Falling off the subsidy cliff: How ACA bonuses would change for people losing bailout subsidies

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The Affordable Care Act (ACA) offers subsidies to offset the cost of health insurance, capping the amount that people who enroll in ACA markets pay to a certain percentage of their income. These subsidies operate on a sliding scale, with people whose incomes are just above poverty receiving the most generous subsidies while those whose incomes are three to four times poverty pay more. For years, people whose income was just over four times the federal poverty level were ineligible for grants under the ACA, meaning even a small increase in income could mean they would have to. pay full price.”

This was the case until the American Rescue Plan Act (ARPA) expanded grant eligibility, now capping what high-income earners pay for a silver plan premium at 8.5% of their income. In doing so, ARPA temporarily removed the ACA subsidy cliff, in addition to increasing subsidies for low-income individuals who were already eligible for premium assistance. Congress is considering expanding these enhanced subsidies or making them permanent at an estimated cost of about $22 billion a year. If the ARPA grants expire, as they are expected to do at the end of this year, people with incomes above four times the poverty level would no longer be eligible for the grants and would have to pay full price for coverage. ‘insurance.

On average in the United States, a 40-year-old with an income just over four times the poverty level ($51,520 a year for people buying coverage in 2022), will see their premiums drop by 8.5% of its income to about 10% of their income if the ARPA grants expire. The typical 40-year-old would go from a subsidized monthly payment of $365 to an unsubsidized payment of $438, or an increase in their premium of about 20% simply because of the loss of subsidies. This is before taking into account any increase in the unsubsidized premium from 2022 to 2023.

Because unsubsidized premiums vary so much across the country, Marketplace enrollees living in some states would pay more than those living in other states. For example, a 40-year-old with an income just over four times the poverty level living in West Virginia or Wyoming would pay an average of 18% of their income for a Silver plan without the government subsidies. ‘ARPA. That’s a more than 100% increase in their premium payments. Meanwhile, the same person living in one of the six low-premium states (Colorado, Maryland, Michigan, Minnesota, New Hampshire, and Rhode Island) is already paying less than 8.5% of their income for premium money. not subsidized.

Older residents of high-premium states would see even larger increases in premium payments due to the loss of ARPA subsidies. Instead of paying 8.5% of their earnings for a Silver plan, like they do under ARPA, a 64-year-old market enrollee earning just over four times the poverty level in West Virginia or in Wyoming would have to pay more than 40% of their income for a silver plan if they lost access to ARPA grants. This would equate to an increase of over 380% in their premium payment. Again, this is all based on 2022 premiums, so it doesn’t take into account any further increases in unsubsidized premiums as we approach 2023. Insurers are just starting to file their 2023 premiums with regulators in the states, but unsubsidized premiums in many states are likely to increase.

If the ARPA grants expire, bounty payments will increase across the board for the 13 million subsidized Marketplace enrollees. But the roughly one million people whose incomes are above four times the poverty line will face a double whammy: not only will many of them lose their subsidies, but they will also have to start paying for any increase in premium not subsidized beyond. The reality is that for many people, such a premium increase would be unaffordable, causing them to drop their health coverage.

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