American Rescue Plan Reduces Health Insurance Costs for Young Adults

Since generations, the process of enrolling in their own insurance coverage after leaving the medical plan of their parents has been a transitional factor for young adults (assuming that they were fortunate enough to have been covered by a parent’s health plan).

The Inexpensive Care Act brought about some important changes that made coverage more accessible to younger adults. This included the ability for them to remain on their parents’ health plan until they reach age 26. The American Rescue Plan (ARP), however briefly, makes protection more affordable.

Our updated subsidy calculator will estimate the amount you can save on your medical insurance premiums in 2021.

The ARP offers enhanced premium subsidies for 2021 and 2022 (aka the premium tax credit). Those who received unemployment benefits at any level during 2021 were eligible for premium-free coverage with substantial cost-sharing discounts. ( In 2022, there is no provision for unemployment-related subsides. Those who receive unemployment benefits in 2022 may qualify for income-based subsidies. However, the rule in place in 2021 should not be applicable in 2022.

Some younger adults already have access to their employer’s health plan by the time they are ready to secure their own protection. What should you do? You may be working part-time, working for a small business that does not provide health insurance, or pursuing your entrepreneurial dreams. We’ll examine your options for purchasing your own health insurance, as well as the things you should consider when going through this process:

Individual-market plans more affordable than ever

The ACA guarantees that coverage will be issued to all individuals, regardless of their medical history (you won’t be denied insurance or charged a higher premium because you have a pre-existing condition). The ACA also created premium subsidies to make coverage more affordable than it would be otherwise. The ARP, however, has increased the size of these subsidies in 2021 and 2022.

The Supreme Courtroom has simply confirmed the ACA. Should market insurance coverage customers breathe a sigh if relief?

Prior to this, healthy young people with limited incomes were often forced to choose between a policy with an extremely low (or even free) monthly premium but very high out-of pocket costs, or a more manageable plan that had a lower monthly premium, but higher out-ofpocket costs.

The new ARP subsidy structure can help to eliminate this strong solution by reducing premiums.

How much can “younger invincibles” save on protection costs?

The amount of the subsidy is dependent on where you live and how old you are. Some examples can be given, such as how the ARP’s subsidies make coverage more affordable and allow younger people to enroll in stronger well-being plans.

Imagine you are about to turn 26, live in Chicago and expect to earn $19,000 by 2022 from two part-time positions – none of which offer medical insurance benefits. Your parents’ health plan will expire at the end of June. You need to purchase your own plan for July.

  • According to HealthCare.gov’s plan comparison tool, the benchmark plan for this area has a full price value of approximately $249/month. This is for a 26 year old.
  • In 2021, the benchmark plan’s after-subsidy amount would have been approximately $65/month under the old guidelines (i.e. before the American Rescue Plan). This is 4.1% of a person’s $19,000 income. Here’s how it’s calculated. The amount would have been similar in 2022 (though the American Rescue Plan changed them before the start of 2022).
  • The American Rescue Plan will only cost $1 per month at this earning level in 2022. The deductible is $625 and this is the total out-of pocket cost for the year. There are no additional copays or costs. The built-in cost sharing reductions are responsible for these strong benefits. The exact benefits will vary by area and plan. Some plans may have lower deductibles but still require coinsurance or copays. However, the overall silver-plan benefits are strong for anyone with this income level, due to cost-sharing discounts.

Cost-sharing discounts are always available. Without the American Rescue Plan, an able-bodied 26-year old might have been tempted to purchase one of the less expensive Bronze plans. In this case, a plan was available pre-ARP for less than $5/month in 2021, while others were accessible for less than $30/month. These plans have deductibles no lower than $7,400 and maximum out-of pocket expenses as high as $8,700 by 2022. Value-sharing discounts are only available on Silver plans. The benchmark plan will always be a Silver plan. Its value is used to determine the amount of a person’s subsidy.

The $5/month premiums might have been affordable for a younger, healthy individual with a limited earnings. They’d have had a tough time paying for out-of pocket costs if they experienced a serious medical event during the year. The ARP’s expanded premium subsidies make it easy to choose, as the benchmark plan with its strong cost-sharing discounts has a $0 monthly premium for people with incomes up to 150% of federal poverty level (for one particular person that is $19,320 by 2022). Here’s a summary of factors to consider when choosing which steel stage is best for you. The short story is that if your earnings do not exceed 200%, silver will be your only choice.

The ARP subsidy for older people will be higher (because their pre-subsidy rates are much higher), but it is important that this new law makes it easier for “younger unstoppables” who have limited incomes to enroll into plans with cost sharing reductions. Bronze plans with much higher out-of pocket costs won’t be as interesting when Silver plans become more affordable – or even free.

What about young people with higher incomes?

What if you are a teenager whose earnings is too high to qualify for the cost-sharing discounts? The American Rescue Plan makes coverage more affordable and allows you to afford better plans. Say our 26-year old in Chicago earns $40,000 by 2022, which is about 311% below the federal poverty level.

  • The benchmark plan is $249/month without premium subsidies.
  • Without the American Rescue Plan no subsidies would be available for this person’s earnings (even if they are below 400% poverty level). The most affordable plan available would have been $207/month (it is a Bronze Plan with an $8,600 deductible).
  • This person may be eligible to receive a subsidy to reduce the cost of the benchmark (Silver plan) to $209/month. (This is because the percentage of income that people are expected to spend on this plan has decreased). The lowest-cost plan will drop to approximately $167/month.

What is the takeaway? In 2021 and 2022, buying your own medical insurance will be more affordable than in the past. Depending on your income, you might be eligible for a robust well-being protection with no premiums. Or, you could be eligible for premium subsides even if you were not prior to the American Rescue Plan.

Remember these things when switching to your personal plan

You may want to consider a few things when switching from a parent’s health plan to your own self-purchased plan. This is especially true if your previous medical coverage was provided by your employer.

  • There will be more options than what you or your family are used to. If your parents’ plan is offered by their employer, they may only have a few options to choose from each year. When you are shopping for your own protection in the individual market, there may be dozens of plans to choose from. Here are some things to consider when selecting a plan if the choice process feels overwhelming.
  • PPOs may not be available. In the market sponsored by employers, PPOs are widely available. They offer some protection to out-of network companies, and also have wider supplier networks. They are usually much less available in the individual market. When you purchase your own protection, it’s more possible that you will come across plans which only cover care obtained in-network. It is therefore vital to know what providers and doctors are included in the network before enrolling.
  • Even if you’re with the identical medical insurance company as before, your supplier community could be totally different. You may decide to enroll in a plan offered by the same insurer, even if your parents’ plan is administered or provided by Anthem Blue Cross Blue Protect. Most insurers offer totally different provider networks for their individual and group health plans. You’ll want to check to make sure that your chosen medical providers are included in the network.

What if you have low earnings? Medicaid is also an option

You may be eligible for Medicaid if you reside in Washington DC or any of the 38 states where Medicaid eligibility has been expanded by the ACA. Medicaid eligibility in the continental U.S. will extend to a person’s annual earnings up to $18,754 by 2022. It’s higher in Alaska and Hawaii. DC also has the next limit, allowing people to enroll in Medicaid if they earn up to $29,219.

Medicaid eligibility is also based on current monthly earnings. This means that you won’t need to project your entire annual income the same way you would for premium subsidy. In a state which has expanded Medicaid eligibility under the ACA, a person could qualify for Medicaid in 2022 with a monthly earnings as high as $1,563. If you are going through a period where your earnings is lower than normal, Medicaid is a good safety net.

Medicaid usually has no monthly premiums and the out-of pocket costs are generally lower than with an individual insurance plan.

The Minnesota Primary Health Program is also available in New York. These plans are affordable and provide good health protection. These plans are accessible to people who earn too much for Medicaid but not over 200% of poverty level (which amounts to $27180 for one particular person in 2022).

COBRA: Entry remains unchanged, but may be expensive

COBRA or mini COBRA (state continuation coverage) might be available if you’re aged out of your parents’ health plan. If you can afford it, this is an excellent option. It allows you to keep the same coverage you already have for up to 18 months. It’s not necessary to start over with the deductible or out-of pocket maximum of a new plan. You also won’t need to worry about changing to a different provider network or selecting a plan that covers a diverse list of drugs.

You can continue your coverage via COBRA if you are no longer covered by a parent’s health plan. However, you will have to pay the full cost of the insurance plus a 2% administration fee. It may be more sensible to switch to another plan in the market, depending on your circumstances. Here are some factors to consider when deciding if COBRA is a good option.

The majority of Scholar Wellbeing Plans are in compliance with the ACA

This is a good option if you’re enrolled in school and eligible for student health insurance. It can be inexpensive and convenient. Due to the ACA, most student health plans are stronger than ever before and provide coverage that adheres to the same guidelines as individual market plans.

Check with your faculty to find out if coverage is obtainable and, if so, whether it’s in compliance with the ACA. (Some self-insured student health plans have chosen to avoid ACA-compliance. If your school offers one of those plans, ensure you understand what types of medical care are not coated under the plan.

If you have the option to enroll in an excellent student health plan, it’s important to compare that to the other options available, such as self-purchased individual market coverage or staying on your parent’s plan if you are under 26.


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