How the American Rescue Plan Makes Buying Health Insurance Easier
The American Rescue Plan was passed in March of 2021, primarily to help Americans impacted by the Coronavirus. But the plan included numerous provisions that fixed many of the health insurance problems associated with the Affordable Care Act. These changes are retroactive to January 1 2021. The changes also are set to expire in 2022.
Improvements to the Affordable Care Act
1: Reopening Enrollment
There were several issues that made buying health insurance through healthcare.gov difficult. The biggest problem was that if you did not enroll during the annual open enrollment period (November 1 thru December 15 of each year) you generally unable to enroll later without an eligible qualifying event.
Under the provisions of the American Rescue Plan, open enrollment was extended through August 2021. As a result of this extended open enrollment period, a qualifying event is not necessary. That means anyone can enroll for any reason. And all preexisting conditions must be covered!
2: Elimination of the Penalty for Underestimating Income
One of the big problems with the subsidies on healthcare.gov has been in estimating your income. This is especially problematic for individuals impacted by Covid. In general, if you underestimate your income, you will be required to pay back a portion of the subsidy that you received.
The American Rescue Plan eliminated that penalty for the 2021 plan year. That does not mean that you can purposely underestimate income for the purpose of getting a subsidy. That would be fraud and is illegal. But if, as a result of Covid, based your income on reduced hours but end up working more than expected you will not owe anything at tax time.
3: Elimination of the Financial Cliff
Prior to the American Recovery Act a small increase in income could mean the total loss of your subsidy. To understand this, I want to share the story of one of my clients. This particular client was a husband and wife, both age 63. They were taking early retirement and were going to limit their 401K withdrawals to $65,000 so that they could qualify for a health insurance subsidy.
At $65,000 of income this couple qualified for a subsidy of more than $1500 a month. This subsidy meant that they could enroll in a high deductible health plan with no premium due. The income question asked whether their income would be more or less than $69,000. Thinking that meant that they could increase their 401K withdrawal, we modified the application. So, instead of using $65,000, this couple increased their expected income to $68,000. That $3000 increase in income resulted in the total loss of the $1500 subsidy.
Under the American Rescue Act that is no longer the case. Today, everything is based on whether the health insurance premium is more r less than 8.5% of your income. As a result, if the premium is more than 8.5% you qualify for a subsidy, regardless of income.
4: Larger Health Insurance Subsidies
The change with the biggest impact for lower income Americans is the increased subsidy amount. As a result of this change many current enrollees can see a reduction of around $70 a month in their premium. And that is retroactive to January 1, 2021. Of course, this requires that they make the change on healthcare.gov. Failure to make the change on healthcare.gov does not mean that you lose the increased benefit. If you qualified for the increased subsidy, you will see it reflected on your tax refund at the end of the year.
Instead of taking the additional subsidy as a premium reduction, you could choose to enroll in a more robust health insurance plan. Many of my clients are now enrolling in plans with no deductible or better copayments for doctor visits and prescriptions.
For a more detailed explanation of the American Rescue Plan read this analysis from the Kaiser Family Foundation. https://www.kff.org/health-reform/issue-brief/how-the-american-rescue-plan-act-affects-subsidies-for-marketplace-shoppers-and-people-who-are-uninsured/
Always Work With a Qualified, Independent Health Insurance Agent
You can certainly go to https://healthcare.gov and enroll in a health insurance without the help of an insurance agent. But as several of my clients discovered, healthcare.gov is not as user-friendly as it should be.
A qualified insurance agent is one who is certified by healthcare.gov to enroll individuals. This agent has taken the annual required training and passed an exam. Beware of the health insurance agent who will sit with you as you create your account and watch as you go through the motions of enrolling. That agent has no training in the health insurance marketplace and has a vested interest in selling you a non-ACA health insurance policy.
An independent health insurance agent will be licensed with multiple insurance companies, both on and off the health insurance marketplace. That means that the agent gets compensated regardless of the insurance plan that he/she enrolls you into.