The $1.9 trillion stimulus bill would make health insurance more affordable for millions

If getting health insurance through a public exchange has been too pricey for you, that could soon change.

The $1.9 trillion Covid stimulus package that’s expected to clear the House of Representatives on Friday includes several provisions that aim to make health care more affordable for households. They include: increasing premium subsidies (technically tax credits) through the federal marketplace and state exchanges for 2021 and 2022, expanding who qualifies for them and forgiving amounts due by taxpayers who received too much in subsidies in 2020 (and minimizing that issue for 2021).

While various parts of the package still could be changed in the Senate, the health-care-related provisions have not been points of contention thus far, said Karen Pollitz, a senior fellow with the Kaiser Family Foundation.

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The stimulus measure, officially called the American Rescue Plan, also calls for $1,400 stimulus checks for most individuals, a $400-per-week unemployment supplement, increased child tax credits for qualifying families and a boost in the minimum wage to $15 by 2025, as well as money for vaccination programs, state and local governments, and schools. Of course, there is no guarantee that what is approved in the House will pass in the Senate.

If the health-care provisions become law, individuals already enrolled through the exchanges would be able to recalculate their subsidy eligibility on the exchange once the rules take effect.

“They could go into healthcare.gov and update their account to get the higher tax credits going forward,” Pollitz said.

A special enrollment period for the exchanges — for existing enrollees to switch or for new enrollees to get coverage — is currently open and will close May 15.

Here are details of some of the health-care provisions in the stimulus package.

Current law limits eligibility for premium tax credits through the federal and state exchanges to households whose income is from 100% to 400% of the poverty level. The stimulus package would remove that cap, as well as limit the amount anyone pays in premiums to 8.5% of their income as calculated by the exchange.

The tax credit amount is based on factors that include income, age and the benchmark “silver” plan in your geographic area. The amount you get is basically advanced to you over the course of the year via reduced premiums.

For illustration, as outlined in a report from the Congressional Budget Office: Say a 64-year-old with $58,000 in income — about 450% of the 2021 poverty level of $12,880 — currently pays $12,900 in annual premiums for a plan through the exchange because they don’t qualify for subsidies. Under the proposed change, that person would pay no more than $4,950 (8.5% of their income) — meaning the tax credits would amount to $7,950.

The older an enrollee is, the greater the savings would be, due to premiums being based at least partly on your age. 

“Older adults’ premiums are triple what younger adults would pay,” Pollitz said.

The CBO report estimates that the expanded eligibility would result in 1.7 million more people getting insurance through the marketplace, with 40% of them being individuals who are currently ineligible for premium tax credits under current law because their income is above the 400% cap.

One result of the federal government’s expanded unemployment benefits last year was that some unemployed workers had more income than they did when they were working.

That could have resulted in marketplace enrollees getting more in premium tax credits than they were eligible for. Under normal circumstances, that mismatch would mean they generally need to pay back the excess at tax time.

The stimulus bill would essentially forgive any amount due on 2020 tax returns.

The measure also would ensure that this year, if you qualify for tax credits and unemployment benefits push up your income, any amount above 133% of the poverty level would generally be disregarded in the subsidy calculation.

A law known as COBRA allows workers who lose their job to remain on their company’s health plan for up to 18 months — but the person typically must pay the full monthly premium, which can be pricey.

The stimulus bill would subsidize 85% of insurance premiums — only through September — for ex-employees who want to stay in their company-sponsored plan.

“They could compare whether the 15% they’d pay for a COBRA plan is a better deal than what they’d pay in the marketplace,” Pollitz said.