There is a lot of information and misinformation circulating the internet about the American Rescue Plan Act of 2021 (ARPA) and it’s easy to get confused by frequent updates. As a result, we’ve taken some time to put together a guide that will help you understand ARPA and what it means for your health insurance plan.
ARPA was signed on March 11, 2021, with the intention of making Marketplace coverage more affordable, subsidizing COBRA premiums, expanding Medicaid and the Children’s Health Insurance Program (CHIP), extending increased unemployment compensation, and providing stimulus payments.
Bu how does ARPA specifically affect your Marketplace coverage? Luckily, many of these changes are positive.
ARPA has updated many of the eligibility benchmarks for Marketplace coverage and subsidies to make health insurance more affordable and accessible for those uninsured during the COVID-19 pandemic. These changes are effective starting April 1, 2021.
Firstly, under ARPA, tax credits are no longer limited to those with incomes under 400 percent of the Federal Poverty Level (FPL). Anyone will now be able to get a tax credit paying no more than 8.5 percent of their yearly income based on the benchmark plan, which is the second least expensive Silver level plan, in your area. This new tax credit will be available for tax years 2021 and 2022.
Many consumers who fall in the 100 to 150 percent of FPL are eligible for the Benchmark Silver level plan at a zero-dollar premium monthly. An estimated more than 50 percent of people currently receiving tax credits will now be able to get a Silver level plan for under $10.
To receive these eligibility benefits, be sure to update your application on the Marketplace after April 1 so that it reflects the new tax credit. The tax credit will be reflected starting May 1 if the application is updated and enrollment in a new plan is done by April 30. The Marketplace will not be providing retroactive tax credits prior to the May 1 effective date. However, the new tax credit will be effective back to January 1, 2021, and consumers will receive the tax credit when they file their federal income tax returns.
It’s important to consider that some carriers may opt to reset plan deductibles. So, if you have spent a good chunk of money towards your deductible, you may want to consider getting your tax credit at the end of the year when you file your taxes to save you some money. Contact your ARC representative to find out what option is best for your specific situation.
2021 Special Enrollment Period (End August 15, 2021)
The Open Enrollment period has been extended through August 15, 2021, so there is plenty of time to get your plan updated. Those without Marketplace coverage can take advantage of the new tax credits by moving to a Marketplace plan during this period. Individuals with employee benefits will still fall under the same guidelines and will most likely not be eligible.
Tax Credit Exemptions
If you had a tax credit for the plan year 2020 and happened to go over your projected income, you will not be responsible for paying back the difference. This is a one-year exemption for 2020 only. If you have already filed your taxes, you do not file an amended return until the IRS releases updated guidance for this situation. More information can be found at IRS.gov/newsroom/irs-statement-american-rescue-plan-act-of-2021.
If you are receiving unemployment benefits, the Federal Pandemic Unemployment Compensation (FPUC) of $300 per week has been extended. This income will need to be reported to the Marketplace, but it is not considered when determining eligibility for Medicaid and CHIP. This will be effective through September 6, 2021.
Lastly, individuals eligible for COBRA because of a reduction in hours at work (theirs or a family member’s) or an involuntary termination will be eligible for a full premium subsidy that covers the entire cost of COBRA. This subsidy is available from April 1 through September 30, 2021, only. Unfortunately, nothing is retroactive and it is only available to those eligible for COBRA based on an involuntary loss of coverage. If your COBRA eligibility ends during this time period it will not be extended and individuals who are eligible for new group health coverage through a new employer or a spouse’s plan are not eligible for the COBRA subsidy and must report the eligibility to the former employer. If you don’t report the eligibility, you may face a tax penalty.
These legislative changes can be confusing and anything can change at any time. Your ARC representative is here to translate these changes for you. Contact us today to learn more about ARPA and how it will affect your individual plan.