How The Stimulus Package Could Cut Health Care Costs For Millions

The $1.9 trillion COVID-19 relief package signed into law by President Joe Biden earlier this month includes health care subsidies that could make coverage more affordable for millions of Americans.

Here's what to know.

What's included in the stimulus package?

The American Rescue Plan includes a temporary increase in tax credits for many people who buy health insurance through the Affordable Care Act's marketplaces.

Those credits will reduce the premiums that eligible Americans pay for coverage.

Who is eligible?

Almost everyone who buys health insurance through the marketplace.

"Ninety-two percent of people who buy their own health insurance are eligible for a subsidy under the Affordable Care Act," the Kaiser Family Foundation found.

"Of that 8% who aren't getting a subsidy, those are really high income people who would pay less than 8.5% of their income for a premium without a subsidy," Cynthia Cox, Kaiser vice president, said during a webinar last week.

Kaiser also found that 1.4 million uninsured people are "newly eligible" for subsidized marketplace coverage.

What's different?

Before the American Rescue Plan was passed, households were required to contribute as much as 9.83% of their income to pay for marketplace insurance premiums, and households with incomes more than 400% above the federal poverty level were not eligible for tax credits to help pay for coverage plans.

Now, no households, including those with incomes higher than 400% of the federal poverty level, will be required to contribute more than 8.5% of the income to pay for coverage premiums, according to a fact sheet from the Centers for Medicare & Medicaid Services.

Those earning up to 150% of the federal poverty level will not be required to pay any premiums for a benchmark plan, according to the Center on Budget and Policy priorities.

Previously, those earning 100% of the federal poverty level were required to contribute 2.07% of household income for a benchmark plan and those earning 150% had to contribute 4.14%, according to Kaiser.

Kaiser found that the number of people eligible for a subsidy has increased by 20%, mostly among those with incomes above 400% of the poverty level.

"Most of the people who are eligible for subsidies are still making below 400% of poverty," Cox said during the webinar last week. "This is still a pretty low income group of people who are buying their own coverage and getting subsidies."

The federal poverty level ranges from $12,880 for a one-person household to $26,500 for a household of four and $44,600 and up for households with eight or more people.

Why it matters

Premium costs will decrease by an average of $50 per person each month or $85 per policy per month, according to the Centers for Medicare & Medicaid Services.

Four out of five people who enroll will be able to find plans that cost no more than $10 a month after the premium tax credits and half will be able to find a Silver plan for $10 or less a month.

Kaiser estimates savings could range from $213 each month for those with incomes between 400% and 600% of the federal poverty level to an average savings of $33 per month for those with incomes under 150% of poverty.

"A family of four making $90,000 could see their monthly premium come down by $200 per month," the White House says.

More than 11.4 million people have enrolled in the marketplace, with California, Florida, North Carolina and Texas home to the highest numbers of people enrolled, according to Kaiser.

How much it will cost

The Congressional Budget Office estimates it will cost the federal government about $34 billion over the next 10 years, Cox said in the webinar. But costs will mostly be "concentrated" during the next two years because the changes are temporary.

How the tax credits work

The increased credits are temporary and only apply in 2021 and 2022.

The CMS says the tax credits are calculated based on:

— A household's expected yearly income

— The number of people filing taxes together in the household

— The "premium amount of the second-lowest cost Silver plan in the consumer's area in the Marketplace."

"This is the 'benchmark' plan cost used to calculate premium tax credits," it says. "It's not related to which plan a consumer actually chooses to enroll in."

Kaiser has a marketplace calculator that includes a subsidy estimate. It can be found here.

How to take advantage

Those enrolling in marketplace coverage on HealthCare.gov can take advantage of the changes starting April 1.

People already enrolled, including those recently did so during the Special Enrollment Period, can update their enrollments or applications starting then, according to the CMS.

Those already enrolled before April 1 can wait until they file their taxes in 2022 to receive the additional credits when they file their 2021 taxes.

"However, we recommend all enrollees come in, update their application, and review their plan options during the 2021 Special Enrollment Period through May 15 because you may be able to choose a plan with lower out of pocket costs for the same price or less than what you are currently paying," the CMS says.

Those who don't have coverage and need it starting April 1 should apply and select a plan by the end of March then "come back after April 1, submit your application again, and reselect your plan to have increased tax credits applied to your coverage for May 1 forward," the CMS says.

People who live in states with their own marketplace should visit the state's marketplace website or call them for more information.

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