subsidies – Maddox Insurance Agency

Congress boosted ACA subsidies. An enrollment surge followed.

September 28, 2021/in American Rescue Plan, Blog, cost-sharing reduction, open enrollment, premium subsidies, subsidies /by wpmaddoxins

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.)

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.

The post Congress boosted ACA subsidies. An enrollment surge followed. appeared first on healthinsurance.org.

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

April 26, 2021/in American Rescue Plan, health insurance premium, premium subsidies, premium tax credit, subsidies /by wpmaddoxins

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.

2021 health insurance premium subsidy calculator

Use our updated subsidy calculator to estimate how much you can save on your 2021 health insurance premiums.

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.

The post What to expect when you’re expecting health insurance premium subsidies appeared first on healthinsurance.org.

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?

January 15, 2021/in cost-sharing subsidies, health insurance exchange, premium subsidies, subsidies /by wpmaddoxins

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?

Use our calculator to estimate how much you could save on your ACA-compliant health insurance premiums.

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.

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?

January 15, 2021/in Affordable Care Act, FPL, health insurance exchange, health insurance premiums, health reform, IRS, navigators, Obamacare, premium subsidies, subsidies /by wpmaddoxins

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

Use our calculator to estimate how much you could save on your ACA-compliant health insurance premiums.

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.]

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?

January 14, 2021/in health insurance exchange, health insurance marketplace, pre-existing condition, subsidies /by wpmaddoxins

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.

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