After months of stalled progress, legislation that would extend the American Rescue Plan Health Insurance Subsidy Improvements is back on the table in the United States Senate. That’s great news for him. 13 million Americans who are eligible for premium tax credits (subsidies) that offset the cost of health insurance in the marketplace (exchange).
The Inflation Reduction Act was announced in late July and a Senate vote is expected next week. The legislation, which is both a climate bill and a health care bill, addresses several pressing priorities, including a three-year extension of subsidy improvements delivered by the American rescue plan.
How would the Inflation Reduction Law affect market subsidies?
If the Senate and House of Representatives pass the Inflation Reduction Act, the current market subsidy structure will remain in place through the end of 2025, instead of expiring at the end of 2022. This would help market buyers in a number of ways :
- the precipice of subsidies would still not exist for the next three years, which means that Americans with incomes greater than 400% of federal poverty level (FPL) would still be potentially eligible for subsidies. Eligibility for the subsidy would depend on the percentage of income a person would have to spend on the referral planand subsidies would be available, even with income above 400% FPL, if the benchmark plan was more than 8.5% of household income.
- The subsidies would continue to be greater than before the ARP. The size of the subsidies varies by income, age, and area, but they limit the post-subsidy cost of the referral plan to a predetermined percentage of household income. That percentage of revenue is on a sliding scale, and the ARP reduced it to 0% – 8.5%. Under the ACA, it had been 2% to 9.5%, with minor annual adjustments for inflation. With the ARP in place, the 0% to 8.5% scale has been used for 2021 and 2022 health plans. And the Inflation Reduction Act would ensure that same scale until the end of 2025.
- The current market Special Enrollment Period for Subsidy-Eligible Applicants with Family Income up to 150% FPL it would continue to be available through 2025. HHS has clarified that this enrollment opportunity is only available as long as the benchmark plans have no premium for buyers at this income level. If the ACA scale were to go back, subsidy-eligible applicants at the lower end of the income scale would pay about 2% of their income for the benchmark plan. But with the ARP scale in place, these applicants pay 0% of their income for the referral plan. The Reducing Inflation Act would continue that for three more years, allowing the special enrollment opportunity to continue as well.
Full price premiums will continue to change in 2023; in more than half of the states so far, the proposed overall average rate increase is about 8% – much of which it is not related to whether the ARP subsidies are extended. But most affiliates don’t pay full price. In 2022, about 89% of those registered in the market receive premium subsidies. HHS Dear that 3 million people will lose their coverage altogether, while 10 million will see their subsidies decrease or disappear, if the ARP subsidies are not extended under the Inflation Reduction Act.
To be clear, even if the Inflation Reduction Act is enacted, there will be fluctuations in subsidy amounts and post-subsidy premiums for plan renewals. This happens every year, depending on how much the benchmark premium changes (keeping in mind that the benchmark plan may be a different plan from one year to the next) and how much the cost of a particular plan changes.
But with the Reducing Inflation Act, overall affordability will remain the same as this year, as the benchmark plan would continue to cost the same percentage of income that people pay this year. (We should note that the benchmark plan may be a different plan from year to year, new plans may be available for the next year, and the rates of other plans relative to the benchmark plan may also change.)
Without the Inflation Reduction Act, coverage would be much less affordable in 2023. HHS calculations show that if the ARP subsidy enhancements had not been in effect this year, the premiums members paid, after the subsidies, would have been 53% higher in the 33 states that use HealthCare.gov. That’s the kind of scenario millions of market enrollees would see in 2023 without the Inflation Reduction Act.
What does the Inflation Reduction Law establish? No do?
Although the Inflation Reduction Law is a radically reduced version of Build Back Better Act of 2021 (which passed the House but later stalled in the Senate), the current ARP Grant Improvements Bill extension is identical to the ARP Grant Improvement Extension that was in the Build Back Better Act.
But there were some additional subsidy provisions of the Build Back Better Act that are not included in the Reducing Inflation Act: The Reducing Inflation Act will not close the Medicaid Coverage Gap which still exists in 11 states. It will not reset the temporary. unemployment-related benefits that were available in 2021. And it will not change how affordability is determined for employer-sponsored health coverage.
Will the Inflation Reduction Law be passed?
The approval of the Inflation Reduction Law is not a sure thing. It needs the backing of all 50 members of the Senate Democratic Caucus to pass, and that’s not a given.
House Speaker Nancy Pelosi (D-CA) has said the House will pass the measure when it receives it from the Senate. Although the margin is not as narrow in the House, the Democrats can lose at most four votes to pass the bill in that chamber.
What does the Reducing Inflation Act legislation mean for 2023 open enrollment?
Open Enrollment for 2023 Health Coverage begins on November 1. If the Inflation Reduction Act is enacted this summer, consumers should expect to see the same overall level of affordability by 2023 as they did in 2022.
But this always varies from one area to another depending on factors such as the entry of new insurers in a market or the state reinsurance programs that reduce full price rates and result in lower subsidies. Even with the Inflation Reduction Act in place, that type of premium subsidy and fluctuation will still occur in some areas and for some plans.
If the Reducing Inflation Act is not passed, net premiums will increase substantially for most current members when their coverage renews for 2023. Some members will need to switch to lower-cost plans to keep their premiums affordable.
Regardless of whether the ARP grant enhancements continue through 2023 or expire at the end of 2022, it will be important to carefully consider all options during open enrollment. There will be changes to carrier participation in some areas, changes to premiums, and new plan designs.
People who buy their own health insurance should consider all available plans and select the one that best suits their needs and budget. That may or may not be the same plan they had this year, regardless of what happens with the ARP subsidy improvements.
Louise Norris it’s a individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinion and educational articles on the Affordable Care Act for Segurosalud.org. Their state health exchange updates they are regularly quoted by the media covering health reform and by other health insurance experts.