The main question on everyone’s mind is, “how does this affect me?”. The new law now extends ACA premium subsidies to higher-income earners who did not previously qualify (for 2021 and 2022); increases ACA premium subsidies for lower-income people who already qualify (for 2021 and 2022); offers highest subsidies to those who receive unemployment benefits (for 2021); and prevents individuals from having to repay excess ACA subsidies at tax time (for 2020). The new law also subsidizes COBRA continuation coverage for laid-off workers (from Apr 1 to Sept 30, 2021) and includes new incentives for states that have not yet expanded their Medicaid programs.
Just how many people are expected to benefit from these changes? Premiums after these new savings will decrease, on average, by $50 per person per month or by $85 per policy per month. 4 out of 5 enrollees will be able find a plan for $10 or less/month after premium tax credits, and over 50% will be able to find a Silver plan for $10 or less.
Enhanced Subsidies Under The American Rescue PlanThe American Rescue Plan strengthens the availability of premium tax credits (PTCs) for millions of lower and middle-income people and families. First, individuals whose income is above 400% of the federal poverty level (FPL) are eligible for PTCs for the first time. There is now no upper income limit on tax credits, meaning that all middle and upper-income individuals who purchase their own coverage can access PTCs if their premiums exceed 8.5 percent of their overall household income.
Second, individuals who are already eligible for PTCs (because their income is between 100% – 400% FPL) will receive higher subsidies under the American Rescue Plan. For instance, those with incomes from 100% to 150% FPL are newly eligible for no-premium coverage (i.e., they contribute no income towards premiums for a silver benchmark plan); under prior law, they were required to contribute up to about 2% of their income in premiums. The amount that an individual must contribute towards premiums rises as income increases but is ultimately capped at no more than 8.5% of household income for those whose income is 400% FPL or more, down from 9.83% of income under prior law. Both types of enhanced subsidies are available for calendar years 2021 and 2022.
Third, individuals who receive or are approved to receive unemployment benefits at any time during 2021 may be eligible for max subsidies under the ACA. Their income will be treated as no higher than 133% FPL, meaning qualifying individuals will receive the maximum amount of PTCs and cost-sharing reductions to lower their out-of-pocket costs (if they select a silver plan). This provision extends to those who are newly eligible to enroll in ACA coverage as well as current marketplace enrollees who will receive additional subsidies. These subsidies are available for calendar year 2021.
Implementation Of Enhanced SubsidiesThese new higher subsidy programs took effect on April 1, 2021 and the new ACA Special Enrollment Period (SEP) is currently extended through Aug 15, 2021. When you enroll in a plan, the effective date of your new plan is the 1st of the following month. So, if you wait until Aug 15, 2021 to enroll in a plan, your effective date will be Sept 1, 2021. If you do not enroll during this SEP, you’ll have to wait until the next ACA Open Enrollment Period (OEP) from Nov 1 – Dec 15. The Biden Administration has also indicated that they will also extend the annual OEP through January of each year (instead of through Dec 15).
The important thing to remember is that if you are not currently enrolled in an ACA plan, you should contact our office and let one of our licensed agents assist you with determining your maximum subsidy amount. Of course, the higher the subsidy, the lower the premium and we have seen many of our clients with premiums less than $100/month and many also qualify for $0 premium. Also remember that we do not charge for our service. The call is free and so is the friendly and professional service!
If you are currently enrolled in an ACA plan, you should decide how you want to use your additional tax credits. You will need to update your application and enrollment to receive new eligibility results. Until Aug 15, you can then reselect your current plan or choose to enroll in a new plan. (Many current enrollees will be eligible for much lower premiums and lower out-of-pocket costs, so it may make financial sense to switch plans. But those who switch to a new insurer may have to pay a new deductible and meet a new out-of-pocket maximum.) In either case, the individual could apply the enhanced tax credits in advance or wait to receive PTC at tax time. Again, you can contact our office for immediate assistance.
If a current enrollee (in an ACA plan) does not return to HealthCare.gov to “claim” their enhanced PTC, they will receive the PTC they are owed at tax time in 2022. Thus, non-returning enrollees will not “lose” the benefit of enhanced subsidies, but they will have to wait to receive that extra PTC until tax time. Current enrollees who want to switch to a more affordable plan will want to return to HealthCare.gov before the end of the special enrollment period or can contact our office for assistance.