The American Rescue Plan Health Insurance Changes Have Expanded Subsidies and Open Enrollment, Giving Americans a Tremendous Opportunity to Find Better Rates on Health Insurance
With the passage of the American Rescue Plan, congress has approved an unprecedented expansion of the ACA Premium Tax Credit (PTC). While the expansion is only set to last for two years, it represents an incredible opportunity for most Americans to lower their monthly health insurance premiums by a considerable amount.
In this guide, we’re going to go over all of the health insurance changes starting April 1st. Readers will also learn how to calculate their expanded ACA subsidy, and if needed, take advantage of no-cost COBRA premiums if they’ve lost their job in 2021.
UPDATE: Information on the American Rescue Plan is still being released. We’ll keep this page updated with the latest and most accurate information, so check back for more.
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Health Insurance Changes from the American Rescue Plan [Key Takeaways]
Here’s a summary of health insurance changes going into effect under the American Rescue Plan on April 1ˢᵗ:
Health Insurance Open Enrollment has been extended to May 15ᵗʰ. There’s now more time to get a health insurance plan for 2021. If you already have a Marketplace plan for 2021, you can use the extended Open Enrollment to switch to a different one.
ACA Premium Tax Credits have been expanded. If you’re already receiving an ACA subsidy, it might be getting bigger. Many Americans will be newly eligible for some $0 premium plans (after subsidy).
The 400% FPL “Subsidy Cliff” has been suspended. For the first time, individuals and families who make more than 400% of the federal poverty level (FPL) are eligible for subsidies. After subsidies, no one’s premiums will exceed 8.5% of their annual household income.
People who have lost their jobs and qualify for COBRA will have their premiums temporarily covered. Cobra costs will be covered 100% until September 30th, 2021. This only applies to people who have been involuntarily terminated.
People who have received unemployment benefits in 2021 are eligible for $0 cost health insurance through the end of 2022. The program will assume your income is at 133% of the federal poverty level, which drop your net premium to $0 for all Bronze plans and some Silver plans, and to very low rates for Gold and Platinum plans.
Pregnancy Medicaid has been expanded from 60 days after birth to a full 12 months. Unlike other ACA changes in the bill, this will be in effect for 7 years.
Is my ACA subsidy going to increase on April 1st?
If you currently qualify for a Premium Tax Credit, then you can expect the amount of that credit to increase. Both individuals and families are eligible for a temporary increase in their subsidy for the 2021 calendar year, going all the way back to January 1ˢᵗ.
In addition, no one will pay more than 8.5% of their household income towards an ACA health insurance plan through 2022. This includes individuals and families who make more than 400% of the federal poverty level, a group which was previously not qualified for subsidies.
The biggest effect of all this is that most people, across all income levels, should see lower premiums as a result of getting bigger tax credits.
Breakdown: New subsidy increases
- If you earn 100-150% FPL, you will be able to qualify for $0 monthly premiums for most bronze plans and some silver plans
- If you earn 150-250% FPL, your subsidies could increase by 50-70%.
- If you earn 250-400% FPL, your subsidies could increase by 30-50%
- Earning greater than 400% FPL will now be eligible for subsidies that cap their insurance costs at 8.5% of income for benchmark plans
What about people who earn less than 100% FPL?
- Americans who earn less than 100% FPL are not eligible for subsidies.
- However, people at this income level should qualify for state Medicaid programs instead.
Meanwhile, households earning between 100% and 150% of the federal poverty level can qualify for $0 premiums plans (after factoring in the tax credit).
Even many people who earn up to 250% FPL will have at least one bronze-tier $0 premium plan available to them.
Example: Who will receive a subsidy that didn’t before
Let’s say that you’re a single American earning $55,000 per year, enrolled in a silver-tier Marketplace plan that costs about $887 per month. This annual income is equal to 431% of the Federal Poverty Level, which means that you did not previously qualify for the Premium Tax Credit (PTC).
Under the new changes, however, no one will have to pay more than 8.5% of their income for a silver-tier plan. 8.5% of $55,000 is $4,675, or $390 per month. That means that you will now qualify for a subsidy of $497 per month, or 56%.
It’s important to note, however, that if you choose to purchase a bronze-tier plan that costs less than 8.5% of your annual income, you will not receive a new PTC subsidy.
*These numbers are based on national averages; Your specific rates will vary by state.
Example: How much your costs will drop if your currently qualify for a subsidy
One of the other changes going into effect on April 1st is reduced premium contributions for anyone earning between 100% and 400% of FPL. In other words, people who already qualified for a health insurance subsidy can expect to see monthly savings of anywhere between 6% and 100% off their current premium.
For this example, let’s say that you are a 4-member household with 2 adults and 2 children, with a total household income of $75,000. This means that you’re earning 286% FPL, which would have qualified you for the PTC. Under the new temporary expansion, however, your credit is going to increase.
Enrolling your family in a benchmark silver-tier plan would normally cost about $1,402 per month, but with an estimated PTC of $1,061, your plan will only cost about $341 per month. That’s a credit that’s equal to 76% of the monthly costs of your plan.
*These numbers are based on national averages; Your specific rates will vary by state.
When will the new tax credits become available on HealthCare.Gov?
All of the increased premium tax credits and expanded tax credits will be available beginning on April 1ˢᵗ. That means that anyone who signs up for a new health insurance plan on April 1ˢᵗ will automatically receive the new increased tax rates.
If you’re already in a health insurance plan, then you will automatically receive your tax credit on your 2021 tax filing next year. However, if you want to update your plan to reduce your premiums right away, you will need to update your application.
We can help you make the updates you need in order to immediately cut your plan premium; Give us a call to get started.
How do I calculate my new premium tax credit?
The best way to calculate your new health insurance subsidy is with the Kaiser Family Foundation’s Health Insurance Marketplace Calculator. This easy-to-use online tool has been updated to include the subsidy changes from the 2021 American Rescue Plan.
In order to begin, click the above link, then enter the following information:
- Your home state
- Your annual household income
- Info on your family’s job-based insurance coverage (if any)
- The number of people in your family
- The number of adults and children enrolling in Marketplace coverage
- Any relevant unemployment numbers for 2021
After that, simply click “Submit” and you will get an estimate of health insurance premiums and subsidies that you are eligible for.
How do I get new the new health insurance changes to go into effect immediately?
With the new health insurance changes, your expanded PTC subsidy has an effective date of Jan. 1, 2021. This tax credit will be applied to your end-of-year taxes.
However, if you’re interested in getting your premiums lowered right away to reflect the change, you’ll need to update your health insurance application or switch to a new plan. Talk to your insurance agent, or reach out to us if you’d like some help.
Compare Pricing on the Best Insurance Plans Available
If your premiums are going down, consider a Health Savings Account (HSA) to maximize the savings
Your increased Premium Tax Credit means that your health insurance premium is going down. This means more money per month that you get to keep in your pocket.
A tip for savvy investors: if you have an HSA-qualified health plan, put the money you’re saving on premiums into a Health Savings Account (HSA). These tax-advantaged accounts are the perfect place to store pre-tax money and let it grow on a tax-deferred basis.
Making your maximum HSA contribution each year is a surefire way to grow your healthcare dollars over time. You can use HSA funds to pay for all sorts of future medical expenses, including any pre-deductible healthcare costs that you’re responsible for.
Don’t have a Health Savings Account? The first step is enrolling in a high-deductible, HSA-qualified insurance plan. This is something that you can do during the 2021 Special Enrollment Period, which lasts until May 15ᵗʰ.
How to use the 2021 Special Enrollment Period to find a better (or more affordable) health insurance plan
Due to the staggering number of Americans who are uninsured or underinsured during the ongoing health situation, health insurance open enrollment has been extended until August 15ᵗʰ
For example, if your subsidy is going up, this might be a good opportunity to find a plan with more comprehensive coverage. Or if you need to lower your premiums as much as possible, you could switch into a high-deductible plan with an effective date as early as May 1ˢᵗ.
But remember: using the Special Enrollment Period to switch plans may mean that your deductible is reset. If you’ve already met your deductible for the year, switching plans now could raise your out-of-pocket costs for 2021.
As always, anytime you’re thinking of changing things up with your health insurance, be sure to consult a professional advisor beforehand.
American Rescue Plan Frequently Asked Questions (FAQ)
When will the expanded subsidies become available?
- You can opt into the new tax credits beginning on April 1st. Your new subsidies will take effect on the first day of the following month.
What happens if I don’t opt into the expanded subsidies in 2021?
- If you don’t opt-in, your expanded subsidy will be automatically reconciled during tax season in 2022.
What if I don’t have an on-exchange health insurance plan? Can I still enroll and get the new subsidies?
- Members have until May 15th to enroll in a Marketplace health insurance plan and qualify for the expanded subsidies.
What is a “benchmark plan” and how does it affect my subsidy?
- In this case, the “Benchmark Plan” refers to the second lowest cost Silver-tier plan that is available in a given area. This is the plan that is used to calculate how much subsidies someone will receive.
Will the new health insurance changes affect my deductible or out-of-pocket maximum?
- Your deductible and out-of-pocket maximum will remain the same, unless you use the Special Enrollment Period to switch to a different plan.
Your Personal Benefits Manager can help you lower your rates fast
If you’re already enrolled in a marketplace plan, the new expanded subsidies will go into effect with a retroactive start date of January 1ˢᵗ, 2021. But you will not see your premiums go down immediately unless you update your health insurance application or switch to a new plan.
Your Personal Benefits Manager is standing by to help you take full advantage of this opportunity. With a short, no-obligation consultation, we can show you the plans that will save you the most money and help you make the switch.
As usual, our services are 100% free to you. Call 800-913-0172 to get started, or click here to get an instant health insurance quote.
Wiley is President of HSA for America. He believes that consumers should have choice and price transparency, so they can make the best healthcare decisions for their needs. Read more about Wiley on his Bio page.