COVID-19 relief package could help 5.3 million pay for individual and COBRA coverage

House committees have approved temporary health coverage subsidy provisions that could briefly increase the number of relatively high-income people with private health coverage by 5.3 million.

The provisions could also increase health insurers’ and employer-sponsored plans’ revenue by about $52 billion, or by about $10,000 per additional coverage enrollee.

Related: How COBRA premium subsidies can protect employer-sponsored coverage

The proposals could have a major effect on:

• People with household income over 400% of the federal poverty level who buy individual or family coverage.
• People collecting unemployment insurance who buy individual or family coverage.
• People who use the COBRA coverage continuation rules to keep their employer-sponsored group health coverage in place after they leave their employers.

Analysts at the Congressional Budget Office (CBO) talk about the subsidy provisions in cost estimate reports for two new cost estimate reports for sections of a major new spending package — Senate Concurrent Resolution 5, a COVID-19 relief package set up in such a way that supporters can pass it through the “budget reconciliation process,” with support from just a majority of the members of the House and a majority of the members of the Senate.

The reconciliation recommendations

The CBO is a non-partisan body that helps members of Congress understand how legislation might affect federal finances.

Under the rules governing ordinary bills, COVID-19 relief package supporters would likely need 60 votes to get the package to the Senate floor. The Democrats and independents who caucus with the Democrats hold 50 seats in the Senate, and Vice President Kamala Harris can cast a vote to break ties.

One of the new CBO cost estimate reports covers a set of reconciliation recommendations approved by the House Ways and Means Committee Feb. 10 and Feb. 11.

A second CBO report covers a set of reconciliation recommendations approved by the House Education and Labor Committee Feb. 9.

Democratic House leaders say they hope to bring the entire Sen. Con. Res. 5 package to the House floor for a vote sometime next week.

The premium tax credit proposal

Affordable Care Act (ACA) premium tax credit subsidies now help about three-quarters of the 12 million ACA exchange program users pay for the private ACA exchange plan coverage they buy through HealthCare.gov or through locally run ACA exchange programs, such as Covered California and Connect for Health Colorado.

To hold down ACA tax credit program spending and keep the ACA exchange system from crowding out other forms of private health insurance, the Affordable Care Act limits access to ACA premium tax credit subsidies to people with household income under 400% of the federal poverty level. In 2021, that’s $51,520 for a one-person household in most of the United States, and $106,000 for a family of four.

Some states, including California, have added subsidies for people with income over 400% of the federal poverty level.

The House Ways and Means Committee is recommending that the federal government government increase premium tax credit subsidies for the people now eligible for ACA premium tax credit subsidies, and that the government suspend the 400% of the federal poverty level limit on access to the subsidies.

Under the committee proposal, the government would expect people in a household with income over 400% of the federal poverty limit to spend up to 8.79% of income on health coverage. The government would use premium tax credit subsidies to make up for the difference between the 8.79% limit and the actual cost of the coverage for relatively high-income ACA exchange plan users.

The CBO analysts give a 64-year-old with a $58,000 annual income as an example.

Under the current rules, typical exchange plan coverage for that individual would cost $12,900 per year, and the individual would get no help from the government with paying for the coverage

Under the new House proposal, the 64-year-old would get $7,800 in premium tax credit support per year and pay only $5,100 out-of-pocket for the coverage, according to the CBO analysts.

In a separate provision, House Ways and Means calls for the ACA premium tax credit system to treat any people who are getting unemployment insurance, and who make too much to qualify for Medicaid, as if they had household income of just 133% of the federal poverty level.

The CBO analysts estimate the provision temporarily lifting the 400% of the federal poverty level income limit on tax credit subsidy use would increase the number of people with individual or family exchange plan coverage by 1.7 million, with $35.5 billion in extra subsidies going to health insurers.

The total overall effect of that provision would be to increase the federal deficit by $34.2 billion from 2021 through 2030, the analysts predict.

The change in the rules for people getting unemployment insurance could increase the number of people with individual or family exchange plan coverage by 1.4 million, with an additional $2.4 billion going to health insurers, and that provision increasing the federal budget deficit by about $4.5 billion over the 10-year period starting in 2021.

The COBRA provision

Both the House Ways and Mean and House Education and Labor committees have approved reconciliation recommendations that the government help pay 85% of the COBRA group health coverage continuation premiums for workers who leave their employers and want to keep their group health coverage, from the start of the month after the reconciliation package becomes law until Sept. 30, 2021.

Employers and insurers can charge 102% of the usual full premium for continuation coverage.

Because typical employers pay 70% or more of the full cost of the premiums, the cost of COBRA continuation coverage often comes as a shock to employees.

Many of the employees who do take up COBRA coverage are those with serious health problems and a critical need to use the same primary care doctors, pharmacies, specialists and hospitals. Benefits costs for those enrollees tend to be very high.

The CBO analysts estimate, for both the Ways and Means and the Education and Labor versions of the COBRA subsidy provision, that 2.2 million extra people could end up keeping COBRA coverage with the help from the subsidy.

The CBO analysts estimate that the Ways and Means version would cost $14.8 billion over the 10-year period starting 2021, and that the Education and Labor version would cost $16.3 billion over that 10-year period.

Neal’s views

House Ways and Means Chairman Richard Neal, D-Mass., said in an opening statement about the reconciliation recommendations that the proposals are part of an effort to increase Americans’ sense of financial security in a time of overwhelming uncertainty.

“We want to build on the special enrollment period that President Biden recently announced by making it even easier for unemployed workers to afford their health insurance,” Neal said.

Implications for health insurers and insurance producers

The ACA exchange program has been popular with Centene Corp. and other health insurers that focus on people who qualify for managed Medicaid plans and other programs aimed at low-income people.

It’s been less popular with agents and brokers who focus on selling life insurance and annuities to higher-income people.

The House ACA subsidy proposals could increase overall ACA exchange plan enrollment by about 3.3 million, or about 26%, and make substantial subsidies available to relatively high-income people, at least temporarily.

Because the enrollees using the new subsidies would mostly be people who previously felt healthy enough to go without coverage, or who would be getting coverage at a relatively low out-of-pocket cost, they might be younger and healthier than people willing to pay a high price for coverage, and significantly more attractive to private health insurers.

The proposals could also make tse subsidies available to consumers in such a way that health insurers would need agents’ and brokers’ help with explaining the subsidies to consumers.