Under the $1.9 trillion American Rescue Plan Act of 2021 passed in March, the clock starts April 1 for millions of people to potentially pay lower premiums and claim higher tax credits if they have a health insurance plan purchased through the Affordable Care Act (ACA) marketplace. The net effect: Most ACA marketplace participants will see less expensive health insurance premiums, and many more Americans will now be eligible for affordable plans.

Key Takeaways

  • As of April 1, more financial help is available for consumers who get their healthcare coverage through the Affordable Care Act marketplace.
  • One estimate shows that 92% of people who buy their own health insurance will now qualify for a subsidy that can help reduce the costs.
  • However, the new provisions are temporary and won't extend past 2022 unless Congress makes them permanent.

What’s Changed?

The law eliminates an income cap that has restricted who qualifies for ACA tax credits to help offset the cost of monthly insurance premiums, opening the door to people with incomes above 400% of the federal poverty level ($51,040 annually for individuals), who were previously ineligible for the tax credits.

It also limits the maximum amount anyone must pay for marketplace health insurance to 8.5% of income vs. 9.83%, and boosts subsidies to lower-income consumers—those with incomes between 100% and 400% of the poverty level (from $12,760 to $51,040 for a single person or $26,200 to $104,800 for a family of four).

With the newly increased credits and subsidies, costs will drop for many who buy ACA-compliant plans and more people will be eligible for the savings. The new provisions are temporary; none will extend past 2022 unless Congress acts to make them permanent.

Still, these are incredibly far-reaching expansions, says Larry Levitt, executive vice president for health policy at the Kaiser Family Foundation (KFF).

“The American Rescue Plan represents the first major enhancement of the ACA, more than a decade since it became law,” he noted during a recent web briefing outlining the law’s impact. “It provides significant new opportunities for more affordable healthcare.”

How Much Will People Save?

A KFF analysis estimates that 92% of people who buy their own health insurance will qualify for a subsidy. Its findings also indicate that 1.4 million uninsured people are now newly eligible for the subsidized marketplace coverage.  

Kaiser pegs the average savings as ranging from $33 a month for those with incomes under 150% of the poverty level to $213 a month for those with incomes between 400% and 600% of the federal poverty level.

Similarly, estimates by the Centers for Medicare & Medicaid Services (CMS) say premiums after the new savings will decrease, on average, by $50 per person per month, or $85 per policy per month. Four out of five enrollees should be able find a plan for $10 or less a month after premium tax credits, CMS says, and more than 50% will be able to find a “Silver” (or mid-level) plan for $10 or less.

Important

Anyone who wants to sign up for Affordable Care Act marketplace coverage should note that the special enrollment period has been extended to Aug. 15, 2021. Go to HealthCare.gov for information.

What Consumers Should Do Now

  • People who want to enroll in a marketplace plan will be able to take advantage of the new changes at HealthCare.gov, starting April 1, 2021. Go to HealthCare.gov/more-savings for the details.
  • People who already have a marketplace plan should update their enrollments or applications, reselecting their plan choice, in order for the changes to take effect and reduce premiums for the rest of the year (applying to coverage for May 1 going forward).
  • People who don’t update their applications now can also wait until they file their 2021 taxes next year to claim the added premium tax credit. 
  • As a reminder, the special enrollment period has been extended until Aug. 15, 2021 for uninsured consumers who apply through the HealthCare.gov platform. (The special enrollment period was previously scheduled to end on May 15.)
  • KFF’s updated Health Insurance Marketplace Calculator can help estimate how much you might receive as a subsidy for health insurance policies purchased on the exchanges, based on estimates of benchmark premiums tied to age, income, and family size.