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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 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.
The American Rescue Plan’s tax provisions affect health insurance in several ways:
Most Americans who buy their own health insurance are eligible for larger subsidies or newly eligible for subsidies under the American Rescue Plan:
It’s important to understand that premium subsidies (premium tax credits) are only available through the exchange/marketplace in each state. So people who were enrolled outside the exchange had 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 had off-exchange ACA-compliant coverage, as well as people enrolled in short-term plans, health care sharing ministry plans, Farm Bureau plans, etc.
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 ensured access to robust health coverage for people who were receiving unemployment compensation.
Anyone receiving unemployment compensation at any time in 2021 was eligible for full premium subsidies and full cost-sharing reductions throughout 2021 (unless they subsequently became 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).
The American Rescue Plan did not fix the family glitch, but the IRS finalized regulations in 2022 to fix that issue starting in 2023.
And the American Rescue Plan also did not solve the Medicaid coverage gap in the states that have not yet expanded Medicaid. But as noted above, it does provide additional funding in an effort to entice more states to expand Medicaid.
For now, the American Rescue Plan’s health insurance provisions are temporary, even though some of them have been extended by the Inflation Reduction Act:
It’s possible that 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 extended again or made permanent by future legislation.
The Inflation Reduction Act would extend ARP's health insurance subsidy enhancements – helping millions eligible for ACA marketplace subsidies.
Legislation signed today provides substantial premium tax credits and cost-sharing reductions to Americans receiving unemployment benefits.