Over 1.2 million Americans signed up for health insurance through HealthCare.gov between Feb. 15 and May 31 of this year.
The creation of state or federal marketplaces, known as health care exchanges, was central to the Affordable Care Act’s charge to extend health coverage to millions of uninsured Americans. Primarily intended for people who do not receive insurance through an employer or public programs such as Medicaid, health care exchanges have led to coverage gains across the U.S.
The ACA provides marketplace enrollees with federal subsidies through a premium tax credit intended to offset monthly premium payments. However, even with federal subsidies to limit premium costs, many people still remained uninsured following the ACA’s passage. Some people earned too much to qualify for subsidies, while others either were unaware of available subsidies or couldn’t afford coverage because of high deductibles or other out-of-pocket costs.
The American Rescue Plan and Health Insurance Premiums
The American Rescue Plan Act, passed in March, aims to increase the affordability of marketplace plans by temporarily increasing federal subsidies for individuals across all income levels. And data shows that these subsidies are, in fact, lowering out-of-pocket costs for consumers. According to recent U.S. Department of Health and Human Services data, many enrollees are seeing their premiums reduced by over 40%.
Before the passage of ARPA, premium tax credits were only available to people with incomes between 100% and 400% of the federal poverty level. ARPA extends subsidies to people with incomes over 400% of the poverty level, eliminating the ACA’s “subsidy cliff.” It also caps the percentage of household income that families or individuals need to pay toward their premiums at 8.5% for those making more than 400% of the federal poverty level, and it sets this cap lower for people who make less—those with incomes between 100% and 150% would pay no premiums.
While the increased subsidies are temporary through 2022, the Biden administration and Congress have expressed interest in extending availability of the expanded tax credits.
Getting People Enrolled in Plans
The Kaiser Family Foundation estimated that at the time ARPA passed, there were “approximately 12.1 million uninsured potential Marketplace shoppers, of whom the vast majority (10.9 million) are eligible for subsidies under the ACA and ARPA to help lower the cost of coverage.” Both the federal government and states are considering targeted strategies for outreach and facilitated enrollment for this group. Increasing enrollment in marketplace plans would not only lower the uninsured rate but may also lead to more stable premiums by spreading risk across a larger pool.
Shortly after ARPA’s passage, the Centers for Medicare and Medicaid Services announced $80 million for navigator programs, which help individuals, small businesses and their employees search for and enroll in marketplace plans, free of charge.
Most Americans shopping for a health plan do so on the health insurance marketplace through the federal exchange, HealthCare.gov. Fourteen states and D.C., however, maintain state-run exchanges where individuals enroll through a state-based website. Special enrollment periods have been extended to Aug. 15 on both the federally facilitated marketplace and the state-based marketplaces. New Jersey, New York and Vermont have extended their enrollment periods even further into 2021, and other states may follow suit.
Some states are prioritizing actions to facilitate outreach and enrollment to eligible individuals. For example, Nevada’s state-run exchange, the Nevada Health Link, is investing most of its budget in navigator programs, outreach and advertising to connect potential enrollees with newly available subsidies.
Coordinating With Existing State Efforts
To lower the consumer costs of marketplace plans before ARPA passed, many states were considering or pursuing such strategies as state-run reinsurance programs, public options and marketplace alternatives such as short-term plans or state-based subsidies. With the newly available premium subsidies, states may face some uncertainty around the role of these strategies.
Currently, 16 states have received federal approval for a Section 1332 waiver, while several others have enacted legislation requiring state officials to seek a waiver. Most states have used waivers to establish and fund state-run reinsurance programs, which help offset high-cost medical claims for insurers and, in turn, lower premiums for individuals enrolled in unsubsidized health plans.
A handful of states have also provided state-based subsidies to individuals purchasing marketplace plans. New Mexico and Washington recently enacted legislation to establish programs financing state-level premium and cost-sharing subsidies. These bills leave certain details, such as premium and cost-sharing amounts and eligibility parameters, to appropriations and rulemaking processes, granting more flexibility in response to uncertainty about the permanence of enhanced federal tax credits.
California, Colorado, Massachusetts, Minnesota, New Jersey and Vermont also offer state-based premium subsidies, funded through an array of sources including general revenue, employer contributions and tobacco taxes. Some of these states are considering shifting funding away from premium assistance toward other cost-sharing reductions or certain populations that are currently ineligible for premium subsidies.
As the debate continues around whether to make the enhanced federal premium subsidies permanent, states may consider remaining flexible in the coordination of relevant state-based programs with this new opportunity for funding.
This publication is supported by The Commonwealth Fund, a national, private foundation based in New York City that supports independent research on health care issues and makes grants to improve health care practice and policy. The views presented here are those of the author and not necessarily those of The Commonwealth Fund, its directors, officers or staff.
Samantha Scotti is a senior policy specialist in NCSL’s Health Program.