The American Rescue Plan (ARP) is famous for its $1,400 stimulus checks, the extension of unemployment benefits, and the child tax credit. One thing it is less famous for is what it just did to increase health insurance access for millions of Americans. And for freelancers who often rely on the healthcare.gov marketplace for their health insurance, this is huge news.
According to new HHS estimates, the new law makes almost 7 million people newly eligible to get a marketplace plan at no cost and adds another 1.3 million who are now eligible to enroll for less than $50 a month. That could be you.
It is widely reported that one of the main reasons eligible people don’t enroll in health coverage, even if it would cost them nothing, is because they’re not aware they’re eligible: Almost 50% of uninsured people actually qualify for a subsidized or free health plan. So let’s try to fix that!
First thing’s first, the enrollment period for marketplace coverage has reopened and has been extended: you can now purchase a healthcare plan for 2021 through healthcare.gov until August 15th.
Now, the rules of the Affordable Care Act (ACA) are complicated, especially because they change based on which state you live in, your age, the plan you select, and your marital status, so it’s hard to make blanket statements as to who is now eligible for what. But no matter what, if you’re currently looking to buy health insurance, and even if you have looked into it in the past and decided against it, you might want to revisit your situation – go to healthcare.gov or call a specialist to discuss your situation and see what you might be eligible for.
Keep on reading if you want more details, but here’s an overall view of what the new law does:
- It increases subsidies across the board, making health insurance cheaper for many
- It increases income eligibility requirement so that more people can receive subsidies
- It erase the coverage gap between ACA subsidies and Medicaid
- It create new rules for folks who receive at least one week of unemployment benefit in 2021
- It reimburses COBRA premiums for the next 6 months (conditions apply)
ACA Subsidies 101
As a starting point, let’s look at some of the basics of how the Affordable Care Act works: the program offers subsidies to folks with a certain income level to help them pay their monthly premium. That subsidy is calculated based on the cost of the benchmark plan.
The benchmark plan is a mid-level plan, which is the second-lowest Silver Plan. You can apply your subsidy to any level of plan, but this is the plan that is used to calculate the dollar amount you’re eligible for.
The income eligibility for subsidies is determined by the Federal Poverty Level (FPL) which for an individual in 2021 is $12,880. To keep it simple, up until now, you were only eligible for some form of subsidy if you made less than 400% of the FPL (4 x $12,880 = $51,040). Above that, you weren’t eligible for any subsidy. It’s also worth noting that, up until now, the ACA never paid the full amount of the premium, the subscriber was always responsible for a portion of it, even if minimal. For example, an individual who made $12,880 a year – so 100% of the FPL – was required to contribute 2.07% of the income toward their premium or $267 per year.
What did the ARP change in the subsidy calculations?
As you probably noticed, there were a lot of “up until now” in the previous paragraph. And that is because the American Rescue Plan (ARP) updated the subsidy income eligibility and the required contribution rules of the Affordable Care Act (ACA). Now, household and families making up to 150% the FPL ($19,410) will be fully subsidized, meaning they can get health insurance for free.
The balance between subsidy / required contribution to premium payments has also been adjusted for every income level, by increasing subsidies across the board. Since an image speaks more than a thousand words, see below.
Note: These increased subsidies are, as of today, only effective for 2021 and 2022.
Making more than 400% FPL? You could now be eligible for subsidies
The 400% FPL cap for subsidy eligibility has also been removed and replaced by another rule: if an individual makes more than 400% of the FPL, they will now only have to contribute up to 8.5% of their annual household income toward the premium of a benchmark plan. Anything above that amount would be subsidized by the federal government. This new rule will mostly benefit older insured, since their premium tend to be much higher than younger folks. Again, see image below.
Receiving unemployment benefits? You could be eligible for free healthcare.
Under the Affordable Care Act, only “applicable taxpayers” were eligible to receive subsidies when purchasing ACA plan.
Applicable Tax Payer?
An applicable tax payer was defined as a person making at least 100% of Federal Poverty Level or $12,880 a year.
Anyone making less was, in most states, covered by the expanded Medicaid. But in states that didn’t expand their Medicaid program, people could fall into what was called the Coverage Gap – too much money for Medicaid, not enough for ACA subsidies. The American Rescue Plan amended that rule so that in 2021 (and 2021 only for now) anyone who receives at least 1 week of unemployment benefits at any point during the year will be considered an applicable taxpayer, and therefore be eligible for government subsidies when they purchase a healthcare plan through healthcare.gov
Also, for this newly eligible category of people, the law states that anything above 133% of their household income will be disregarded when determining eligibility for premium and subsidies, consequently keeping any UI beneficiary under the 150% FPL and therefore eligible for a free silver benchmark plan (see bullet 2). The rule makes it clear that if later in the year, you eventually become eligible for coverage through an employer-based plan, you lose that eligibility, But since that option rarely presents itself for the self-employed, it appears that freelancers might just be able to get free healthcare coverage this year, as long as they’re also receiving unemployment benefits.
Note that this part of the plan still seems to be a bit unclear and Healthcare.gov is also still waiting on some details. They write: “HealthCare.gov will have more information available in the summer once these additional savings are available to those who got unemployment compensation during 2021. At that time, you can come back to HealthCare.gov to update your application and current plan with more tax credits to lower your premiums for the rest of the year.”
So if you’re currently receiving or will receive unemployment benefits and are looking to buy health coverage, make sure to do your research or contact a health insurance specialist to discuss your situation.
Getting health insurance through COBRA? The next 6 months are basically free!
The government will subsidize your COBRA premiums for the months of April, May, June, July, August, and September, as long as you remain eligible for the program. The law requires your former employer to pay the COBRA premiums for subsidy-eligible individuals; the federal government will then reimburse the former employer for this cost.
You’re eligible for this help ONLY if you were laid off or got your hours cut. You’re not eligible if you quit your job voluntarily or lost coverage through another qualifying event.
The law also added one year to the period during which you’re able to enroll in COBRA benefits which is typically 60 days after your last day with your employer. So even if you lost your job early in the pandemic and have NOT yet enrolled in your COBRA program, you might still be able to without needing to pay premiums for the past year and get the next 6 months for free – therefore getting free health coverage from now until September 30th. For example, if you lost your job and health coverage on March 1st, 2020, you had until May 1st to enroll in COBRA. But now you actually have until May 1st, 2021, and you won’t have to pay the premiums for the past 12 months or until October of this year. Contact your COBRA plan administrator or former HR representative to get that process started.
As always with the American health insurance system, things are quite complicated with lots of small fonts and special requirements. But with a little homework, you could be able to offer yourself and your family some well-deserved peace of mind until the end of the year. Don’t let a good thing pass you buy. Contact a health insurance specialist who can help you navigate all this today.