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Five Things to Know About Renewing Affordable Supplementary Care Act Grants in the Inflation Reduction Act

By on August 11, 2022 0

As a member of Inflation Reduction Act, the Senate recently passed a three-year extension (until 2025) of enhanced subsidies for people buying their own health coverage through the Affordable Care Act markets. These temporary grants were originally intended to last two years (2021 and 2022) and were passed as part of the American Rescue Plan Act (ARPA). The enhanced grants increase the amount of financial assistance available to those already eligible and also expand grants to middle-income people, many of whom were previously excluded from coverage.

Here’s what you need to know about the likely renewal of these grants:

If enacted, the Curbing Inflation Act will prevent large increases in premium payments in the market

If Congress extends the temporary subsidies, as seems likely, premium payments in 2023 will remain virtually unchanged for market enrollees, since premium tax credits protect enrollees from increases in the underlying premium. The passage of the Inflation Reduction Act will extend the temporary subsidies, preventing direct premium payments from increasing at all levels next year for almost all of the 13 million subsidized enrollees. In the 33 states using HealthCare.gov, premium payments in 2022 would have been 53% higher (over $700 more per year) on average except for these enhanced grants. The same is true in states that operate their own exchanges. The exact amount of premium increases enrollees would have seen in the absence of the Inflation Reduction Act would have depended on the enrollee’s income, age and premiums where they live.

For example, using our subsidy calculator, you can see that with ARPA, a 40-year-old couple earning $25,000 a year is currently paying $0 for a Silver plan premium with significantly reduced deductible expenses. This would continue to be true under the Inflation Reduction Act, which keeps ARPA grants uninterrupted for three more years. Using a new version of our subsidy calculator that shows what bounty payments would have been in each zip code if ARPA had not past, you can see the same couple would have paid $76 per month (or $915 during 2022) without ARPA. With the Inflation Reduction Act, however, this low-income couple would save $915 a year.

Here’s another example using the new calculator: in the absence of these enhanced grants, a 60-year-old couple with an income of $70,000 would have had to pay $1,859 per month (or $22,307 in the year 2022 ) for a full price. silver plane. Now compare that to our 2022 calculator that shows what they’re currently paying with ARPA: the same couple is currently paying $496 per month (or $5,950 over the course of the year) and would continue to pay a similar amount in under the Inflation Reduction Act. . Instead of having to pay around 32% of their income for insurance, which would likely be unaffordable, the couple is paying 8.5% of their income with enhanced subsidies. So, if Congress passes the Cut Inflation Act, this elderly middle-income couple will save more than $16,000 a year.

Related: Find out how 2022 bonus payments would increase without the ARPA COVID-19 Relief Act’s enhanced tax credits. Click on the images below to access both versions of the calculator.

The double whammy: how premium increases and the expiration of subsidies in 2023 would have affected some enrollees

Renewing these Inflation Reduction Act-enhanced subsidies would also prevent some enrollees from experiencing two types of premium increases at once. If Congress had allowed the enhanced grants to expire, the grant cliff would have returned, meaning people with incomes four times the poverty line (or about $51,520 for a single person) would lose their eligibility altogether. to subsidies. So, without the Inflation Reduction Act, those enrollees would pay not only the increase due to the loss of subsidies, but also any increase in the underlying premium.

Our first look at Contributions 2023 shows that premiums increase by about 10%, with most rate increases being between about 5% and 14%. This is more than in previous years, partly due to inflation and the rebound in use. These rates are still offered and will be finalized this month.

The figure below shows a hypothetical subsidy cliff if premiums actually increase by 10%. For example, a 60-year-old earning just over four times poverty ($51,521) in 2022 is paying 8.5% of their income on a silver plan with enhanced subsidies, but would have paid 22% of their income in 2022 without these subsidies on average across the United States Without the Inflation Reduction Act, and if premiums increase by 10% in 2023, that person would pay 24% of their income in 2023.

In states where premiums are currently the highest, those losing subsidies would have seen the largest increases without the continuation of those subsidies enhanced by the Inflation Reduction Act. For example, a 60-year-old earning just over four times poverty ($51,521) in 2022 would have paid more than a third of their income on a money plan without subsidies in West Virginia and Wyoming. ; and in New Hampshire, the person would have paid 15% of their income without subsidies.

The Tick-Tock: Why Timing Matters

The timing of the Inflation Reduction Act is important to insurers, regulators, and state and federal market administrators. Insurers are in the process of finalizing the 2023 premiums and some are already factoring in a further increase in premiums as they expect ARPA grants to expire.

The National Association of Insurance Commissioners (NAIC) has written to Congress asking for the extension of these subsidies by July to provide greater certainty as insurers set premiums for next year.

States and the federal government, which operates HealthCare.gov, will need to reprogram their enrollment websites and train consumer support staff on the policy changes months before enrollment opens this fall.

The End of the Public Health Emergency: How Improved Market Subsidies Could Mitigate Loss of Coverage

The end of the public health emergency and with it the requirement for continued Medicaid enrollment is expected to result in significant coverage losses. So far, the number of uninsured people has not increased during the pandemic and the resulting economic crisis. However, ironically, we might see a jump in the uninsured rate because the public health emergency ends if people opting out of Medicaid cannot find alternative coverage.

With the passage of the Cut Inflation Act, market-enhanced subsidies could act as a bridge between Medicaid and ACA markets when the public health emergency ends. If the Marketplace’s enhanced subsidies are still in place when the Medicaid Eligibility Maintenance (MOE) ends, many Medicaid dropouts could find similar low-cost coverage on the ACA Marketplaces. If eligible for Marketplace subsidies, people who lose Medicaid coverage can find Marketplace plans that, like Medicaid, have a zero (or near-zero) monthly premium requirement.

Costs: what it means for the federal budget

Although the Congressional Budget Office (CBO) has yet to release a final score for the Cut Inflation Act, an early estimate by the CBO pegged the cost of a permanent extension of the enhanced subsidies at around $25 billion per year. The Inflation Reduction Act extends these grants for three years (until 2025) – not permanently – although the average annual cost is likely to be similar. Much of the estimated cost is due to the CBO’s expectation that millions more people would enroll in ACA markets only if the enhanced subsidies were not extended. The actual cost will depend on how many people sign up and how premiums increase over the next few years.

Conclusion

Health sector inflation, increased utilization and other factors could cause 2023 premiums to increase more significantly than previous years. However, as we wrote beforecongressional action to expand ARPA grants through the Inflation Reduction Act will have an even greater influence on how much subsidized ACA Marketplace enrollees pay out of pocket for their premiums than the market driven factors that affect the underlying premium.

Whether the subsidies expire at the end of this year or in two or three years, their expiration would result in the largest increase in premium payments borne by most enrollees in this market. Because the Inflation Reduction Act extends the enhanced grants for three years rather than permanently, future Marketplace enrollees may see their premiums increase significantly when the grants expire.