Recovery Package Can Make Critical Improvements to Help Millions Buy Health Insurance

To permanently extend coverage to the roughly 30 million people who don’t have it, the President and Congress should use upcoming recovery legislation to make the American Rescue Plan’s premium tax credit boosts permanent, lower cost sharing to reduce out-of-pocket costs, and take other steps to make coverage more accessible and affordable.

The Affordable Care Act (ACA) expanded health coverage to more than 24 million people, sharply dropping the uninsured rate for people of all ages, of all racial and ethnic backgrounds, and at all education levels. The recently enacted American Rescue Plan, particularly its two-year premium tax credit enhancements and strong financial incentives for more states to expand Medicaid, holds tremendous promise for reducing these rates further.

But to make these gains permanent and reach the remaining people who are uninsured, disproportionately people of color, policymakers should take the following steps, as we detail in a new paper.

• Improve and make the premium tax credit enhancements permanent. The Rescue Plan’s two-year premium tax credit increases will eliminate or reduce premiums for millions of current enrollees in the ACA marketplaces and expand eligibility to millions more, ensuring that no marketplace enrollee spends more than 8.5 percent of their income on premiums. This is especially important to middle-income people, older people, and people who live in areas with high premiums, who bear the highest premium burdens. Some 3.6 million people will be newly eligible for financial help, which will likely not just reverse insured rate losses under the Trump Administration but restore the upward coverage trend that ended in 2016. Policymakers should augment these credit improvements to ensure that the credits are enough for anyone with income below 200 percent of the federal poverty line, roughly $25,500 for a single person, to pay no upfront premium. (The Rescue Plan does so for those at 150 percent of poverty in 2021 and 2022.)

• Lower cost sharing to improve access to care. High out-of-pocket costs ― deductibles, copayments, and coinsurance ― can deter people from enrolling in a plan, even if premium help is significant. For people who do enroll, especially those with low incomes, high charges can lead them to delay or avoid getting care they need or increase their financial problems as medical bills go unpaid. The recovery package should expand cost-sharing help to more people and reduce out-of-pocket costs for those who are already eligible by raising the actuarial value (the measure of the plan’s share of costs) of benchmark silver plans for everyone from the poverty line to four times the poverty line, with more help for people who have lower incomes.

  Doing so would let people with incomes at 200 percent of the poverty line get the equivalent of a platinum plan with a deductible ranging from zero to $200. And someone at 300 percent of the poverty line could see plan deductibles drop several thousand dollars a year, from about $5,000 on average to about $1,000. When combined with the proposed improvements in premium tax credits described above, everyone with incomes up to 400 percent of the poverty line could buy a marketplace plan that’s at least the equivalent of a gold plan (with an 80 percent actuarial value) for no more than 8.5 percent of their income.

• Improve employer-sponsored coverage for low-income workers. While employer coverage often works reasonably well for middle- and upper-middle-income employees, lower-income workers are frequently offered less robust coverage and required to pay a larger share of premiums out of pocket. Several options could address this problem. First, either Congress or the Biden Administration could fix the so-called “family glitch,” which requires the marketplace to determine the affordability of family coverage based on whether employee-only coverage is affordable. This locks as many as 5.1 million people, roughly half of them children, out of more affordable marketplace coverage. Second, current standards deem an employer plan affordable even if it costs nearly 10 percent of income; policymakers could drop that to 8.5 percent to match the marketplace standard. Third, policymakers could help improve the value of employer plans by raising the minimum value that employer plans must meet from 60 percent to 70 percent — the equivalent of a marketplace benchmark plan’s actuarial value.

These and other improvements could bring down costs substantially for current enrollees who still struggle to pay for food, housing, and other basic needs on top of their health care costs, and for millions more who have been priced out of health insurance.