The American Rescue Plan includes several changes that will significantly reduce the cost of insurance for millions of people. But the changes are only temporary. And you need to meet different eligibility requirements for each one.
Will the plan help you reduce the cost of insurance? Here are summaries of the eligibility, rules, and effective dates for each provision.
Subsidy Changes to Reduce the Cost of Insurance
There are two ways subsidies will reduce the cost of marketplace plans — also known as Obamacare or Affordable Care Act (ACA) plans. These changes are temporary. Unless additional legislation is passed, they will only be in effect for 2021 and 2022.
First, lower-income earners will reduce the cost of insurance because their subsidies will increase. When subsidies increase, you pay less for your insurance plan. Families earning between 100% and 150% of the Federal Poverty Level (FPL) will pay no premiums for a benchmark Silver plan. That means rather than paying up to about 2% of your income, your insurance payment is reduced to $0.
Second, beginning with incomes at 150% of the FPL, subsidies gradually decrease as your income increases. However, subsidies used to be capped for people whose adjusted gross income was more than 400% of the FPL. In other words, if your income exceeded 400% of FPL, you weren’t eligible for any subsidies. Therefore, you paid full price for your marketplace plan.
That has changed under the Rescue Plan. For 2021 and 2022, no one who buys a marketplace plan will pay more than 8.5% of their household income. That means premiums will decrease. On average, an individual will reduce the cost of insurance by $50 per month.
When New Subsidies will be Available
When will you be able to know what your savings will be? Increased subsidies are scheduled to be available on federal marketplace websites on April 1, 2021. State-run marketplaces may have different dates. Even if the date in your state is later than April 1st, that doesn’t mean you should wait to enroll.
For example, California’s marketplace website, Covered CA, says beginning in May you’ll able to enroll for the new lower premiums. However, it also says you shouldn’t wait to enroll. If you sign up now for an April 1st effective date, you’ll get a credit for the new, lower premium on a future bill.
Use this map to find your state’s marketplace information.
If you’re concerned about making a change before the May 15th enrollment deadline, don’t worry. The deadline has been extended to August 15th.
Unemployment Benefits Create Eligibility for Cost Savings
If you are receiving, or are approved to receive, at least one week of unemployment benefits in 2021, your income will be considered as being no greater than 133% of FPL. Because that consideration puts your income below 150% of FPL, you pay nothing for a benchmark Silver plan.
Before you decide to reduce your insurance costs using this benefit, remember this: Unlike the increased subsidies that last through 2022, this benefit only lasts through 2021. Unless this provision is extended or you qualify for another subsidy, you will pay more for your plan beginning January 1, 2022.
COBRA Subsidies
COBRA coverage is offered to employees who lose their employer health insurance coverage. It’s expensive. You pay the full premium price (employer and employee contributions) plus a 2% administration fee.
Even if you have COBRA coverage, you might be able to reduce the cost of your insurance. Under the American Rescue Plan, the federal government will pay your COBRA premiums from April through September 2021. But (and this is an important point) the benefit is given only to employees who did not voluntarily quit.
If you are eligible for this benefit, keep in mind the savings only last from April through September 2021. You will have the pay the full premium again beginning October 2021.
If you didn’t sign up for COBRA when you were first eligible, you’ll be given a second chance to enroll. You’ll have 60 days to enroll from the date you’re notified of the new subsidies. Both premiums and coverage will begin on your new enrollment date. Neither will be retroactive to your original COBRA eligibility date.
No Payback of 2020 Excess Subsidies
When you enroll in an ACA plan, you project your earnings for the year. Your subsidies are based on that projection. If your earnings exceeded the amount you projected, you may have received more subsidies than you were entitled to. You have to pay back those excess subsidies the following year.
The American Rescue plan forgives excess subsidies for 2020. That means you don’t have to pay them back. What if you’ve already filed your taxes? The IRS is figuring out what you’ll need to do. So don’t file an amended return yet.
If you haven’t yet filed taxes, the IRS may have a solution before the new tax filing deadline of May 17th. Check with your tax preparer for guidance.
Since this subsidy forgiveness only applies to 2020, project your 2021 income carefully. Unless there is another change to the rules, in 2022 you’ll be required to repay excess subsidies received in 2021.
How to Get the New Benefits
The scope of these changes mean that systems used to administer marketplace plans and COBRA have to be changed. If you’ve ever been involved in a system change, you know that’s a lot of work. Additionally, in this case administrators don’t have much time to make the changes.
It is expected that increased subsidy information for Federal marketplace plans on Healthcare.gov will be ready on April 1st. Dates for states using their own websites, such as CoveredCA.com, may vary.
Getting systems ready for free health plans for people receiving unemployment benefits will likely take longer. Healthcare.gov is not expected to be ready until this summer.
The steps you’ll need to take to enroll for these benefits will also likely vary across states. They may require you to enroll now then re-enroll to get additional benefits once the systems are ready.
There are ways to get information and help with enrollment. This navigator provides contact information by state. You’ll be given links to your state’s website, local resources, and a phone number to reach a representative.
Your Choice – Your Savings
The American Rescue Plan has given you several ways to reduce the cost of insurance. Take the time to understand what benefits you might be eligible for. Use the online resources or call the numbers listed on your state’s marketplace website to help you choose and enroll in the best benefit for you.