A huge question right now—one that will have a big impact on insurance agents and their clients this fall—is whether Congress will extend the enhanced premium tax credits that have been in place for the last two years.
Shortly after taking office, President Biden announced a number of actions to provide relief during the COVID-19 health emergency. One of those was an increase in the premium tax credits available through the federal and state marketplaces.
As we explained in a June 2021 blog post, the American Rescue Plan Act (ARPA) made four big changes to the ACA’s premium tax credits for calendar years 2021 and 2022:
- ARPA increased the premium tax credit amounts for all income brackets by lowering the percentage of income people must pay for the benchmark plan. And people with incomes below 150% of the federal poverty level (FPL), or about $19,140 for a single person in 2021, owe nothing in premiums. Under the ACA, they were required to pay up to 4.14 percent of their income for the benchmark plan.
- Nobody will pay more than 8.5 percent of their household income for the benchmark plan or a less expensive plan. The benchmark plan is the second-lowest-priced silver-level plan in the marketplace, and it’s the plan that’s used to determine the premium tax credit amount. Before this change, the capped amount was determined on a sliding scale that went all the way up to 9.83% of the household income.
- The “subsidy cliff” for those earning more than 400 percent of the federal poverty level (FPL) was eliminated for 2021 and 2022, capping the premium that higher income earners pay for the benchmark plan at 8.5 percent of their income. Previously, anyone earning more than 400 percent of the FPL was ineligible for financial assistance.
- For 2021 only, anyone who received unemployment benefits at any point during the year was considered to have “income at 133 percent of the federal poverty level (about $17,000) for the purposes of calculating how much they owe in premium contributions for a marketplace plan” according to Kaiser Health News. This qualified them for a zero-premium plan and cost-sharing reductions.
As we approach the end of 2022, there are calls to extend the enhanced tax credits at least for another year, and some are saying the changes should be made permanent. Of course, not everyone is on board with the proposal, and Congress is currently debating whether to include this change in its 2023 budget.
With a slim majority in the Senate, Democrats could make this change without a single Republican vote, but it’s not clear whether every Democrat will support the proposal. And, even if they do, it’s unclear how they would vote on a budget bill if it includes additional items that they do not support.
Specifically, Senator Joe Manchin [D-WV] appears supportive of extending the ARPA subsidies but would vote against a bill that combats climate change or increases taxes on the wealthy. As the Washington Post explains, Manchin told Democratic leaders “he would not support an economic package this month that contains new spending on climate change or new tax increases targeting wealthy individuals and corporations,” but “he is open to provisions that aim to lower prescription drug costs for seniors” and “expressed support…for extending subsidies that could help keep health insurance costs down for millions of Americans.”
At this time, we do not know if Democrats will take what they can get or continue to negotiate, potentially dragging the process out or killing their chances of passing the bill altogether.
And timing is important. As Larry Levitt, Executive Vice President for Health Policy at the Kaiser Family Foundation says in a July 15 Twitter thread, “There's some confusion around when Congress would have to extend enhanced ACA subsidies to avoid a premium shock for enrollees.” He explains that “ACA open enrollment starts November 1, but renewal notices generally go out to enrollees in October detailing premium changes. If the enhanced subsidies are not extended by then, people will get news of big out-of-pocket premium increases.” While “it would not be impossible to pass a bill extending the subsidies in September and make it all work,” he points out that “the federal ACA marketplace and state exchanges need time to program systems with the correct subsidies well in advance of open enrollment,” so “the longer this drags on, the bigger the potential logistical mess for ACA open enrollment.”
We’ll definitely be keeping an eye on this and will let you know just as soon as Congress makes a decision about extending the premium tax credits. Stay tuned…