State-Based Marketplaces Gear Up to Implement the American Rescue Plan

On March 11, President Biden signed into law the largest expansion of health insurance coverage since the Affordable Care Act (ACA). The American Rescue Plan builds on the ACA by providing approximately $24.4 billion in enhanced premium subsidies for coverage sold through the health insurance marketplaces. These subsidies will be available to people enrolled in marketplace plans in 2021and 2022 at all income levels, including individuals with incomes above 400 percent of the federal poverty level (i.e., $51,040 for an individual or $104,800 for a family of four) who previously did not qualify.

The federal government, which operates HealthCare.gov in 36 states, has already begun implementing the law. In the 14 states and D.C. that have state-based marketplaces, the state will lead. This will require not only a big investment in consumer education and enrollment assistance, as consumers navigate their new coverage options, but also significant operational changes to ensure marketplace websites reflect the law’s changes and insurers correctly apply the new subsidies to enrollees’ premium charges. As a result, when and how consumers benefit from the American Rescue Plan’s enhanced premium subsidies could vary across states.

Under the ACA, the health insurance marketplaces are required to provide a mechanism consumers can use to find out if they are eligible for premium subsidies and to enroll in a qualified health plan. Each marketplace has its own eligibility and enrollment system with different capabilities. The marketplaces will need to make technical and operational updates to implement the American Rescue Plan’s changes; those with less nimble technology systems could face challenges.

Implementing the American Rescue Plan’s Enhanced Premium Subsidies

Current marketplace enrollees will want to know how quickly the enhanced subsidies will be applied to their monthly premium payment. Those who are uninsured or enrolled in coverage outside the marketplace will want to see what their premium would be if they enrolled in a marketplace plan. Consumers in states that use HealthCare.gov have been able to view enhanced subsidies based on household income level since April 1. Current federal marketplace enrollees and those who are newly enrolling in a marketplace plan through HealthCare.gov will see any additional assistance they qualify for reflected in their May premium bill if they submit their new or updated application in April.

Some state-based marketplaces are taking longer than HealthCare.gov to update their eligibility and enrollment systems. For example, Connecticut and Washington’s websites will display the reduced premiums in early May. Others have announced a staggered approach to implementation, most likely because of technical or capacity limits. In New York, individuals with household incomes up to 400 percent of poverty were able to view the newly reduced premiums in April, but individuals with incomes above 400 percent of poverty will have to wait until June. Massachusetts, Minnesota, and Rhode Island also are requiring individuals with incomes above 400 percent of poverty to wait longer to see the enhanced subsidies reflected on the marketplace website.

A critical question is whether individuals already enrolled in a marketplace plan will have to return to the marketplace to sign up for the enhanced subsidies or if the marketplace will automatically apply them. There is a clear divergence between HealthCare.gov and state-based marketplaces. Consumers who use HealthCare.gov will need to submit updated marketplace applications to receive the enhanced subsidies, even if they were already receiving subsidies.

Many state-based marketplaces have announced they will automatically update enrollees’ accounts to apply the enhanced premium assistance, allowing enrollees to benefit from premium savings without taking any action. However, to avoid potential tax liability if they receive more in premium subsidies than they are entitled to, these enrollees should return to the marketplace to confirm their financial and household information is accurate and they are receiving the correct amount. In both the federal and state-based marketplaces, the millions of people newly eligible for premium subsidies who are either uninsured or have coverage outside the marketplace will need to apply.

Looking Ahead

Regardless of where they live, subsidized individuals will benefit from the American Rescue Plan’s enhanced premium subsidies either monthly or next year when they reconcile their 2021 taxes. But time is of the essence for those in plans outside the marketplace or currently uninsured, as subsidies are available to them only for the months they are enrolled in a marketplace plan. People who are uninsured or who did not qualify previously need to know that these new premium subsidies are available and how to access them. That will require an unprecedented marketing and consumer assistance effort. HealthCare.gov recently doubled its marketing budget to $100 million, and many state-based marketplaces also are investing in outreach. These are unexpected new costs for the marketplaces, but ultimately will bear fruit as millions more consumers have access to affordable coverage.