By Guy Furay
The recently passed 1.9 trillion dollar American Rescue Plan is radically shifting the way people will be getting insurance. In an industry that is almost constantly fluid, these are some of the biggest changes I have seen in my 25-year career.
As a consumer or a business owner, here are some things you need to know.
■ COBRA federal subsidies. COBRA is the name for the law that allows people who have recently lost their jobs or switched careers the ability to continue on group insurance for up to 18 months (Longer in certain circumstances) Former employees and their families have long used COBRA as a stopgap for their healthcare payment needs. Many people have not opted for COBRA because they have sticker shock from the high costs. The former employer no longer subsidizes the premium, thus resulting in much higher costs than people are used to paying. Under the new American Rescue Package Act plan, there is a 100% federal subsidy for COBRA costs for those laid off. These subsidies are available from April 2021 through September 2021.
■ More enhanced subsidies
o Retroactive to the start of 2021 and in effect for until the end of 2022, enhanced federal subsidies include people with income between 100-150% of federal poverty level will have a benchmark plan available for FREE;
o Subsidies now available for the first time for those with higher incomes above 400% of the Federal Poverty Level---instead capping their contribution to a maximum of 8.5% of income for a “benchmark” silver plan;
o unemployment compensation received in 2020 will not be considered taxable income for that year; and
o anyone who is on unemployment at any point in 2021 will be eligible for the maximum subsidies for health insurance---without regard to their income.
■ Income tax: People who underestimated their income for the 2020 tax year will not have to pay their excess subsidies back. This is a one-time thing.
■ Neonatal changes: Pregnancy Medicaid will now be extended from two months to a full year. This provision will be valid for seven years.
Now, here comes the harder part for consumers and business owners. All these changes to make private coverage more affordable came after many people had already enrolled in 2021 marketplace plans, after the 2020 tax filing season was underway and also after HealthCare.gov and state-based marketplaces had announced a time-limited special COVID enrollment opportunity.
It will take time for federal and state agencies to implement these changes, including updates to marketplace subsidy eligibility systems, drafting of model notices, and revision of tax forms. The new subsidies will be available on April 1st, but not before.
All of this will happen, but you need to be working hard to stay on top of it. You or the HR department need to be working with a smart insurance company to make sure nothing slips through the cracks and you get expert advice applicable directly to your situation.
Guy Furay is owner of the Insurance Source an independent brokerage specializing in health, life, disability and dental insurance. The Insurance Source has helped others protect what matters most since 2005 and is located in Greer, South Carolina. Learn more at www.theinsurancesourcesc.com.