Consequences of Expiring Insurance Subsidies under the American Rescue Plan

Over 14,5 million people enrolled in private health plans through the medical insurance markets across the country during the open enrollment period for 2022. This was a record high and a 21% increase over the number of people who enrolled in the previous year.

In most states, the open enrollment period for 2022 was one month longer. The federal authorities also spent significantly more money on outreach and enrollment assistance. The affordability of coverage was the main factor driving enrollment growth. Self-purchased insurance is now more affordable for many people thanks to the American Rescue Plan, which came into effect last spring.

Unfortunately, the increased affordability will expire at the end of 2022. If Congress does not act to increase the ARP subsidy improvements, the subsidy structure will return to the basic Reasonably priced Care Act subsidies on January 1, 2023.

The cost of medical insurance will once again become unaffordable to many.

The Congressional Price range Workplace predicted final year that improved subsidies would increase market enrollment by 1.7 Million People by 2022. However, enrollment actually grew by 2.5M people. The longer enrollment window, and additional federal funding for enrollment assist and outreach are two of the reasons why enrollment grew. The first reason for the increase in enrollment is due to the increased affordability of the market protection.

If the ARP subsidy enhancements don’t continue, almost everyone with market coverage will pay higher premiums next year. Two,5 million additional enrollees could not afford to pay for their coverage in 2023.

Subsidies would no longer be available to households earning more than 400% of federal poverty level. We’ve explained that some People who earn a little over 400% of poverty level had to pay up to half of their annual income for health insurance before the ARP’s subsidies were implemented.

That’s untenable, clearly. Before the ARP was introduced, people in this situation were either uninsured or resorted to cheap options that didn’t provide complete coverage – such as a health care sharing ministry plan or a short-term medical policy.

If the ARP subsidy enhancements expires, coverage can become even less affordable for people with incomes below 400% of poverty level. Although most will continue to be subsidy eligible, their subsidy amounts will decrease, leaving them with higher monthly premiums. The chart below shows some examples of the ARP increasing subsidies. These subsidy increases will disappear at the end of the year until Congress passes legislation to increase them.

HHS: ARP saves customers $59 per month on premiums

The average monthly premium for the 10.3 million people who signed up via the federally-run exchange (HealthCare.gov) is $111/month. HHS stated that without the ARP’s subsidy improvements, the average web premium would be $170/month. The ARP saves the average enrollee $59 per month in 2022. Charles Gaba, at ACA Signups has alarming graphs that show how much more people will pay for their medical insurance if subsidy enhancements don’t continue.

In early 2021, when the ARP was introduced, only 63% of all alternate enrollees were enrolled in Silver and Gold plans. Individuals who were previously enrolled in Bronze Plans have switched to the more robust Silver and Gold Plans this year.

Although these percentages remain the same, it is important to remember that this year’s enrollment was much higher. This means that this year, 2 million more people have coverage under the strong Silver and Gold plans (9.6 millions compared to 7.6 million last year). The ARP subsidy improvements have made it more affordable. People want the strongest protection they can afford. The ARP has made it easier to afford better protection.

The ARP subsidy allows individuals earning up to 150% of poverty level to enroll in the benchmark Silver plan at no cost. (For 2022 coverage, 150% poverty level is $19320 per year; for a family of four, it’s $39.750). These enrollees can benefit from a Silver plan that is more affordable than Platinum plans, thanks to the cost-sharing discounts. Prior to the ARP’s introduction, people in this income range had to pay up to 4% of their annual earnings as premiums for the benchmark plan. Without the ARP’s subsidies, these individuals may not be able to afford their coverage this year.

In states with expanded Medicaid, Medicaid coverage is available to people with incomes up to 138% of poverty level, resulting in a much smaller group of low-income enrollees who are subsidy-eligible. The enrollment of market plans increased by 21% nationally in 2022. However, the biggest growth was concentrated in the states which haven’t extended Medicaid.

All of these features will be lost if Congress does not act to increase ARP subsidies. In 2023, tens of millions will either lose their coverage or have to switch to a less robust plan because their current protection is no longer affordable.

ARP subsidies would end the special enrollment for low-income families

If the ARP subsidies are not extended, the new enrollment period for people with incomes up to 150% of poverty level will expire at the end of 2022. HHS clarified when they created this special enrollment period that it would only be in effect as long as people in that income range can enroll in the benchmark plan without paying any premiums.

Without the ARP’s enhanced subsidy, this may no longer be the case.

Will Congress extend the ARP construction subsidy?

The Construct Again Higher Act was passed by the U.S. House of Representatives last fall. It called for a short extension of ARP’s subsidy improvements. Under that law, the larger and more widely available subsidies would have continued in place until 2025 instead of just 2022. The laws also called for an extension of one year of the ARP subsidy enhancements to those receiving unemployment compensation.

Unfortunately, the bills stalled in the Senate after all 50 Republican Senators and Sen. Joe Manchin from West Virginia, a Democrat, opposed them. The subsidy increases for those receiving unemployment compensation will expire at the end of 2021. And the remaining ARP subsidy improvements are scheduled to expire by the end of 2022.

Construct Again Higher Act, which addresses a number of issues and costs more than $2 trillion, is a massive piece of legislation. The extension of ARP subsidies is supported by Sen. Manchin, but a smaller law addressing this issue could garner more support.

What will be the impact of uncertainty regarding ARP subsidies on premiums in 2023?

Technically, Congress could take action to protect the current subsidy structure at any time from now until the end of 2022 (and in 2023 with subsidy improvements retroactive to the start of 2023 as it was with ARP subsidies enhancements in 2021). Subsidy construction is a key factor in the process of determining 2023 plans and prices.

If the ARP subsidies are kept in place until 2023, the enrollment will continue to be higher than it would be otherwise, and healthy individuals – who might have opted out of coverage if it had been less affordable – will stay within the insurance pool. The actuaries of medical insurance companies take into account all this when deciding whether to enter or stay in different markets, which plans to offer, and how much premiums to charge to cover their costs.

States and insurers need to be flexible in the coming weeks and months, as the extension of ARP’s subsidies enhancements is still up in the air. As the ARP was implemented on March 11, last year, insurers already knew what the parameters of subsidy would be for 2022. We’re only a few months away from that date this year, but there is no readability of 2023.

State can require insurers to file two sets of rates for 2023 or a single set that specifies whether they are assuming ARP subsidies expire or will be extended (Missouri, as an example, is a state who takes this approach). Some states tell insurers that they can simply base their filings of charges on the current scenario, i.e. that ARP subsidies won’t be available in 2023. They will then deal with any revisions that may occur. (Virginia was an example of a state instructing insurers to file fees based on a belief that ARP subsidies would expire at the end of 2023. This was clarified by the Virginia Bureau of Insurance in a recent teleconference).

States and insurers demonstrated their ability to act on a dime in the past, as was seen in the speed revisions carried out by many states in October 2017 after federal funding for cost sharing reductions had been withdrawn at the eleventh-hour. If the ARP subsidies were extended midway through the speed submission/overview process, insurers would be able to adjust their rates accordingly, even at the last minute.

The earlier ARP construction is delayed, the more ARP subsidy will be increased

This course will be smoother for everyone if the ARP subsidy laws are passed sooner rather than later. It could help customers, especially those with incomes a little over 400% of poverty level, plan ahead for the next year. This could help insurers to nail down their pricing proposals and coverage areas. It could make it easier for state insurance departments to conduct speed reviews.

You can contact your congressmen if you buy your own medical insurance and ask them to enhance the subsidies that have made it more affordable than before.


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