The American Rescue Plan(ARP) and your Health Insurance
The American Rescue Plan (ARP) has some assistance for people responsible for getting their health insurance coverage. Individuals and families could benefit from the enhanced health insurance subsidies, with the highest aid for individuals claiming unemployment, a new round of COBRA premium assistance, and reconciliation of 2020 premium tax credit overcalculations.
Time is essential for some of these benefits, and you should look into this information as soon as possible.
Improved health insurance financial subsidies
The enhanced subsidies are the most important news for you. Previous Affordable Care Act subsidies for health insurance coverage were limited to those with modified adjusted gross income (MAGI) less than 400% of the poverty level, which equates to $51,520 for a single person, $69,680 a couple, and $106,000 for a family of four. The “cliff” for obtaining subsidies for health insurance is eliminated for 2021 and 2022.
For example, let’s look at a couple who are both age 62 – a costly age for health insurance.
If this couple has MAGI of $70,000, they previously received no help paying for their health insurance coverage and were on the hook for all insurance premiums and out-of-pocket expenses. With the changes under ARP, premiums are limited to no more than 8.5% of MAGI. For this couple, premiums would be limited to $5,950 per year.
The credit is based on the cost of the second-cheapest Silver Plan available in your area. For example, in the Denver area (using a zip code), the premium for the second-cheapest Silver Plan for a 62-year-old couple is $23,838 per year. Since your payments are limited to $5,950 per year, this couple would receive a tax credit of $17,888 to assist with their health insurance purchase. Under previous ACA rules, they would receive nothing!
The credit is gradually phased out as income increases. Unlike the previous credit under the ACA, it isn’t suddenly “wiped out” because you jumped over the income limit.
To qualify for this credit, and this is key, you must purchase your health insurance at Healthcare.gov. The website has been updated on April 1 to reflect the new tax credit. Open enrollment lasts until May 15, so you must act fast. On March 23, the Biden administration announced an extension of the open enrollment period for the Affordable Care Act to August 15. The tax credits apply only for the months a person is enrolled in a plan through the Affordable Care Act, so the sooner you apply, the more you can potentially save on health insurance.
What do you need to do now?
You may qualify if you are paying for your health insurance because you do not have access to employer-based coverage, Medicare, Medicaid, or other public programs.
You can update their information on the site after April 1 to have the tax credit applied to premiums in the future. One caveat – states that do not utilize Healthcare.gov may have slightly different enrollment rules, so make sure you understand those differences.
Ideally, you have a health insurance agent in your area who will help you with enrollment. This doesn’t change your cost, but it eases the pain of dealing with the Healthcare.gov site.
Because of budgetary procedures, these credits are not extended past 2022. However, what the government gives, it can not easily take away, so it is likely these credits will be extended past 2022 (no guarantee.)
If you already receive assistance through the Affordable Care Act, you may see slight increases in your premium tax credit for the 2021 tax year going back to January 1. However, you may want to reevaluate your plan selection after April 1 to see if they qualify for lower cost-sharing with a new plan.
Maximum assistance for unemployment benefit recipients
Anyone without access to affordable insurance through another family member and has received even one week of unemployment benefits in 2021, that person will be deemed as having earnings at no higher than 133% of poverty level for the entire year and will qualify for a no premium cost Silver plan.
This sounds too good to be true, and it is even better than that – a person who claims and receives unemployment income in 2021 will also qualify for cost-sharing subsidies that will significantly lower their deductible.
For example, a typical deductible for a Silver plan for those making more than 250% poverty level is about $5,000. Currently, with the ACA, once one’s MAGI is below 250% of the poverty level, that deductible gradually declines. If income goes down to 100% of the poverty level, the deductible also can go down to zero. Since the unemployed person is considered to not have income any higher than 133% poverty level, their deductible will be very low.
One small glitch with the implementation of this provision is that Healthcare.gov will not be able to reflect the credits available for unemployment situations until the summer, which is after open enrollment has ended. However, the tax credit will be provided on the back end when you file your taxes.
A potential workaround for those who qualify for this benefit is enrolling now and entering your income for tax credit purposes at 133% of federal poverty level. This will provide a current tax credit and automatically show the reduced deductibles available for that income level. It will be important to re-enter that information once the site is adjusted for this credit. It may be worth working with a health insurance agent in your state for assistance in applying.
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