Impact of Key Provisions of the American Rescue Plan Act of 2021 COVID-19 Relief on Marketplace Premiums
The Affordable Care Act (ACA) provided tax credits to people purchasing health insurance in the marketplaces, but generally only if their income was between 100% and 400% of federal poverty. These subsidies limit a participant's spending on a Silver Benchmark Plan Award to a maximum of a percentage of the participant's household income. The amount of the tax credit corresponds to the difference between the actual benchmark plan premium for this person and the required contribution. The tax credit can be applied to any metal plan.
However, at 400% of the poverty line there is a sharp cliff. According to the ACA, a 60-year-old earning $ 50,000 per year (392% of poverty) would not pay more than $ 410 per month for a benchmark silver plan (9.83% of her income after receiving an average subsidy) before law changes of had received 548 USD per month). However, if their income is over $ 51,040 per year (400% of poverty), health insurance becomes much more expensive. For example, a 60-year-old with an income of $ 52,000 per year (408% of poverty) would pay the full price premium, which averages $ 957 per month nationally for a benchmark silver plan (22% of her income). This doubling of the premium payment for people with incomes just over 400% of poverty has been called the “subsidy cliff”, as shown in the blue line in Figure 1 below.
In addition, there are millions of uninsured people who may have subsidized coverage on the ACA marketplaces but have not received this financial assistance. In many cases, the financial aid available to them may not be sufficient to make the premium or deductible affordable.
COVID-19 Subsidy Extensions for Relief Marketplace
The U.S. Rescue Plan of 2021 (COVID-19 Relief) Bill, passed in March 2021, extends market subsidies to over 400% of poverty and increases subsidies for those earning between 100% and 400% of the poverty line for two years (2021 and) 2022), in line with what President Biden proposed during his election campaign.
These additional subsidies will result in significantly lower premium payments for the vast majority of the nearly 15 million uninsured people eligible to purchase on the marketplace and the nearly 14 million insured people insured in the single market. With a few exceptions (in the case of the highest income participants whose premiums may not be high enough to qualify for a subsidy), most of these 29 million people could and could afford to see lower health insurance premiums because of these subsidies lower deductible plans. However, it is far from certain how many people will avail of the new financial assistance.
The following Table 1 compares the ACA and COVID-19 Subsidy Plans, both of which are compared to the premium of the Silver Plan with the second lowest cost. The COVID-19 Subsidy Plan is increasing subsidies across the board by extending them for the first time to people with incomes above 400% of the poverty line and access to a zero dollar premium plan for people with incomes between 100% guaranteed. 150% of poverty. The COVID-19 Aid Act also extends the marketplace subsidies to people receiving unemployment insurance (UI), which we will discuss in more detail below.
| income (% the poverty) | Affordable Care Act (before law change) |
COVID-19 Relief (applicable law 2021-2022) |
| Under 100% | Ineligible * | Ineligible ** |
| 100% – 138% | 2.07% | 0.0% |
| 138% – 150% | 3.10% – 4.14% | 0.0% |
| 150% – 200% | 4.14% – 6.52% | 0.0% – 2.0% |
| 200% – 250% | 6.52% – 8.33% | 2.0% – 4.0% |
| 250% – 300% | 8.33% – 9.83% | 4.0% – 6.0% |
| 300% – 400% | 9.83% | 6.0% – 8.5% |
| Over 400% | Not eligible | 8.5% |
| NOTES: * Legally present immigrants whose household income is less than 100% FPL and who are otherwise ineligible for Medicaid are eligible for marketplace tax subsidies if they meet all other eligibility requirements. ** Under the COVID-19 Relief Act, lawfully present immigrants in states that have not expanded Medicaid would still be eligible for market subsidies. In addition, individuals receiving Unemployment Insurance (UI) are treated as if their income does not exceed 133% of poverty for tax credit purposes. This could extend tax credits to some people with incomes below poverty. SOURCE: KFF |
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Removing the subsidy cliff
We estimate that there are approximately 8 million people who will either buy unsubsidized plans or pay full ACA coverage before the COVID-19 Relief Act goes into effect. This included an estimated 3.4 million uninsured people who fell into the subsidy cliff (i.e., had too high an income to qualify for subsidies under the ACA). In addition, approximately 3.3 million people bought over-the-counter cover and 1.4 million people bought unsubsidized exchange plans, presumably because many were not eligible to buy subsidized cover.
By expanding the entitlement to marketplace subsidies to over 400% of poverty, the COVID-19 Aid Act will flatten the ACA's subsidy cliff and lower the premiums for practically everyone who is already eligible for marketplace subsidies. As shown in Figure 1, older people with incomes just over 400% of poverty ($ 51,040 for a single person) would receive significant new subsidies. The benefit would gradually expire at higher incomes as the benchmark silver awards no longer exceed 8.5% of the income threshold.
As noted above, older adults with incomes greater than 400% of poverty would generally see some of the most significant savings from the COVID-19 Relief Act. Uninsured people in the subsidy cliff are on average older than those who are eligible for subsidies because the premiums for this group were so high under the subsidy cliff. Figure 2 below shows the amount of savings available to older participants who are currently falling into the subsidy cliff. Compared to current premium payments, a 60-year-old on an income of $ 55,000 would pay 77% less for a bronze plan ($ 146 versus $ 634 per month), 56% less for a benchmark silver plan ($ 390 versus $ 887 per month) ). and 52% less for a gold plan ($ 453 versus $ 951 per month) on average under the COVID-19 Relief Act. Many young adults with incomes above 400% of poverty who are currently in the subsidy cliff would also see savings under the COVID-19 Relief Act, but those savings would be more modest (a 6-9% decrease, depending on the Metal content). for an average 27 year old).
Extended subsidies for those already eligible
While removing the subsidy cliff would result in the biggest drop in premium payments, the additional subsidies of COVID-19 relief for those already eligible are also substantial, especially as they would guarantee millions of low-income participants zero-premium silver plans. At least 3.4 million of the lowest income participants would see a 100% decrease in their premium contribution.
COVID-19 relief sets benchmark silver award contributions at $ 0 income for all participants with incomes below 150% of poverty. These zero-premium silver plans would also come with cost sharing reductions that cut the deductibles significantly. Participants with incomes between 100% and 150% of poverty would be eligible for a zero-premium silver plan with an average deductible of $ 177.
Most of these attendees would already be eligible for a no-premium bronze plan under the ACA, but bronze plans have a typical deductible of approximately $ 6,900. For the same $ 0 premium, market participants with the lowest incomes could have a deductible that is 97% lower under the COVID-19 Facilitation Act.
Individuals who receive unemployment insurance
The COVID-19 Relief Act takes into account in particular people who receive or are allowed to receive unemployment benefits at any point in time in 2021. If a person is receiving unemployment benefits under the COVID-19 Relief Act and is eligible to take out insurance on the Marketplace, they and all eligible dependents can receive a $ 0 Silver plan. This is because, according to the proposal, a household income greater than 133% of poverty will not count towards the calculation of her tax credit if she is on unemployment insurance.
For people receiving unemployment benefits at any point in 2021, their income up to 133% of poverty will be taken into account in determining eligibility for a cost-sharing reduction, which is only available to people with incomes between 100% and 250% of poverty . That is, a person with an income including unemployment benefit equal to 260% of poverty would receive a premium and a cost-sharing reduction grant as if their income was 133% of poverty. An individual on unemployment income would also need to certify that they do not have an affordable offer of employer-sponsored insurance from their spouse or other family member. Since the COVID-19 Relief Act does not change the so-called “family disorder” in the ACA, this can result in people receiving unemployment being disqualified if an employer offer is deemed affordable (9.83% of household income for 2021 for self-insurance) Income from receiving ACA subsidies if they still have a working family member with an employer offer.
State level differences
As with the ACA, the subsidy amount in the COVID-19 Aid Act would vary based on age, income and geographic location. The tables in the appendix show the premium payment at the national level for various age and income scenarios and at the state level for a 60-year-old who is currently in the ACA subsidy cliff. Note that all tables take into account additional government subsidies already provided in California and Vermont. Therefore, the typical savings would be even greater if these states were excluded.
Older adults in the ACA subsidy cliff living in high premium states would see the greatest premium savings from the COVID-19 relief bill. As shown in the map below, a 60-year-old who makes $ 55,000 a year in Wyoming, West Virginia, South Dakota, Nebraska, Connecticut, or Alabama would save an average of over 70% on the Benchmark Silver Plan. Older adults who were previously on the ACA subsidy cliff in several states would even be eligible for free bronze plans, as shown in the state-level appendix table.
Impact on federal government costs and uninsured rate
The Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) believe the improved premium tax credits in the original House COVID-19 relief proposal will reduce the federal deficits by $ 34.2 billion over a decade would increase (including an increase in direct federal spending of $ 22.0 billion and a decrease in sales of $ 12.2 billion). Additionally, the CBO and JCT expect the increased subsidies for those on unemployment insurance to add another $ 4.5 billion over the next decade (including a $ 2.4 billion increase in spending and one Revenue decreased by $ 2.1 billion).
CBO projections typically span a 10 year period. However, since the increased subsidies only last two years, most of the costs would be concentrated in 2021 and 2022. However, the CBO and JCT expect that some new entrants will continue to acquire subsidized market coverage for a number of years, even if this is no longer available, receiving increased subsidies.
The CBO and JCT estimate that 1.7 million people would be covered through the marketplace in 2022. They estimate that new enrollments will represent $ 13.0 billion in federal costs while increasing the remaining tax credits for existing attendees.
Methods
We analyzed data from the 2021 Individual Market Medical files to determine the premiums and benchmark amounts to calculate the tax credits for the scenarios presented. The State Marketplaces Rewards come from the KFF analysis of data obtained from Massachusetts Health Connector, Covered CA, and the KFF analysis of data released by HIX Compare by the Robert Wood Johnson Foundation. This analysis only includes stock market plans. The premium caps used to model the premiums under the ACA and the COVID-19 Relief Act are listed in Table 1 above.
All averages are weighted at the district level after the plan for 2020 has been selected. The 2020 plan selection comes from the county-level public enrollment file provided by CMS for the 2020 Marketplace Open Enrollment Period. In states that operate their own exchanges, we have collected data on the selection of county level plans where possible and otherwise the selection of county level plans based on the county population in the 2010 census and the total selection of state level plans in the OEP provided by CMS -File collected for public use at state level 2020.
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