The Biden administration recently passed its 100 day milestone on April 30, 2021. Like his predecessors, President Biden sought to capitalize on his political momentum and deliver on his campaign promises to maintain it. With millions without health insurance during a global pandemic and high unemployment, the administration needed to act quickly to increase access to affordable health coverage. Faced with these challenges, among other pressing issues, the administration notched early victories through executive orders and the American Rescue Plan Act of 2021 (ARPA). The $1.9 trillion relief package presents some of the most sweeping reforms to the Affordable Care Act (ACA) since its passage in 2010. In this post, IMPAQ researchers explore these policy actions, as well as how they affect consumers and the insurance industry in the near and long term.
Marketplace Policy in the First 100 Days
President Biden oversaw two major policy actions in an attempt to strengthen the ACA Marketplaces in the early days and months of his administration.
On Jan. 28, 2021, the president issued an Executive Order on Strengthening Medicaid and the Affordable Care Act (Executive Order), offering three methods to strengthen the ACA Marketplaces by increasing consumer awareness and access. First, it established a three-month special enrollment period (SEP) for states with Federally-facilitated Marketplaces (FFMs). Second, it allocated $50 million in additional funding for CMS to conduct outreach and education activities. Third, it directed all agencies with authorities and responsibilities related to the ACA to examine any previous policies, demonstrations, or waivers that hindered access to the Marketplaces. In the months following, the Biden administration extended the SEP to Aug. 15, 2021; doubled its outreach budget; and offered a record allocation of an additional $80 million in navigator funding for the 2022 open enrollment period.
On March 11, 2021, Biden signed the ARPA into law, which among other provisions, helps make Marketplace plans more affordable for most consumers in plan years 2021 and 2022 by:
- Making silver-level plans widely available for a $0 premium and a reduced deductible for individuals with annual incomes up to 150% of the federal poverty level (FPL) (e.g., $19,320 for an individual);
- Increasing premium subsidies for those with annual incomes up to 400% FPL (e.g., $51,520 for an individual);
- Extending subsidies for all ACA individuals with annual incomes above 400% FPL for the first time by limiting their contributions to 8.5% of household income; and
- Waiving the typically required repayment for any excess premium tax credits issued in 2020.
How Have the Administration’s Actions Affected Stakeholders?
Combined, Biden’s actions have already affected consumers and the insurance industry in the near term and promise to dramatically alter the ACA Marketplace through 2022.
Many Consumers Should Expect Lower Health Care Costs
Consumers purchasing or renewing plans on the ACA Marketplaces can expect a dramatic drop in premiums during plan years in 2021 and 2022. An analysis by the Kaiser Family Foundation (KFF) comparing the average annual premium contribution and tax credit for a 40-year-old in 2021 under both the ACA and ARPA, found that this hypothetical individual would have a $0 premium contribution if they made up to 150% FPL and significantly more premium tax credit assistance if they had a household income between 200-300% FPL (e.g., between $25,760 and $38,640 for an individual). Additionally, KFF’s analysis found that older consumers making above 400% FPL could benefit from the 8.5% contribution cap, and individuals making above 400% FPL may return to a Marketplace plan after seeking cheaper and less comprehensive options elsewhere.
While the ARPA does offer financial assistance in terms of premiums, significant financial barriers remain for individuals making between 200-300% FPL. The ACA and ARPA offer cost-sharing assistance; however, this begins to phase out at 200% FPL and drop completely for those at 250% FPL or higher. With high deductibles or other out-of-pocket costs still in place, affording a hospital stay or treatment for a chronic condition could remain difficult despite the additional financial assistance.
Consumers’ Access to Subsidies May Differ Depending on Where They Live
Where a new or renewing Marketplace consumer resides also dictates when and how they will be able to take advantage of increased ARPA premium subsidies. Consumers residing in the 36 FFM states were eligible to choose to submit or update an application for premium assistance as of April 1, 2021, and will see changes reflected in their May premium bill. Meanwhile, 14 states and D.C. using State-based Marketplaces (SBMs) have created their own timelines to implement these changes or have announced that they will automatically apply the premium subsidies to a customer’s account. Table 1 below outlines the SEPs in states with SBMs in more detail, as well as when the new subsidies will be available to consumers.
Table 1. State-Based Marketplace Special Enrollment Periods & Subsidy Availability (updated as of May 17, 2021)
April 12 - December 31, 2021 * +
Automatically applied to enrollees' accounts beginning in May 2021
Extended to August 15, 2021 *
New enrollees could access the new premium subsidies beginning April 15, 2021
May 1 - August 15, 2021 * + ^
Available May 1, 2021 for most enrollees
District of Columbia
Ongoing until the end of the COVID-19 public health emergency *
New enrollees could access the new premium subsidies beginning in April 2021
March 1 - April 30, 2021 * ^
Available April 1, 2021 for most enrollees
Extended to August 15, 2021 *
Automatically applied to enrollees' accounts beginning in April 2021. Retroactive coverage avalaible during COVID-related enrollment window.
January 23 - July 23, 2021 * + ^
Available May 2021 for current enrollees
Extended to July 16, 2021 * +
New enrollees could access the new premium subsidies beginning in May 2021
Extended to August 15, 2021 * + ^
New enrollees could access the new premium subsidies beginning April 19, 2021
Extended to December 31, 2021 * ^
Available May 2021 for most enrollees
Extended to December 31, 2021 * ^
New enrollees at certain income levels could access the new premium subsidies beginning in April 2021
February, 15 - August 15, 2021 * ^
New and current enrollees may apply for additional financial assistance to determine their eligibility, however, the state has not indicated when enrollees will be able to access it
Extended to August 15, 2021 * ^
New enrollees could access the new premium subsidies beginning April 1, 2021
Extended to October 1, 2021 * +
Available summer 2021 for most enrollees
Extended to August 15, 2021 * + ^
New enrollees could access the new premium subsidies beginning May 6, 2021
* Available for uninsured residents
+ Available for residents who are currently enrolled in off-exchange plans
^ Available to current marketplace enrollees
IMPAQ researchers compiled this information from the respective state pages of https://www.healthinsurance.org/health-insurance-marketplaces/
Insurance Industry is Well Positioned for Profits
For the insurance issuers in the individual and small group ACA Marketplaces, the $34 billion subsidy price tag further solidifies the private sector’s role in covering millions of Americans. By opting to primarily expand coverage via the private sector, the Biden administration’s first legislative push faced little opposition from industry stakeholders. Considering the higher reimbursement rates for physicians and hospitals under private insurance plans and the potential influx of new and renewing customers paying more subsidized premiums (over 1 million and counting), it is no surprise the ARPA’s health provisions faced minimal industry opposition. Additionally, multiple issuers have indicated that they are expanding their offerings on the Marketplaces or plan to re-enter certain markets. Expanding subsidies further to higher income individuals in the middle to upper-middle class may also make ACA Marketplaces more popular and sustainable.
New higher-income consumers and existing consumers with more subsidized money to spend in the Marketplaces will likely lead to significant profits for issuers and providers through plan year 2022. However, this could be only a temporary boon for industry groups. The Congressional Budget Office projects that any enrollment gains beyond 2021 would reverse by 2023 should the Marketplace provisions expire as planned.
Just as the administration entered its 100th day, it released more details on the American Families Plan, which includes a $200 billion investment to make the premium subsidies under the ARPA permanent. Moreover, the 2022 Notice of Benefit and Payment Parameters final rule offered additional consumer financial assistance by lowering the maximum out-of-pocket costs by $400 compared to what CMS proposed in November 2020. Likewise, the Department of Health and Human Services notes that the median deductible for new enrollees during the SEP has fallen by nearly 90 percent. Fortunately for consumers and industry stakeholders alike, the policy actions at the start of the Biden administration aim to get more Americans covered on the Marketplaces; however, the administration will need to look to additional public and/or private mechanisms to address affordability and sustainability of tax-payer funded subsidies over time.
Andy Elkins, Research Analyst, IMPAQ Health
Talia Fish, Research Associate, IMPAQ Health
Kevin Van Dyke, Managing Director, IMPAQ Health