5 Ways the American Rescue Plan Can Reduce Your Health Insurance Costs

If you are one of the thousands who have no medical insurance or buy their own on the individual market, then the American Rescue Plan has just changed the rules in a way that will likely make it easier for you to get affordable complete medical coverage.

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

The laws signed by President Biden last week will increase premium subsidies and make them available to more people in 2021-2022.

In 2021, many people receiving unemployment benefits will be eligible for premium-free health insurance with substantial advantages. Individuals who received extra premium subsidies in the year 2020 do not have to pay back that money to the IRS when they file their 2020 taxes.

The enhancements, though not permanent and part of a large bill designed to help the nation recover from the COVID epidemic, will make it easier for people to afford quality medical insurance. They have also generated a great deal of confusion and questions, especially amongst those who are wondering if they need to rethink their plan choice for 2021.

The timing of these changes coincides with the COVID enrollment period available nationwide. It continues in most states until August 15. In many states, people can enroll for the first time or switch from one plan to another. Protection is effective the month following enrollment.

You must use this window if you want to change your plan or enroll now that ARP is in place. You may want to take another look at your coverage options. Here are some of the most common scenarios – and questions people should be asking – right now:

1. You are enrolled in a plan that is ACA compliant but not on the exchange

Off-exchange policies are similar to on-exchange insurance plans. However, people buy them directly from the insurance company instead of buying through the medical insurance market. Off-exchange enrollment is a good idea if you know for sure that you are not eligible for premium subsidies. If you might qualify for a subsidy, however, enrolling by the exchange is the only way to receive it – either upfront or later on in your tax return.

Candidates with incomes over 400% of federal poverty level, who were previously ineligible for subsidy, may now be eligible for one. The subsidy can be significant depending on where they live and how old they are.

If you are enrolled in a program that is not on the exchange, you should definitely look into the options available to you and determine if you qualify for a subvention under the new rules.

If you reside in a state which uses HealthCare.gov for its insurance coverage, the new premiums and subsidies will be available to view on April 1. The 15 state-run markets are also working on this and will show the new subsidy amounts as soon as possible. CMS clarified, however, that people should still enroll by the end of March in order to get coverage on April 1. They can then return to the marketplace at the beginning of April to activate their new subsidies. (Purposes that are submitted before April 1 will only have the current, pre-ARP subsidies built-in. However, enrollees can still collect the entire subsidy amount after they file their tax returns for 2021).

If you are enrolled in a plan that is not on the exchange and you want to switch to a plan that is, your insurer may be willing to transfer any out-of pocket expenses you have accrued so far this year. This is not required. You’ll want to contact your insurer and ask if this is something they would allow.

Depending on where you live and what plan you have chosen, you may or may not be able to purchase the same plan on exchange (with the same medical provider network). If you are switching from one policy to another on exchange, your out of pocket expenses will be reset to zero.

Switching to a plan on the exchange may not be the best option for everyone. It depends on the plan’s availability, the supplier network, the amount you have spent in-pocket this year, and how much your premium subsidy is if you enroll.

2. You are enrolled in a health plan that is not ACA compliant

You can choose from a variety of plans, including a short-term health insurance plan, an ACA-compliant plan or a plan that is grandfathered in. You probably chose this option because the monthly premiums fit into your budget, while ACA-compliant health insurance didn’t – at least the last time you checked. It’s still worth checking.

People with incomes above 400% poverty level have long been attracted to these different types of insurance, and so have people with incomes just below 400% poverty stage that only qualified for small premium subsidies. The ARP has increased the subsidy for 2021-2022. There is no subsidy cliff.

You’ll want to check out your options before the COVID enrollment window closes (August 15th in most states; this may vary in states with their own exchanges). You may be pleasantly surprised to find that you can obtain ACA-compliant health insurance – for both this year and next year – at a much lower premium than what you saw the last time you looked. If you are looking at plan options before April 1st in most states you won’t be able to see the more substantial premium subsidies. You can still claim them on your 2021 tax returns for any of the months that you were enrolled in.

3. By trade, you’re already enrolled in the Bronze plan

If you are currently enrolled in Bronze coverage by your trade, it is likely that you chose this plan because the premiums were lower than those of Silver, Gold, or Platinum. After your subsidy had been used, you could have received a Bronze plan for free.

The ARP will still have a low or free premium, but it is in your best interest to compare it with the other options available during the current COVID enrollment period. You may find that you qualify for a Silver plan with more benefits than your Bronze plan. This is especially true if you are eligible for cost sharing reductions (CSR), which are essentially a free upgrade to your health insurance benefits. In 2021, CSR benefits will be available to individuals earning up to $31,900 and families of four earning up to $65,500. Alaska and Hawaii have higher amounts.

Before you switch plans, however, it’s best to be aware of the maximum out-of pocket limits for the subsequent steel level. If you are not eligible for the CSR (i.e., your income is over 250% of poverty level), you might find that the Silver plans available have out-of pocket limits similar to what you had with your Bronze plan. It may or may not be worth paying the additional premium if you plan to use your policy throughout the year.

If you expect high claims costs that will affect your out-of pocket expenses no matter which plan you have, an upgraded plan won’t be a good deal more cost-effective when you add up all of your out-of pocket costs and premiums. If you don’t have frequent medical needs, an upgraded plan can save money by lowering your deductibles and copays.

Take into account all elements: the total premiums paid, the out-of pocket maximum, and how the plan will cover your medical costs if you do not expect to meet the out-of -pocket maximum throughout the year.

If you selected a Bronze plan because you wanted to contribute to an HSA and enroll in a high-deductible health plan (HDHP) that qualified for the HSA, it is worth checking to see if HDHPs are available in your area at the next metal level. While Bronze HDHPs are common, Silver and Gold HDHPs can be found in many areas. The ARP’s new subsidies may allow you to keep your HSA eligibility while also having a health plan that has lower out-of pocket costs and doesn’t cost you too much extra each month.

4. Your job and well-being protection are at risk if you’ve lost your job or are about to lose it.

You have a few options if you recently lost your job or are about to lose it – along with your medical insurance. You may need to access COBRA, state continuation coverage (mini-COBRA), or you might have a specific enrollment period during which you can join an individual/family health plan.

Under ARP part 9501, from April 1, 2019 to September 30, 2021, the federal government will cover the total premiums for COBRA and mini-COBRA. This is not available if you have voluntarily quit your job.

If you were laid off or experienced an involuntary reduction in hours resulting in the loss of health coverage in the last 18 months, and you were eligible for COBRA but declined it or terminated it later, you can choose to enroll in COBRA again to benefit from the new subsidy. The subsidy does not extend your initial COBRA termination date which is usually 18 months after you would have started COBRA if you had chosen to opt in at the beginning. If you were first eligible for COBRA at October 1, 2019, then your COBRA will end on April 30, 2020 (i.e. 18 months later). The same applies to state continuation programs, which can be shorter than COBRA.

If you receive unemployment compensation in any way this year, you will be eligible for the $0 Silver plan, which has the strongest level of cost-sharing discounts. (CMS clarified that the fine print would take time to be programmed into HealthCare.gov. However, enrollees can log back into their accounts to activate the larger subsidies.

Do you have to choose the COBRA plan or the market plan that is sponsored by the company? There are several factors to consider:

  • What’s your plan if you decide on COBRA for the final quarter of the year? Will you be able to pay the full value as soon as your federal government subsidy expires?
  • Federal guidance is not available on whether the top of the COBRA subsidies funded by the government will trigger a specific enrollment period for market plans. We assume it will, but we don’t have any official confirmation. (The employer’s COBRA subsidies set off an enrollment period.) If it happens, would you like to switch to a market-based plan?
  • If you have incurred out of pocket costs under your employer’s plan up to now in 2021, COBRA may be the better choice, since you won’t need to begin over with the out of pocket prices for a new plan. You’ll still need to consider what you will do after September and whether it’s cheaper to pay the full cost of COBRA in the final months of the year or to start over with a new plan.
  • If you choose to switch to a market-based plan, be sure to pay close attention to the covered drug lists and supplier networks. Even if the market plan is offered by the same insurance company that administers or provides your employer’s health plan, the benefits and provider network could be quite different.

If you are already enrolled in an market plan, and you receive or have received unemployment compensation in the past 12 months, it’s time to examine your coverage options in more detail. If you are currently enrolled in the Bronze plan, you should consider the Silver plan that has a $0 premium and strong cost-sharing discounts. This plan may be available to you under the ARP due to your unemployment compensation for 2021.

5. You are already registered in the market, and you’re happy with your plan

About 15% of current market enrollees are paying full price for their protection. This is often because they earn more than 400% poverty level and therefore, are not subsidy eligible. If you fall into this category, you may be eligible for an ARP subsidy.

The ARP is likely to provide a larger amount of subsidy to market participants, but they may not want to change their coverage.

If you are already enrolled in an insurance plan, and you feel that it is the right plan for you in your current situation, then you do not need to take any action. If you are eligible for an additional premium subsidy amount, it will be retroactively applied to January 2021. You can claim this when you file your taxes in 2021.

You can log back into your account to declare the new or additional subsidy amount, so that your insurer will be able to pay it to you every month until 2021.

If you reside in a state which uses HealthCare.gov (the 15 state run marketplaces might have their own protocol for how they are dealt with), CMS has confirmed the subsidy amounts will not be updated routinely. You’ll need to either return to “the market” to provide proof of your income (if you are currently enrolled in full-price plans and have never given your earnings details to “the marketplace”) or reselect the plan you already selected to activate the new subsidies.