Important Changes to The American Rescue Plan Subsidies

| By Amanda Blount

Back in March, the American Rescue Plan, or ARP, was signed into law. It made some significant changes to healthcare subsidies that may impact some of you who are obtaining health insurance through the marketplace or through COBRA. 

Previously, the marketplace premium subsidies were partial, regardless of how little an applicant earned. The ARP changed all that by stating that the benchmark marketplace plan—the second lowest cost silver plan in the applicant’s area—is fully subsidized for people earning income up to 150% of the federal poverty line. 

To give you a frame of reference, a two-person household would have to earn less than $26,130. A four-person household would have to earn less than $39,750 in order to qualify for the fully subsidized plan. That means their healthcare would be premium-free with modest deductibles. 

On the upper end, before the ARP, households with income above 400% of the poverty line were not eligible for subsidies. Using the same examples, a two-person household with income over $69,680 and a four-person household with income over $106,000, according to the ARP, now do not have to contribute more than 8.5% of household income toward the benchmark plan.  

So, let’s say you’re in a four-person household making $150,000. You would not be expected to pay more than 8.5%, or $12,750, toward the benchmark plan premium. Currently, these changes to premiums are for this year and next year, but there has been quite a bit of talk about making them permanent.

The ARP also made changes to unemployment subsidies. Basically, if you receive any unemployment benefits at any time in 2021, you will be eligible for a zero premium benchmark silver plan even if you resume working. However, if your new employer offers healthcare benefits, those subsidies can be reduced or lost.

Finally, the ARP provides for temporary COBRA premium subsidies for up to six months during 2021. As you know, COBRA is the federal program that gives workers and their families who lose their health benefits the right to choose to continue group benefits from the plan they had for a limited time when they have lost their job, had their hours reduced, or left their employer. 

You are expected to pay up to 102% of the entire premium to be covered under the group plan. The subsidies offered by the ARP cover 100% of the monthly cost of COBRA for those who are eligible. So, just who is eligible? Those who had their health insurance coverage lost due to termination of employment or a reduction in hours worked. 

If coverage was lost due to death or divorce from the covered employee, or from the loss of dependent child status, they are not eligible for the subsidies. The payments are for COBRA coverage no earlier than April 1st and no later than September 30th of 2021. So, if you or someone you know lost a job earlier this year and continued the employer health insurance through COBRA during April thru September, you should definitely look into reimbursement.

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