may have found that your after-subsidy premium ended up increasing significantly, which can be disconcerting after you’ve seen headlines about rate decreases. This is what happened in some parts of Colorado in 2020, for example. And it can also happen in areas where a new insurer moves into the area and undercuts the previous benchmark plan; there are at least 20 states with new insurers for 2021 and numerous other states where existing insurers expanded their coverage areas.

Can you avoid health premium increases?

No matter what, you need to carefully compare your options when you enroll.

If you’re eligible for a premium subsidy, you need to shop in the exchange in your state. (Use our calculator to get an idea of whether you’re subsidy-eligible – it only takes a minute to find out. And make sure you understand what counts as income under the ACA and how you might be able to adjust yours to make yourself eligible for a subsidy.)

And if you currently have a plan you purchased outside the exchange, be sure to double-check your on-exchange options for next year before deciding whether to renew your off-exchange plan. And keep in mind that as the poverty level numbers increase each year, the limits for subsidy eligibility go up as well. In 2014, a family of four had to have a household income of no more than $94,200 in order to get a subsidy. For 2021, that number is nearly $105,000.

If you have a grandmothered or grandfathered plan and your insurer is letting you renew it, be sure to carefully compare it with the ACA-compliant options that are available to you. Consider the benefits as well as the premiums, and know that you’ll also qualify for a special enrollment period during which you can pick an ACA-compliant plan to replace your existing coverage, instead of renewing it.

So did health insurance premiums increase for 2021?

The answer is … it depends. It depends on where you live, what plan you have, whether you changed plans during open enrollment, and whether you get a premium subsidy. And if you do get a subsidy, there are several variables that go into how much your rates might have changed.

So ignore the headlines. Each year, focus on the plans that are available to you and see how your premium and out-of-pocket costs might change if you select a different plan versus keeping the one you have.

Thanks to the ACA, you have the option to shop from among all of the available plans in your area each year, regardless of whether you have health conditions or not (prior to the ACA, people in most states had limited access to new health plans in the individual market if they had pre-existing conditions).

The initial transition to ACA-compliant plans

The ACA makes health insurance available to anyone who applies (no more underwriting rejections or rate-ups) and subsidizes the cost for people who need it the most.

Some people who don’t get a premium subsidy saw sharp rate increases in 2014, with the transition to a guaranteed-issue market and plans that cover the essential health benefits. But even among people who pay full-price for their coverage, some enrollees may have experienced a rate decrease when they switched to an ACA-compliant plan, even without a subsidy. That could be the case for a variety of populations:

  • If they already opted for a very comprehensive, low-deductible plan prior to 2014, they may have been able to find coverage in the exchanges that wasn’t significantly more expensive than what they paid prior to 2014.
  • If they had an underwriting rate-up on their pre-2014 plan, the new plans might have been a less-expensive alternative. Although the standard rates for ACA-compliant plans were higher than the pre-2014 base rates, there’s no additional charge for people with pre-existing conditions. Prior to 2014, that was not the case. People with pre-existing conditions were often charged rates that were at least 25 percent higher than the base rates, and sometimes 100 percent higher.
  • Older applicants get a better deal than they used to prior to 2014. Rates for older enrollees are limited to three times the rates for young enrollees under the ACA, which is a dramatic shift from the pre-ACA ratios that often ran as high as five to seven times as much for an older applicant.

Who’s paying more? Who’s paying less?

There are some people who are paying quite a bit more for their health insurance now that the ACA has been implemented: primarily enrollees who are younger, healthy, had plans with high out-of-pocket exposure prior to 2014 (potentially higher than the ACA now allows, like a $10,000 individual deductible, for example), and also have incomes high enough to make them ineligible for subsidies.

However, there are plenty of people who are ineligible for subsidies who don’t fall into those other categories. For them, there hasn’t been as much in the way of “rate shock” over the last few years, and they might have ended up with a better deal starting in 2014, even without accounting for subsidies.

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 Did health insurance premiums go up or down for 2021? appeared first on healthinsurance.org.

 

Maddox Insurance Agency

Insurance Agency in Memphis, Tennessee

Main Office

2151 Courtland Place | Memphis, TN 38104

Licensed in Tennessee, Mississippi & Arkansas

Contact

Phone: (901) 335-0154
Fax: (901) 255-9141

Lee.Maddox@maddoxinsured.com

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