Time is running out to ensure affordability of ACA health plans
The Senate is expected to vote this week on a proposal that would extend ARP subsidies for another three years. Will they?
Open enrollment for individual and family health coverage begins in just a few months, and will give millions of Americans the chance to sign up for 2023 ACA-compliant health coverage. But the affordability of 2023 ACA plans remains a huge question mark for consumers because we still don’t know whether Congress will extend the American Rescue Plan’s (ARP) premium subsidy enhancements, which are currently set to expire at the end of 2022.
Related: End to ACA tax credits could leave 3 million uninsured
Even the impact of implementing the “family glitch fix” — a significant rule change that stands to improve access to ACA subsidies for many families — would be diluted without an extension of ARP’s subsidy enhancements.
13 million Americans rely on ACA subsidies
The ARP made premium tax credits — also called subsidies — larger and more widely available in 2021 and 2022, leading to record-high marketplace enrollment this year. If the ARP subsidies expire, health insurance will become much less affordable for the nearly 13 million people who currently receive subsidies in the marketplaces nationwide.
Some will lose their subsidies altogether as the “subsidy cliff” would return for many households with incomes above 400% of the federal poverty level.
Others will see their subsidies decrease enough that their current plan becomes unaffordable. HHS projects that 3 million people will lose their health insurance if the ARP subsidies are allowed to expire, and 10 million others will see their subsidies decrease or disappear.
Without the ARP subsidy enhancements, some of those who continue to have coverage will be forced to switch to a less-robust plan in order to afford their premiums. And with inflation at a four-decade high, many Americans have very little leeway in their budgets to cope with the sort of premium increases we are likely to see in 2023 if the ARP subsidies aren’t extended.
In an analysis of the rates filed by some ACA marketplace insurers for 2023, most of the insurers who quantified an impact of the loss of ARP subsidies said the loss of ARP subsidies would have very little impact (meaning often no more than 1%) on full-price premiums. But the impact on the budgets of enrollees who rely on subsidies to fund some or all of their premiums could be substantial, and most marketplace enrollees do receive premium subsidies.
Some insurers have said that they won’t change their proposed rates if the ARP subsidies are extended, although others will revise them slightly downward. The slight downward adjustment would account for the overall larger, healthier risk pool that they expect if the ARP subsidies continue. Those insurers and state regulators will need time to implement accurate rates if and when the ARP subsidy extension is approved, so time is of the essence.
Limits of the “family glitch” fix
One bright spot this summer has been the proposed fix for the “family glitch,” which the IRS is working to have in place by this fall, in time for 2023 plan selections. The idea is to make marketplace premium subsidies newly available to some families whose employer-sponsored family health coverage is deemed affordable under current rules but is in reality unaffordable. For families that would become eligible for marketplace subsidies, this could result in lower total premiums next year.
Some families who have been hit by the family glitch may have checked their subsidy eligibility years ago and given up on marketplace plans. It will be important for those families to double check marketplace subsidy eligibility this fall, since the family glitch fix is expected to be in place by the time open enrollment begins. Some of them may find that they’re eligible for coverage that’s more affordable than the last time they checked. But this will depend quite a bit on whether the ARP subsidies are extended.
Since the proposed family glitch fix would make some families newly eligible for subsidies, the size of the subsidies matters a lot. If the ARP subsidy enhancements are allowed to expire, overall marketplace subsidies will be smaller in 2023, and fewer people will be eligible for subsidies. This will apply to everyone who shops for marketplace plans, including those who might otherwise have been newly eligible for subsidies as a result of the family glitch fix.
Consumers want Congress to act
Congress has been working on an ARP subsidy extension since last year. It was included in the Build Back Better Act that passed the House last November, but — until recently — an agreement in the Senate had been stalled for months.
We imagine that for some of the 13 million Americans who currently rely on ACA marketplace subsidies, the extended debate over ARP subsidy extensions has been agonizing. The continued affordability of their health coverage hangs in the balance, at a time when most other goods and services are also getting more expensive.
The Senate is expected to vote this week on a proposal that would extend ARP subsidies for another three years. Two-thirds of American voters – including roughly half of Republicans — support the extension of ARP subsidies, according to a recent Morning Consult survey.
Members of Congress know that their coverage will continue to be affordable next year. Their votes could help provide Marketplace enrollees that same peace of mind.
Louise Norris is an insurance expert and health policy analyst at healthinsurance.org. She has authored numerous informative articles on health insurance coverage, including state-specific issues and data.