What is the American Rescue Plan?
The American Rescue Plan Act of 2021 – H.R. 1319 – was enacted on March 11, 2021. The legislation provides a great deal of financial relief to Americans struggling with the fallout of the ongoing COVID pandemic.
Some of the most widely known provisions are the third round of stimulus checks ($1,400 per person, for most Americans) and the extension of additional federal unemployment benefits into September 2021. But there are also several important health insurance provisions in the American Rescue Plan.
How does the American Rescue Plan improve access to coverage for the unemployed?
Throughout 2020, maintaining health insurance coverage was one of many challenges faced by Americans who lost their jobs or saw a reduction in their income due to the pandemic. To address this for 2021, the American Rescue plan ensures access to robust health coverage for people who are receiving unemployment compensation.
Anyone receiving unemployment compensation at any time in 2021 is eligible for full premium subsidies and full cost-sharing reductions throughout 2021 (unless they subsequently become eligible for an employer-sponsored plan or Medicare, in which case the subsidies would end at that point just as they normally do in that situation).
“Full” premium subsidies means that the two lowest-cost Silver plans available to a buyer will be premium-free, as will any other marketplace plans that are priced below the benchmark plan. Depending on where the buyer resides, this can include the majority of Bronze plans and possibly even some Gold plans. But if you’re receiving unemployment compensation in 2021, it’s likely in your best interest to select a Silver plan (including one of the two that will have $0 premiums), as that Silver plan will also include the most robust level of cost-sharing reductions, making it better than a normal Platinum plan.
Note that the additional subsidies for Americans receiving unemployment benefits will be available on HealthCare.gov as of July 2021. For people in states that run their own marketplaces, the timing of the rollout of this benefit will vary from state to state.
How do the American Rescue Plan's tax provisions affect health insurance?
The American Rescue Plan’s tax provisions affect health insurance in several ways:
- Subsidized buyers who would otherwise have had to repay excess premium tax credits for 2020 do not have to do so.
- The first $10,200 in unemployment compensation from 2020 is not included in taxable income for most people, which could result in larger premium subsidies for some people who had marketplace coverage in 2020. (Although policyholders aren’t required to repay excess subsidies to the IRS, policyholders can still claim additional premium tax credits to which they’re entitled.)
- Premium tax credits for 2021 and 2022 are larger and more widely available.
Who is eligible for the American Rescue Plan's premium subsidy enhancements?
Most Americans who buy their own health insurance are eligible for larger subsidies or newly eligible for subsidies under the American Rescue Plan:
- People who already receive a subsidy are eligible for a larger subsidy due to the reduction in the percentage of income that people are expected to pay in after-subsidy premiums. This comparison sheet shows several examples.
- People who have a household income over 400% of the federal poverty level (ie, more than $51,040 for a single person or $104,800 for a family of four in the continental U.S.) may find that they’re newly eligible for a subsidy due to the elimination of the “subsidy cliff.”
- People with income under 400% of the poverty level who weren’t previously subsidy eligible (because the benchmark plan was already considered affordable under normal rules) may find that they’re now eligible for a subsidy.
It’s important to understand that premium subsidies (premium tax credits) are only available through the exchange/marketplace in each state. So people who are currently enrolled outside the exchange will need to transition to the exchange in order to claim the tax credits, either upfront or on their tax return next spring. This includes people who currently have off-exchange ACA-compliant coverage, as well as people enrolled in short-term plans, health care sharing ministry plans, Farm Bureau plans, etc.
Fortunately, there’s a COVID-related enrollment period, which runs through August 15, 2021 in most states, during which people can transition to a plan in the marketplace or – if they already have a marketplace plan – switch to a different plan that will better allow them to take advantage of the enhanced premium subsidies.
Who is not helped by the American Rescue Plan?
Unfortunately, the American Rescue Plan does not fix the family glitch. So family members who are eligible to enroll on an employer-sponsored plan – which is considered affordable for the employee – are not eligible for subsidies, regardless of the cost to add the family members to the employer-sponsored plan.
And the American Rescue Plan also does not solve the Medicaid coverage gap in the states that have not yet expanded Medicaid. But it does provide full subsidies for a person receiving unemployment benefits in 2021, even if they would otherwise be in the coverage gap. And as noted above, it does provide additional funding in an effort to entice more states to expand Medicaid.
How long will the American Rescue Plan’s provisions be in effect?
For now, the American Rescue Plan’s health insurance provisions are temporary:
- The amnesty for repayment of excess premium tax credits only applies to 2020.
- The full premium tax credits and full cost-sharing reductions for people receiving unemployment benefits are only applicable for 2021.
- The elimination of the “subsidy cliff” is applicable for 2021 and 2022.
- The reduction in the percentage of income that people have to pay for the benchmark plan is applicable for 2021 and 2022.
But it’s possible that at least the enhanced premium tax credits (ie, the elimination of the subsidy cliff and the reduction in the percentage of income that people have to pay in after-subsidy premiums) could be made permanent as part of the infrastructure plan that the Biden administration is considering in 2021.