Are you ready for one of—if not the biggest change to the 2010 healthcare law since its passage? Set to increase subsidies for nearly every single person who has secured insurance on the individual market, the change comes as part of the latest COVID-related stimulus bill.
Passed by both the House and Senate, a healthy portion of the $1.9 trillion legislation was set aside to increase subsidies on the individual market, encourage states to expand Medicaid, and subsidize COBRA insurance continuation for those who have lost their jobs as a result of lockdowns and economic uncertainty.
Especially when paired with the extended enrollment period as discussed in our latest blog, this move hopes to bring new people into the marketplaces while making coverage through them more affordable. So what does the bill offer and what can you expect? We look at everything below.
Expanding Premium Tax Credits for ACA Health Plans
Possibly the biggest focus in the health insurance portion of the stimulus bill, lawmakers sought to spend $34 billion to help Americans who buy insurance on the marketplaces created by the ACA through 2022. When signed into law, the legislation will eliminate an income cap that limits who is eligible for ACA tax credits while limiting the amount households pay to only 8.5% of their income on insurance.
How Do Tax Credits Work?
Something we discussed in our introduction to subsidies and tax credits, the tax credit was the portion of the ACA designed to reach middle-class Americans. Initially available for those with incomes up to 400% of the Federal Poverty Level, the Advance Premium Tax Credits cap the maximum premium you can pay—approximately 2%-9.5% of your Modified Adjusted Gross Income for the second lowest cost silver plan.
How the Stimulus Bill Expands Tax Credits
According to Kaiser Health News, many consider this spending to provide a lifeline to lower- and middle-income Americans who have fallen through the cracks of the government’s eligibility requirements for ACA assistance.
During the two-year period, the Congressional Budget Office estimates this will bring in new people to the program, with 1.7 million people expected to enroll.
Who Benefits from This?
Despite being a small part of the $1.9 trillion stimulus, the $34 billion will help the middle class to see value out of the ACA. With many overlooked by the 400% FPL cap, those in the Middle Class often had no motivation to secure Silver, Gold, or Platinum plans. In addition to those in the Middle Class, similar groups serve to benefit as well:
Middle-Class Americans
Some of the biggest beneficiaries of the bill are those in the middle class who were initially overlooked by the ACA. Prior to the stimulus, a single person who earns more than about $51,000 wasn’t eligible, nor was a family of three that makes about $87,000.
Pre-Medicare Seniors
Another group who serves to gain the most from the law? Those who are getting insurance before they are eligible for Medicare.
“The change would also benefit Americans who make more than the subsidy cutoff. About 3.4 million uninsured people fall into this category, according to the KFF analysis.
For example, [before the passage], a 60-year-old who makes $50,000 annually pays no more than $410 per month out-of-pocket for a silver plan on the exchanges, with the government chipping in $548 per month. But A 60-year-old who makes $52,000 annually would receive no subsidy and would be expected to pay the full premium herself, at a cost of about $957 per month for the same plan, KFF found.”
By adjusting this to cap premiums at 8.5% of income, the cost drops. According to the Wall Street Journal, a 60-year-old with a $55,000 income would see premiums drop by around 50% to 80% depending on the plan.
Bronze Plan Holders Ineligible for Silver Tax Credits
The next group to gain significantly are those who bought a low-premium, high-deductible health plan. Often consisting of people who found themselves ineligible for a tax credit, many people would choose a Bronze plan—after all, why upgrade to a Silver plan if you’re not going to see the tax credits?
Paired with the special enrollment period, someone on a Bronze plan can upgrade to a tax credit-eligible Silver plan with minimal increase in cost. Most of the nearly 14 million people enrolled in plans sold on the marketplaces would pay less under the new provisions, with the option to use those savings to buy a new plan with a lower deductible.
Those Receiving Unemployment Benefits
Another group who serves to gain are those collecting unemployment benefits. Typically, ineligible for subsidies on the exchange, the bill will make these people temporarily eligible to receive said benefits.
COBRA Reimbursement
Another critical part of the bill is designed to help those who have been laid off or furloughed. COBRA, an acronym for the Consolidated Omnibus Budget Reconciliation Act, gives terminated employees in certain situations the right to pay premiums for and keep the group health insurance that they would otherwise lose after they reduce work hours, quit their jobs, or lose jobs.
Notably, if you’ve ever continued insurance through COBRA, you know how expensive it can be. As we discussed in our article comparing COBRA to Marketplace plans, COBRA plans exist to continue employer plans—with employees picking up the employer’s side of the equation.
Though this did provide certain advantages, like being able to keep your doctor, it got very expensive very quickly.
Picking Up the Cost of Premiums for COBRA
For those who like their doctor and want to keep them, COBRA may be a palatable option—especially considering the fact that the stimulus will allow recently unemployed workers to be reimbursed for premiums.
Know Your Options, Understand Your Choices: Insurance Broker Hub
Not only has the new stimulus made insurance costs more palatable, when paired with the extended enrollment period allowing shoppers to change or enroll in coverage, the Affordable Care Act will be affordable for the majority of Americans.
Understandably, the path to securing insurance may still be confusing, especially considering the many changes that have occurred in the past couple months. That’s where we can help.
With the help of our national network of licensed brokers, shopping for insurance doesn’t have to be complicated. Insurance Broker Hub has helped over 10,000 consumers find the coverage they need at a price they can afford.
Our free service gives you access to an independent network of national brokers who have the experience and expertise to design a plan around your needs and budget. Ready to get started? Simply request a no obligation health insurance quote here.
