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How to get your health insurance subsidy if you’ve been unemployed

The subsidies that deliver $0 Silver premiums take effect July 1, but you won't automatically receive them. Here's what you need to do to collect.

If you enroll in a marketplace plan or update your account between July 1 and July 31, your new subsidies will take effect August 1. Image: Aledeca Productions / stock.adobe.com

Reviewed by our health policy panel.

Most of the American Rescue Plan’s (ARP) additional premium subsidies have been available since April, and an estimated 1.65 million people have enrolled in health plans through the exchange (marketplace) during the COVID-related special enrollment period that’s been ongoing since February.

But a major provision of the law will take effect on July 1, when HealthCare.gov makes additional subsidies available to people who have received unemployment compensation this year.

DC and 14 states run their own exchanges, and some of them had already activated the additional unemployment-based subsidies in May or June. But in the 36 states that use HealthCare.gov, as well as some of the state-based exchanges, the additional subsidies will become available this Thursday, July 1.

Here’s what you need to know about these additional unemployment-based subsidies:

The subsidies apply to both premiums and out-of-pocket costs

The unemployment-based subsidies are two-fold:

  • They provide full premium subsidies, which means they fully cover the cost of the benchmark plan (second-lowest-cost Silver plan) in your area.
  • They provide the most robust level of cost-sharing reductions, which means they’ll boost the benefits of any Silver-level plan so that it’s better than a Platinum plan.

Who is eligible for unemployment-based health insurance subsidies?

The unemployment-based subsidies are available to anyone who has received or been approved to receive unemployment compensation at any time this year. (If you’re eligible to receive unemployment compensation but haven’t applied or haven’t been approved to receive it, you’re not eligible for the additional health insurance subsidies.)

Eligibility for the unemployment-based subsidies includes people whose income is under the federal poverty level, as long as they’re not eligible for Medicaid. (If a person is eligible for Medicaid or CHIP, they aren’t eligible for subsidies in the exchange; nothing has changed about that.) People with income under the poverty level are normally not eligible for subsidies, which means there’s a coverage gap in the states that have refused to accept federal funding to expand Medicaid. But a person who would otherwise be in the coverage gap can receive a full premium subsidy and full cost-sharing reductions in 2021, if they receive unemployment compensation at any time during the year.

CMS has confirmed that the full premium subsidies are only available if it’s a taxpayer who is receiving the unemployment compensation. If it’s a dependent who is receiving it, the household is eligible for the cost-sharing reductions (assuming the household is otherwise also eligible for premium tax credits), but not the full premium subsidies.

Even if you only received unemployment compensation for one week of 2021, you’re potentially eligible for the enhanced subsidies for the entire year. But subsidy eligibility would end if and when you become eligible for employer-sponsored health coverage (that’s considered affordable and provides minimum value), or premium-free Medicare Part A.

The ARP has not fixed the family glitch, so family members would also lose access to any subsidies in the exchange if they become eligible for employer-sponsored coverage that’s considered affordable for the employee.

How to claim the extra subsidies

HealthCare.gov will not be able to automatically update these subsidies (although that’s something that may become available later on), so you’ll need to log back into your account and update your application to activate the subsidies. You can do this through HealthCare.gov, or through an enhanced direct enrollment entity if you use one.

Some of the state-run exchanges are automatically applying the additional subsidies to accounts where applicants indicated that they’re receiving unemployment compensation this year. But if you’re in a state that runs its own exchange, it’s in your best interest to log back into your account to confirm that you’re receiving all of the benefits for which you’re eligible.

If you enroll or update your account between July 1 and July 31, your new subsidies will take effect August 1. The COVID-related special enrollment period continues through August 15 in most states, but enrollments or updates completed in August won’t take effect until September.

If you’ve already got coverage through the exchange but you don’t update your application to start receiving the additional unemployment-based subsidies, you’ll be able to claim the premium subsidy on your 2021 tax return. However, there is no way to claim cost-sharing reductions after the fact. So it’s important to make sure you’re enrolled in a Silver plan as soon as possible, if you want to take advantage of that benefit.

You might need to switch plans to get the full benefit

You can get the additional premium subsidies applied to any metal-level plan, although your subsidy can never be more than the cost of your plan. So if you’re enrolled in a plan that’s less expensive than the benchmark plan, you might find that you’re able to upgrade to a better plan without paying any additional premium.

But you can only get the enhanced cost-sharing reductions if you’re enrolled in a Silver plan. So if you currently have a Bronze or Gold plan, you might choose to switch to a Silver plan to get the full benefits available under the ARP.

Although switching to a new plan mid-year usually means starting over with a new deductible and out-of-pocket maximum, many states and insurers are allowing enrollees to keep their accumulated out-of-pocket costs, as long as they switch to a new plan from the same insurer.

What you’ll pay each month

The unemployment-based subsidies will cover the full cost of the benchmark plan. So you’ll have access to two Silver plans that have no premium, and you’ll likely have access to a variety of Bronze plans — and possibly some Gold plans — that have no premium.

If you pick a plan that’s more expensive than the benchmark plan, including the higher-cost Silver plans, you’ll pay at least some premium each month.

If you’re in a state that has additional state-mandated benefits that aren’t covered by premium subsidies, you may find that you have to pay at least a dollar or two each month in premiums, regardless of which plan you select.

What you’ll pay when you need medical care

If you enroll in a Silver plan, you’ll get the full benefits of the unemployment-based subsidies, meaning that you’ll have fairly low out-of-pocket costs if you need medical care later this year. Any Silver plan you choose will have a maximum out-of-pocket of no more than $2,850 in 2021, and it’s common to see these plans with deductibles that range from $0 to $500. Copays for office visits and many prescriptions also tend to be fairly low.

If you choose a non-Silver plan, the normal cost-sharing will apply. No matter what plan you select, your out-of-pocket maximum for in-network care won’t exceed $8,550 this year, but the specifics of the coverage will vary considerably from one plan to another.

How big will your subsidy be?

You can use our subsidy calculator to see the subsidy amount that will be available to you. For people receiving unemployment compensation, the exchange will disregard any income above 139% of the poverty level for 2021.

The 2020 poverty level numbers are used to determine subsidy eligibility for 2021, so you can find the poverty level for your household size, multiply it by 1.39, and enter that number into the subsidy calculator. And if you need help finding a plan, our direct enrollment entity can provide assistance.


Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about the Affordable Care Act for healthinsurance.org. Her state health exchange updates are regularly cited by media who cover health reform and by other health insurance experts.

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Unemployed and In Debt
Unemployed and In Debt
16 days ago

Great, my “OOP max” is now just $1200! Too bad I’ve already incurred over $6000 in medical bills on the same silver plan prior to July 1st that still have to be paid because the cost-sharing reductions are not retroactive. I have to say this rollout was handled incredibly poorly. Of course I really appreciate the $0 premiums, but for someone on unemployment, they pale in comparison to the massive bills faced by those of us with chronic conditions, on expensive medications, or receiving any kind of hospital procedure prior to this magic deadline.

Louise Norris
Editor
15 days ago

I’m really sorry you’re going through this. Have you double-checked with the insurer to make sure there’s no way they can/will reprocess the claims from earlier in the year? There’s nothing that requires them to do this, but we’ve heard anecdotal references to some insurers being willing to do this in some areas.

Jerry
Jerry
11 days ago

Can you explain what a “benchmark” plan is and how it is defined? I received unemployment for part of 2021, am on a Silver 94 plan with Covered California, and had thought that all Silver plans available to me would now cost $1 per month, and considered retroactive to Jan 1, resulting in significant tax credits when I do my PTC reconciliation in my taxes at end of year. But only a couple of plans were $1,; others, including my Blue Shield, were more, though still less than before. What makes those plans cost more than $1? Also, what is the PTC amount that will be considered retroactive to 1/1/21 at tax time next year? I want to know so I can figure what my estimated taxes should be through the year, since some amount I have paid in premiums will be refunded.

Louise Norris
Editor
9 days ago
Reply to  Jerry

There are two different definitions for “benchmark plan” under the ACA: https://www.healthinsurance.org/glossary/benchmark-plan/ In this case, we’re talking about the first definition.

Premium subsidy amounts are calculated based on the cost of the second-lowest-cost silver plan in each area. For people who qualify for full subsidies (including those with unemployment compensation in 2021), the lowest-cost silver plan will be free (or nearly free, as is the case in California), and so will the second-lowest-cost silver plan.

But if you pick a more expensive silver plan, you’ll have to pay the difference between what that plan costs and what the second-lowest-cost silver plan costs. It sounds like you have a silver plan that’s priced above the benchmark plan, which is why you still have some additional premium to pay each month.

Last edited 9 days ago by Louise Norris
Jerry
Jerry
8 days ago
Reply to  Louise Norris

Thanks! But what about the retroactivity? I have read in so many places that the nearly free premiums will be retroactive to 1/1/21 for those who were unemployed in 2021. If one signs up for a more expensive plan, will THAT plan’s premium be retroactive? Will the retroactive aspect be reconciled at tax time in 2022?

Louise Norris
Editor
7 days ago
Reply to  Jerry

The retroactive premium subsidies will be based on the plan you actually had for each month of the year, and yes, it will be sorted out when you file your 2021 tax return.

So for example, let’s say a person was enrolled in a Bronze plan that had an after-subsidy premium of $50/month for the first six months of the year. Now let’s say that person received unemployment income in 2021, and switched to the benchmark Silver plan on July 1, qualifying for a much larger total subsidy that completely covers the cost of the benchmark plan (or in California, covering nearly all of it).

When tax time rolls around, the person will be able to get back the $50/month that they paid in after-subsidy premiums for the first six months of the year (or nearly all of it in California). But the subsidy can’t ever be used to make your costs less than $0/month. So even though the person’s subsidy might have increased by much more than they were previously paying, they can’t claim the full amount of the new subsidy for a month when they were enrolled in a less expensive plan — the subsidy can never be more than the cost of the plan in which you’re actually enrolled in a given month.

Form 8962 helps to make this clear: https://www.irs.gov/pub/irs-pdf/f8962.pdf You can see how they calculate the subsidy for each month, based on the plan the person was enrolled in and the cost of the benchmark plan. So it can vary from one month to another if you switch plans.

Let me know if that makes sense!

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