On March 11, 2021, President Joseph R. Biden signed the American Rescue Plan Act of 2021 (ARP) into law. The $1.9 trillion coronavirus rescue package was designed to facilitate and support the United States’ recovery from the devastating economic and health effects resulting from the COVID-19 pandemic.
While the public is aware that the ARP provides a direct stimulus payment of $1,400, an extension of unemployment compensation benefits, continued protections from eviction and foreclosure, the ARP also provides funds for state and local governments to help compensate for lost tax revenues, and money for schools to safely reopen. However, some other key takeaways of the ARP that should not be overlooked are the improvements in access to, and affordability of, health coverage through the Marketplace. The Act increases eligibility for financial assistance to help consumers pay for coverage.
Under the American Rescue Plan many consumers will be eligible for higher tax credit amounts to help cover their Marketplace health plan premiums. The new law will now make premium tax credits available to those families above 400% of the federal poverty level and caps how much of a family’s household income the family needs to pay towards their premiums at 8.5%, based on the cost of the benchmark plan.
The new law will lower premiums for most people who currently have a Marketplace health plan and will expand access to financial assistance for more consumers. Starting April 1, 2021, consumers enrolling in Marketplace coverage through HealthCare.gov will be able to take advantage of both lower costs and increased savings, as individuals who purchase their own health insurance directly through the Marketplace will now become eligible to receive increased tax credits to reduce the cost of their premiums. The premium tax credits are calculated based upon several factors including: a Household’s total expected income for the year; the total number of people in the household that file taxes together; and the premium amount of the second-lowest cost Silver plan in the consumer’s area in the Marketplace (considered to be the “benchmark” plan cost used to calculate premium tax credits). The tax credit calculation uses a percentage of the household’s income that they will need to contribute (spend) on monthly health insurance premiums. For those households and taxpayers who had a Marketplace plan with premium tax credits, they will need to file their federal income tax return and reconcile the amount of tax credit received in advance with the final premium tax credit calculation. If the household income turns out to be higher than what was originally estimated on the Marketplace application, the household may need to pay back some or all of the excess premium tax credit they received in advance. However, depending upon the specific circumstances, the amount owed back may be capped.
The law also increases premium tax credits for all income brackets for coverage years beginning in 2021 and 2022. For 2021 and 2022, the law applies a new premium percentage owed by individuals and families at all household income levels. The hope is that with the implementation of the new law, most people across all household income levels will see lower premiums as a result of receiving more tax credits to reduce plan prices, including those taxpayers who receive unemployment compensation during any week beginning in 2021.
To take advantage of the increased premium tax credits based on the lower income contribution percentage along with expanding tax credit access to consumers with household incomes above 400%, new consumers and current enrollees who apply and select a plan on or after April 1 will receive the increased premium tax credits for 2021 Marketplace coverage. Extra tax credits for consumers receiving unemployment compensation will be available starting this summer.
Consumers currently enrolled in a Marketplace plan can update their applications and enrollments to get new eligibility results beginning April 1. Consumers will need to reselect their current plan in order for the changes to take effect to reduce premiums for the remainder of the year. For those consumers who reside in a state that operates its own Marketplace, consumers should visit their State Marketplace website or call center for more information about when these additional savings will be available through that Marketplace.
For those consumers who need coverage starting April 1, consideration should be given to applying and selecting a plan by the end of March through the Special Enrollment Period (SEP), for coverage to begin April 1. To get the added benefits, consumers are directed to come back after April 1 to submit the application again and reselect their plan to have increased tax credits applied to their coverage for May 1 forward.
Even if consumers do not act, they will still receive the additional benefit as part of their premium tax credit when filing their federal income tax return next year. However, beginning on April 1, consumers must go to HealthCare.gov to update their application to receive possible increased tax credits this year. For further information and answers to possible questions, consumers should review HealthCare.gov.
To read the Health and Human Services fact sheet regarding the ARP, visit: https://www.hhs.gov/about/news/2021/03/12/fact-sheet-american-rescue-plan-reduces-health-care-costs-expands-access-insurance-coverage.html
Our Firm has extensive experience counseling employers and businesses on health care regulatory issues, particularly the evolving regulations during the COVID-19 pandemic. If you have any questions related to this Legal Briefing or questions related to COVID-19 reopening rules and procedures, please contact any member of our Firm at 585-730-4773. Please note that any embedded links to other documents may expire in the future.
This Legal Briefing is intended for general informational and educational purposes only and should not be considered legal advice or counsel. The substance of this Legal Briefing is not intended to cover all legal issues or developments regarding the matter. Please consult with an attorney to ascertain how these new developments may relate to you or your business. © 2021 Law Offices of Pullano & Farrow PLLC