What ACA agents need to know about the American Rescue Plan Act
This article was last updated on 6/9/21.
The American Rescue Plan Act was recently passed by Congress and signed into law by President Biden. In combination with the 2/15—8/15 Special Enrollment Period, this newest coronavirus relief bill gives ACA agents and brokers a unique opportunity to enroll new and existing clients in more affordable health coverage without a qualifying life event.
In this blog post, we'll briefly touch on where subsidies under the Affordable Care Act stood before 4/1/21, how the American Rescue Plan Act will change subsides to improve health insurance affordability, the clients who are most likely to benefit, how your HealthSherpa Agent account can help you make the most of this Enrollment Period, and finally highlight what the American Rescue Plan Act does not change.
Where subsidies currently stand under the Affordable Care Act
Under the current law, subsidies that lower the cost of insurance premiums and sometimes deductibles are available for households with an income between 100 — 400% of the Federal Poverty Level (FPL).
Specifically, households who expect to make between 100 — 400% of the FPL qualify for advanced premium tax credits (APTC), which improves premium affordability. Households with income between 100 — 250% FPL also qualify for cost sharing reductions (CSR) which lowers the health plan's out-of-pocket costs like deductibles, coinsurance, and copayments. Generally, enrollees APTC and CSR subsidies are more generous the closer a household income is to 100% FPL.
Note that under the Affordable Care Act, 34 states (including Washington, DC) have adopted and implemented the Medicaid expansion, qualifying households making up to 138% FPL for the program. In these states, households who are eligible for Medicaid are not eligible for premium tax credits and cost sharing reductions with a Marketplace plan. Oklahoma and Missouri recently voted to expand Medicaid, and their programs should be implemented this year.
When estimating a household's modified adjusted gross income (MAGI), unemployment compensation has been included in the calculation for Marketplace coverage, but not Medicaid eligibility. This also applied to the additional unemployment benefits from the CARES act in 2020, which affected a client's eligibility for subsidies and savings on their ACA premium and deductible.
How the American Rescue Plan Act changes Affordable Care Act subsidies
This coronavirus relief bill includes a major, two-year expansion of the Affordable Care Act. After two years, Congress will need to take further action to keep these enhancements to the original bill in place.
These are the most important changes ACA agents should know about with regards to how this newest coronavirus relief bill impacts ACA enrollments:
- Larger subsidies for 100—400% FPL. The percentage of household income paid in premiums for a health plan will lower for all individuals within 100—400% FPL.
As a refresher, under the ACA, premium subsidies are the difference between (i) the cost of the second-cheapest, or "benchmark", silver plan offered, and (ii) the percentage of income a household must pay for the benchmark plan.
Benchmark plan premium — relevant % of household income = premium subsidy
The closer a household's income is to 100% FPL, the lower the percentage of income they must spend on premiums. While the benchmark health plan is used to calculate the premium subsidy, that subsidy applies to any ACA plan chosen.
By lowering the second half of that equation, the American Rescue Plan increases the amount of premium subsidy for all households within 100—400% FPL.
Most significantly, enrollees who are within 100 - 150% FPL are eligible for a $0 premium silver plan with substantial cost sharing reductions that lower deductibles.
- Expanded APTC eligibility to those above 400% FPL. Currently, under the ACA, households with an income just above 400% FPL are on the wrong side of what's commonly known as the subsidy cliff: they receive no premium subsidies, meaning they must pay the full premium for any Marketplace plan they choose.
The American Rescue Plan caps the percentage of income paid for a Marketplace benchmark silver premium to 8.5%, regardless of income. This will remove the subsidy cliff and significantly improve health plan affordability for enrollees who traditionally had too high of income.
- APTC guarantees for enrollees receiving unemployment compensation. With The American Rescue Plan, households receiving unemployment compensation will qualify for subsidies as if their income is 133% FPL. In other words, enrollees receiving at least 1 week of unemployment compensation in 2021 are eligible for a silver plan with a $0 premium and significant cost sharing reductions.
In Medicaid expansion states, a client will be treated as getting the maximum subsidy (138% FPL) and not be made eligible for Medicaid.
This will be implemented July 1st. In the meantime, update the client's application to receive the premium subsidies under ARP using their expected MAGI for 2021.
While generous, it is important to note that this measure will end at the end of 2021.
- These subsidy amendments apply to plan years beginning on and after January 1st, 2021. This means these subsidies will apply for clients who enrolled during the 2021 Open Enrollment Period or in the early months of this year's Special Enrollment Period.
Beyond ACA subsidies, there are a few more changes agents should be aware of for clients.
(i) For the 2020 tax year only, taxpayers who underestimated their income, meaning they paid too little in premiums throughout the year, won't have to pay back the excess subsidy. The IRS will reimburse taxpayers who already filed their 2020 tax return and paid back excess APTC.
(ii) Generally, Medicaid for pregnancy lasts for 60 days after giving birth. With the new bill, states can opt in to extend Medicaid to 12 months. This measure will be in effect for 7 years!
(iii) Individuals who were involuntarily terminated (e.g. laid off) and offered COBRA coverage through their employer will have their premiums covered until September 30, 2021. As of late April, individuals who choose COBRA coverage will be granted a Special Enrollment Period after the COBRA subsidy runs out. It will be important to compare the value of enrolling in an ACA plan now vs. choosing COBRA and then having to restart their deductible with 3 months left of the year.
The American Rescue Plan subsidy changes went into effect on 4/1/21 and the additional unemployment eligibility for $0 Silver premium plans will be rolled out in July.
Please read our help article on new American Rescue Plan features our team has rolled out to help ACA agents service clients and manage their book. Please remember that you need your client's consent before applying their new subsidy and resubmitting their application.
There are still some outstanding questions around how parts of this bill will be implemented. We will be keeping the agents and agencies who use us informed, and we will update this blog post with more details as they become available.
Which clients and leads are most likely to benefit from the new American Rescue Plan subsidies
The Department of Health and Human Services estimates that the American Rescue Plan's enhancements to ACA subsidies will make 3.6 million uninsured people newly eligible for health care coverage savings. Their fact sheet also includes a detailed state breakdown.
With Marketplace health plans becoming more affordable, ACA agents will have an easier time enrolling many more uninsured individuals and families than in previous years. And, through 8/15/21, anyone eligible for Marketplace coverage can enroll or change plans.
To help ACA agents and brokers focus their efforts, we'll cover the types of households HealthSherpa believes will benefit the most from switching plans or enrolling in Marketplace coverage for the first time.
New entrants: Households, especially older ones, making just above 400% FPL
In their cost estimate, the Congressional Budget Office projected that households making more than 400% FPL will account for 40% of new people with coverage through the Marketplace.
Because health plan premiums increase with age, older individuals, especially those just above the 400% FPL subsidy cliff, will get the most significant premium subsidies.
In line with the figure above, older households with >2 people also will see dramatic improvements in ACA plan premium affordability. Based on national averages, a 60 year old couple with an income of $69,854 could save up to $17,102 on premium payments annually. In addition, a 50 year old couple with an adult child with a household income of $88,060 could save up to $11,931 on premium payments annually.
Existing clients looking to switch: Households making 100—150% FPL currently enrolled in a $0 bronze plan
Cost sharing reductions lower the amount a client needs to pay in deductibles, co-payments, and coinsurance. Under the ACA, clients are eligible for cost sharing reductions if their household income is between 100—250% FPL, and these extra savings only apply if they purchase a silver health plan.
As mentioned earlier, households within 100—150% FPL are eligible for a silver plan with a $0 premium and significant cost sharing reductions under the American Rescue Plan. An estimate from KFF suggests that the average deductible for a $0 premium silver plan will be $177, compared to the typical bronze plan deductible of about $6,900 under the ACA.
Any clients who decided to use their premium subsidy on a bronze plan for lower premiums would save more on their health care costs by switching to a silver plan because of the cost sharing reductions. The case for switching plans will likely be more compelling to any household who expects to need a moderate amount of health care services for the reminder of the year.
Existing clients looking to switch: Households making 150—250% FPL
While it isn't a $0 premium, the American Rescue Plan slashes the percentage of household income that these clients are required to pay for a benchmark silver premium.
According to CMS’s fact sheet on the American Rescue Plan, 80% of existing enrollees will be able to find a plan for $10 or less per month after premium subsidies, and over 50% of existing enrollees will be able to find a Silver plan for $10 or less.
Again, older households will benefit the most from these lower premium caps.
What the American Rescue Plan does not address
This coronavirus relief bill is the first major expansion of the ACA by the federal government since the original law was signed in 2010, and the law's passing means ACA health coverage will be free or significantly more affordable for households buying their own coverage through the Marketplace. As cited earlier, millions of uninsured individuals and families are projected to enroll in a health plan over the next two years because of this law.
As an ACA agent, there are two circumstances you've likely encountered with clients in the past that will persist: the family glitch and the Medicaid Gap.
Briefly, the family glitch is when a household is ineligible for ACA subsidies because one family member's employer offers and insurance plan that is considered affordable for the individual, but is not affordable for the whole family.
The Medicaid Gap exists in the 12 states that decided not to expand the program to low-income adults who make up to 138% FPL through the ACA. In these states, anyone who makes too much to qualify for Medicaid in their state but also makes below 100% FPL are not eligible for ACA subsidies. Thus, individuals who fall in the Medicaid Gap see the full premium price when they search for plans on the Marketplace.
It's also worth reiterating that the American Rescue Plan only expands subsidies for two years, and Congress will need to take further action to keep these measures in place beyond the 2023 plan year.
How to capitalize on this ACA expansion with a HealthSherpa Agent Account
For your clients currently enrolled in Marketplace coverage. After extra subsidies become available on 4/1/21, clients who are currently enrolled in a Marketplace plan will need to update their applications and enrollments in order to get new eligibility results and a reduction in premiums. This also applies to clients who want to stick with their current coverage: they will need to reselect their health plan.
If your clients change plans, the amount they’ve already paid towards their deductible may be reset, and they might need to start over paying out of pocket expenses to reach the deductible of their new plan. In the coming weeks, insurance carriers will likely share information on how they will handle clients who switch within their plan options.
If some of your enrolled clients are receiving unemployment compensation, extra tax credits will be available starting this summer. CMS recommends that your enrolled clients update their applications after April 1 to receive updated tax credits and then wait for more information in the summer as the additional savings from the bill become available. HealthSherpa will alert ACA agents and brokers who use our enrollment platform when this opportunity becomes available.
What happens if your clients do not return and update their applications after April 1st?
When your clients file their taxes in 2022, their additional premium tax credit amount will be reconciled when they file their 2021 taxes.
If you work with a lead before April 1st who needs coverage, you should still enroll them by the end of March through the SEP so coverage can start April 1st. After the new subsidies go into effect, reconvene with your client to submit their application again, and reselect the plan to have increased tax credits for May 1st going forward.
With HealthSherpa, ACA agents and brokers are able to see all their clients in one place, and we will look for opportunities to make this resubmission process as smooth as possible.
The HealthSherpa Agent Account is the ACA enrollment solution of choice for more than 36,000 agents and 4,800 agencies. Our platform is a one-top shop for agents who need to quote, enroll and manage their ACA clients. Through enhanced direct enrollment (EDE), HealthSherpa has the fullest integration possible with the Marketplace, which means a streamlined application that takes as little as 8 minutes to complete. Compared to other enrollment solutions on the market, we offer agents unparalleled control of their business at a price that can't be beat (our platform is free). With HealthSherpa, ACA agents enroll their clients under their own AOR, and they can check whether they remain a clients AOR through their account.
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