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Can you count on your Obamacare subsidy?

Premium subsidies are available for 2021 coverage, and a Supreme Court ruling wouldn't affect them until later in 2021, if at all

The ACA’s premium subsidies are a cornerstone of the law, and are the primary means of making health insurance affordable for the majority of the exchange’s enrollees.

Of the people who enrolled in health plans through the exchanges for 2020, 86 percent received premium subsidies that averaged $491/month, which amounts to 85 percent of the average monthly premium. (The specific amounts vary considerably depending on where a person lives and how old they are).

Given the huge role that the subsidies play in keeping coverage affordable, it’s understandable that people wonder about their long-term prospects.

This article was initially written in 2014, when there was a considerable amount of anxiety surrounding the King v. Burwell case. People in states that use the federally-facilitated exchange (which is the majority of the states) were understandably concerned that their subsidies might be taken away, as that was the premise of the case. Ultimately, the federal government won the case in the summer of 2015, and subsidies continued to be available without interruption.

But similar anxiety has resurfaced multiple times over the last few years, including during Congressional Republican’s efforts to repeal the ACA in 2017, and now in response to the California v. Texas lawsuit that’s scheduled to be heard by the Supreme Court on November 10, 2020. The Trump administration and 18 GOP-led states are seeking to overturn the entire ACA with that case. A Supreme Court decision is expected by mid-2021 (likely between April and June).

If the Court overturns the ACA, premium subsidies would disappear unless Congress enacts legislation to prevent that, which would likely require a Democratic majority in the Senate.

Other than the California v. Texas case, the ACA is doing quite well at this point, nearly seven years after the bulk of its provisions were implemented. Although there were spiking premiums and numerous insurer exits from the exchanges for 2017 and 2018, we’ve seen the opposite trend for the last few years. For 2019, 2020, and 2021, overall average premiums have been very stable (average benchmark premiums have declined in each of those three years), and insurers participating in the exchanges has been steadily growing.

So let’s revisit the question: Can you count on your Obamacare subsidies? In short, yes, at least for the time being. Open enrollment for 2021 coverage is underway, and regardless of what you’ve heard about Obamacare – good or bad – the subsidies are still available. People are currently enrolling in 2021 health plans at a rapid clip, with substantial subsidies to offset some or all of their premiums.

What happens if the ACA is overturned by the Supreme Court?

A Supreme Court ruling in the California v. Texas case is expected by June 2021. Many legal experts expect that the Court will uphold the ACA, but the situation is obviously very much up in the air for now. So what would happen to premium subsidies if the ACA is overturned and Congress hasn’t taken action to preemptively protect the law? The exact terms the Court might hand down aren’t yet known, but it’s likely that premium subsidies would end immediately if the ACA were to be overturned and Congress hadn’t appropriated any money to keep them going.

The contract that insurers signed with HHS this fall reportedly includes an “exit clause” that would allow insurers to back out of the contract if the ACA’s subsidies are eliminated. But states also have non-cancellation rules that prohibit insurers from dropping insureds unless premiums aren’t being paid, and it’s unclear at this point how those two provisions would work together. Of course, many people who receive premium subsidies would not be able to afford the full price of their coverage even if the plan continued to be available.

So for now, the short answer is that we just don’t know how this will all play out in the latter half of 2021. But for the time being, premium subsidies are fully available and people are enrolling in subsidized coverage for 2021. If you’re in need of health coverage, your best bet is to sign up for 2021 coverage before the end of open enrollment (December 15 in most states, but later than that in some states). It will take effect January 1, and any applicable subsidies will continue to be paid for at least the first part of 2021. And the most likely scenario is that they’ll continue to be paid throughout 2021 and that the ACA will remain intact. But we won’t know that for certain until the Supreme Court issues a ruling and until we see how Congress addresses this issue in the 2021 session.

What if your carrier is leaving the exchange?

In many areas of the country, insurers are joining the exchanges for 2021 and there will be more plan options available than there were in 2020. But there are some insurers that are exiting the market at the end of 2020, such as New Mexico Health Connections. This is much less common that it was at the end of 2016 and 2017, but it does still sometimes happen.

There are a couple of things to keep in mind if you’re currently receiving a subsidy to help cover the cost of your plan, and your carrier is exiting the exchange at the end of the year:

  • Subsidies are only available in the exchange. If your carrier continues to offer plans outside the exchange, you’ll have the option to switch to one of their off-exchange plans, but you’ll give up your subsidy if you do so.
  • In most cases, the exchange can pick new plans for people whose carriers leave the exchange, if the enrollees don’t select their own replacement plan. But by far your best bet is to log on to your exchange account by December 15 to select your own new plan for 2021. Auto-renewal is never the best choice. But if you’re auto-renewed onto a new plan, your subsidy will still apply to the new plan, assuming you remain eligible for a subsidy.

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 Her state health exchange updates are regularly cited by media who cover health reform and by other health insurance experts.

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