WASHINGTON, DC – MARCH 11: U.S. President Joe Biden participates in a bill signing as Vice President … [+]
When President Biden signed the American Rescue Plan Act of 2021 into law on Thursday, $1,400 direct stimulus checks and extended unemployment benefits got most of the attention.
But the American Rescue Plan contains many other provisions, including several that have the potential to substantially improve health insurance affordability for millions of lower- and moderate-income Americans.
At least temporarily, the Act expands Affordable Care Act (ACA) subsidies, introduces COBRA subsidies, and improves Medicaid coverage. Taken together, these measures could reduce the number of Americans without insurance and ease the healthcare-related financial strain exacerbated by the Covid-19 pandemic.
“This is a big deal,” said Dr. Alice Chen, chief medical officer at Covered California, the state’s health insurance Marketplace. “Not only as the first opportunity in four years to make a dent in the uninsured, but also to provide economic relief to middle-class Americans in the context of rising healthcare costs.”
Nearly 15 million uninsured Americans could now qualify for subsidies if they enroll through Healthcare.gov, but the impact on coverage expansion may be broader.
According to Chen, 25 million Americans could benefit from the new law, including 13.2 million Americans who can now access heavily subsidized insurance through the Marketplace; 1.5 million who could save money by switching their individual insurance for coverage from the Marketplace; and 10 million who are already in a Marketplace plan but will save money through more generous subsidies.
“Through a number of different measures, including additional subsidies and expanded eligibility for insurance purchased through federal and state exchanges, the legislation provides for the biggest expansion in healthcare coverage since passage of the ACA,” said Rima Cohen, a former U.S. Department of Health and Human Services official in the Obama Administration.
Premium tax credits (PTCs), one form of ACA subsidy, have only been available to people earning between 100% and 400% of the federal poverty level (between $12,880 and $51,520 for an individual in 2021). Many people earning more than 400% of FPL earned too much to get assistance but not enough to afford full-price premiums.
The new law removes this “subsidy cliff” so there will no longer be an upper bound on income to qualify for subsidies in 2021 and 2022.
Now, anyone who would have to pay more than 8.5% of their income for individual or family coverage can qualify for subsidies, regardless of their income, according to Joel Ario, managing director of Manatt Health and formerly the first director of the U.S. Department of Health and Human Services Office of Health Insurance Exchanges.
“It is the first real expansion of the ACA Marketplaces since the law passed a decade ago,” Ario said.
The American Rescue Plan doesn’t just expand who can get subsidies, it increases the amount of subsidies for people who already qualify. For example, people who earn between 100% and 150% of FPL are eligible for zero-premium coverage; this group used to pay 2% or more of their income toward premiums.
People who qualify for unemployment benefits during 2021 will get the maximum subsidy level and zero-premium Marketplace coverage.
One challenge of the ACA subsidies has been the form: premium tax credits are based on estimated income and reconciled via income tax filing. People who end the year having earned more than they expected need to repay all or part of that premium reduction. The new legislation waives repayment for people who received more subsidies than they should have due to underestimating their 2020 income.
Another feature of the Act is a 100% COBRA subsidy for people who lose their health insurance because of involuntary job loss or reduction in hours between April 1 and September 30, 2021. COBRA allows people to stay on an employer’s health insurance plan for 18 months after losing a job or their health benefits. But, it requires individuals to pay the entire premium themselves, which can make COBRA prohibitively expensive. The new subsidy will make COBRA a viable coverage option for many more Americans.
The American Rescue Plan includes dramatic Medicaid reforms which will benefit the lowest-income and most vulnerable populations who get free or heavily subsidized insurance coverage.
The legislation expands funding for home- and community-based services; allows states to provide 12 months of postpartum coverage for low-income new mothers; expands coverage for Covid-19 testing, treatment, and vaccination; and creates incentives for states that have not yet expanded Medicaid under the ACA to do so.
Medicaid expansion is critical to vulnerable populations disproportionately impacted by Covid-19 and related unemployment, according to Dr. Jay Bhatt, internal medicine physician based in Chicago and chief clinical product officer at Medical Home Network.
The health benefits of Medicaid expansion may also be tremendous, said Dr. SreyRam Kuy, former chief medical officer for Louisiana Medicaid.
“From a public health perspective, Medicaid expansion works,” said Kuy.
Since Louisiana expanded Medicaid in 2016, state data show that more than 56,000 thousands adults have gotten colon cancer screening and 17,000 of them have had colon polyps removed.
“On a personal level, as a surgeon who does colon cancer surgeries, that’s immensely gratifying,” Kuy said. “That’s 17,000 people who aren’t going to show up down the road in the operating room for a colon cancer surgery.”
“The legislation includes many of the proposals Biden put forward in his campaign,” Cohen said.
Yet despite fulfilling many campaign promises, the American Rescue Plan does not solve all of America’s healthcare woes.
Chen noted that many people will need to take action in order to receive federal financial assistance and said that the Congressional Budget Office estimates that only 10% of people newly eligible for subsidies and 20% of people who currently buy individual insurance off the Marketplace will enroll through the Marketplace by the end of 2022.
Part of the challenge, according to Chen, is that the federal government avoided promoting Marketplace insurance during the last administration.
“Covered California is going to be leaning in heavily, but is facing an uphill battle in terms of getting the word out and getting eligible people enrolled,” she said.
Bhatt and Ario agree that there are important improvements that did not make it into this bill.
“The American Rescue Act does not, for instance fund state initiatives, bolster outreach and enrollment funding, or adopt a public option,” Bhatt said.
Nor does it address out-of-pocket costs Americans face when trying to access healthcare.
“The biggest affordability problem still to be addressed is reducing cost-sharing burdens,” said Ario.
Despite the Act’s shortcomings, it’s most dire limitation may be its duration.
Ario said, “The changes are temporary for 2021 and 2022 but will create enormous pressure to make them permanent.”
I am the author of The Health Care Consumer’s Manifesto: How to Get the Most for Your Money about turning consumer out-of-pocket costs into purchasing power, based on