House Bill’s Permanent Marketplace Improvements Would Expand Affordable Coverage

The House Ways and Means Committee has approved a bill that would significantly improve access to affordable health coverage through the Affordable Care Act (ACA) marketplaces, most notably by permanently extending the American Rescue Plan’s temporary increase in premium tax credits for people buying marketplace coverage. The increase, enacted for 2021 and 2022, has contributed to a surge in marketplace enrollment, with more than 2.8 million people gaining coverage between mid-February and mid-August.

Under the Rescue Plan, people with incomes below 150 percent of the poverty line (or less than about $19,000 for a single person) pay zero net premium for the “benchmark” silver plan in the marketplace, and people with incomes between 150 and 400 percent of poverty (about $51,000 for a single person) pay a lower share of their incomes toward premiums than they did before. The Ways and Means bill, part of broader economic recovery legislation the House is crafting, also permanently extends premium tax credits to people whose incomes exceed the ACA limit of 400 percent of poverty but who face excessive premium burdens relative to their income.

The House Energy and Commerce Committee has approved separate provisions to permanently close the Medicaid “coverage gap” and provide a pathway to coverage for the more than 2 million people with incomes below the poverty line who live in 12 states that have failed to adopt the ACA Medicaid expansion. About 7 million people would gain coverage in 2022 as a result of the premium tax credit and coverage gap provisions combined, Urban Institute estimates show. That’s a nearly one-quarter drop in the uninsured, from about 30 million to about 23 million.

Other provisions of the Ways and Means bill would improve access to affordable health coverage by:

• Lowering the threshold for determining whether employer-sponsored health coverage is affordable, to 8.5 percent of an employee’s household income (compared to 9.83 percent in 2021). This could prod more employers to make the coverage they offer more affordable, especially since employers that don’t meet ACA affordability standards could face financial penalties. Workers whose employers don’t meet the new standard will be able to qualify instead for financial assistance to buy marketplace coverage.
• Protecting workers who are disabled and receive a lump-sum payment from Social Security Disability Insurance (SSDI) from having to repay large amounts of premium tax credits. SSDI applicants cannot know in advance if or when their claim will be paid; often it occurs after some delay and in a lump sum. They can end up with higher income for the year than they originally projected and have to repay large premium tax credit amounts when filing their taxes. The Ways and Means bill would exclude SSDI benefits attributable to prior years from current-year income when calculating someone’s eligibility for premium tax credits, resolving a problem that has caused financial hardship for many people.
• Extending through 2025 an option for recipients of unemployment benefits to enroll in a “benchmark” silver plan with low deductibles and other cost sharing and no upfront premium. The Rescue Plan created this option for 2021 only.

Improving financial assistance is critical to covering more people with low or moderate incomes, who are more likely to be uninsured, and the premium tax credit enhancements made permanent by the Ways and Means bill are providing significant savings. For example, a family of four making $50,000 pays $67 rather than $252 per month in premiums for benchmark coverage (1.6 instead of 6.0 percent of their income) ― an annual savings of $2,220. Four in five enrollees can get a plan for $10 or less per month.

Also, permanently extending premium tax credits to people above 400 percent of poverty would eliminate a subsidy cliff that has particularly affected older people. The ACA equalized net premiums across age groups for people with incomes between 100 and 400 percent of poverty, by basing premiums on their incomes instead of the age-adjusted sticker price premiums. But the premium tax credit ended abruptly once income rose above 400 percent of poverty, requiring people to pay the full premium. The premium tax credit enhancements ensure that no marketplace enrollees, irrespective of income, pay more than 8.5 percent of their income in premiums. For example, a 64-year-old making $52,000, just above the prior subsidy cliff, pays $368 rather than $1,061 per month in premiums, saving nearly $8,300 in 2021.