Analysis finds ACA subsidy expansion in COVID bill could lower premiums for millions

A Kaiser Family Foundation (KFF) brief finds the expansion of ACA subsidies included in the House’s $1.9 trillion COVID-19 relief bill could result in lower premiums for millions of enrollees and uninsured potential enrollees.

The brief states:

“The vast majority of the nearly 14 million people already insured through the individual market would see lower premiums under the proposal, and could potentially use the premium savings to buy plans with lower deductibles. Most of the roughly 15 million uninsured people who could buy coverage through the Marketplace would be eligible for new or bigger subsidies.”

The COVID relief package currently working its way through Congress includes several health reform provisions. Among those is an increase in premium tax credits for households receiving insurance through the ACA exchanges. For 2021 and 2022, the proposal would fully subsidize coverage for those below 150% of the federal poverty level (FPL) and would increase subsidies for those up to 400% FPL. For the first time ever, the bill would also extend subsidies to those with incomes over 400% FPL.

 

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Under current law, households making over 400% FPL are not eligible for premium subsidies. This means an individual just under the cutoff has a limit on their premium payment, while someone at 401% FPL has to pay the full premium cost. This is referred to as the “subsidy cliff.”

KFF gives the example of a 60-year-old making $50,000 a year (392% FPL). This individual would pay no more than $410 per month (9.83% of their income) for a benchmark silver plan. But, if their income jumped to $52,000 (408% FPL), they would pay the full premium. The national average for a benchmark silver plan is $957 per month, or 22% of the 60-year-old’s income, says KFF.

The new COVID relief bill would remove the 400% FPL cap and would allow any household to get coverage through the ACA exchanges with a premium of no more than 8.5% of its annual income.

 

Image: Kaiser Family Foundation

 

Some of the most significant savings would be felt by older adults with incomes that are just above 400% FPL. The brief states:

“Compared to current premium payments, a 60-year-old with a $55,000 income would pay 77% less for a bronze plan ($146 vs. $634 per month), 56% less for a benchmark silver plan ($390 vs. $887 per month), and 52% less for a gold plan ($453 vs. $951 per month), on average, under the House COVID-relief proposal.”

The proposal would also require those with incomes below 150% FPL to contribute $0 toward benchmark silver plan premiums. KFF estimates at least 3.4 million low-income enrollees could see a 100% decrease in their premium contribution.

The amount of the subsidy would also vary based on geographic location.

For example, a 60-year-old with an income 430% FPL in Washington State would see a $431 reduction in the cost of their benchmark silver plan. In California, the cost would decrease $176, while an individual in North Carolina would see a $705 reduction.

The biggest reductions would be seen in high premium areas such as Wyoming, South Dakota, Nebraska, Alabama, and Connecticut. KFF estimates the 60-year-old in Wyoming would see a $1,289 decrease in cost to the benchmark silver plan.

 

Image: Kaiser Family Foundation

 

The Congressional Budget Office (CBO) and Joint Committee on Taxation estimate the enhanced tax credits would result in “a $35.5 billion increase in premium tax credits for health insurance purchased through the marketplaces.”

In recent commentary, State of Reform columnist Jim Capretta noted that the cost of the expanded coverage subsidy provisions will be higher than what is reflected in CBO estimates because it is “near certain” that Congress will extend the assistance past 2022.

“For instance, as written, the premium credit increases would run only through 2022 and thus, come 2023, enrollees would see their premium assistance fall. The authors of this provision know this is highly unlikely; once granted, Congress rarely allows benefits to decline. There should be every expectation that another bill will come along (perhaps even this year) to prevent any cuts in subsidies for eligible individuals. In other words, the higher subsidies enacted in the COVID bill will be permanent.”