How market costs and premiums will change if bailout subsidies expire

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The American Rescue Plan Act (ARPA) passed earlier this year temporarily extended the grants available in health insurance markets to the Affordable Care Act (ACA), building on existing ACA grants. . Until the end of 2022, low-income families who were already eligible for financial assistance under ACA are eligible for even more financial assistance to purchase their own health insurance and pay their co-payments and deductibles. for coverage purchased on Healthcare.gov or their state. to exchange. In addition, middle-income families, who were often excluded from ACA coverage before ARPA, are now eligible for financial assistance for the first time with their monthly insurance premiums.

These new and additional grants were created as part of ARPA as part of a broader pandemic relief strategy, but Democrats have long favored similar strategies to lower the cost of ACA market plans for registrants. And the state of California, along with a handful of other states, had already implemented its own state-funded grants to improve premium affordability. One of the main criticisms of the ACA has been the high and rising premiums, especially for working families with incomes above four times the poverty line (just over $ 50,000 for a single or just over $ 103,000 for a family of four), who were not previously eligible for financial assistance. While the relief program does not directly address the high cost sharing for these registrants, larger premium grants can help them afford plans with lower deductibles.

Now, there is debate in Congress over whether to make these additional bonus grants permanent, or at least extend them for a longer period. On the one hand, if Congress extends ARPA grants or makes them permanent, federal costs would increase. On the other hand, if Congress does not extend these grants, premium payments will rise sharply for almost everyone in the market.

If ARPA grants are extended, federal costs will increase

The Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) initially estimated that the additional temporary grants provided under ARPA would increase federal deficits by $ 34.2 billion. Most of these costs are concentrated in the first two years since the additional grants expired at the end of 2022, although the CBO expects the costs to persist as some grant recipients would remain enrolled for a while, even after the end of the ARPA grant enhancements.

The Department of Health and Human Services (HHS) reports that ARPA grants for existing consumers cost $ 537 million per month. It is likely that these costs could increase next year, as more people purchase coverage during open enrollment.

If grants expire, bonus payments could double for millions of Marketplace subscribers

According to HHS, the 8 million market registrants who signed up before the adoption of ARPA grants now pay $ 68 per month, after factoring in an average monthly premium savings due to ARPA of $ 67. Without the ARPA grants, premiums would on average double for these registrants and they would pay an average of $ 800 more per year if they were enrolled for the entire year.

Premiums or deductibles would increase the most for market registrants with the lowest incomes

People with incomes between 1 and 1.5 times the poverty line currently represent 42% of registrants and, with grants from ARPA, now pay little or nothing for their monthly premium. Before ARPA, these people had to contribute more than 2% of their income to the premium of the reference plan in cash. These lower income registrants would therefore see the largest percentage increases if ARPA grants expire.

As a result of these premium increases, some low-income people may go from very generous silver plans with deductibles below $ 200 to bronze plans with deductibles of around $ 7,000 – more than 30 times higher. The HHS reports that the median deductible in the federal market has declined by more than 90%, from $ 750 in 2020 to $ 50 in 2021, as some low-income registrants have switched from bronze plans to silver plans.

Millions of middle-income people would lose their eligibility for grants

Middle-income individuals and families also buy coverage in the market when they do not have access to group employment-based plan coverage. These include people who work for small companies that do not offer group health benefits, concerts and other self-employed workers, and people who take early retirement, before Medicare eligibility age. We estimate that 3.7 million people (most with incomes between 4 and 6 times the poverty) have qualified for ARPA grants.

Under ARPA, the vast majority of people who purchase their own health insurance coverage can be immune to premium increases by taking advantage of the grants offered in the ACA market. If these grants expire, however, the middle and upper middle income people who lose their grant eligibility will not only have to make up the difference in the grant; they will also be held responsible for any increase in the premium “sticker price” by January 1, 2023.

Although these people earn a living wage, it is often not enough to afford full cost insurance. A 48-year-old man earning $ 60,000 a year would see his monthly premium payments increase by 36% if he lost his grant eligibility, and that doesn’t account for a further increase in the price of the premium sticker. Families and older registrants would see even larger premium increases.

Without a subsidy, the health insurance premium for a 60-year-old currently averages over $ 11,000 per year. If the 60-year-old man has an income of just over $ 51,000 – more than four times the poverty line – his ARPA grant covers more than half of his monthly costs. Without ARPA, their premium would increase by 165%.

The timing of potential premium increases could have policy implications

In the event that ARPA’s grants expire, the timing of the resulting impact on insurance affordability could become an electoral issue. The ARPA bonus subsidy enhancements are expected to expire at the end of 2022. Open registration begins November 1, just one week before the midterm elections are held on November 8, 2022.


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