2021 Hero OW Modeling Affordable Care Act

New study shows enhanced premium tax credits make coverage more affordable at all income levels

In March, Congress enacted the American Rescue Plan Act (ARPA) — a broad economic stimulus package that made important investments in health care. A principal component of the ARPA was enhanced premium tax credits for people with health coverage through the Affordable Care Act (ACA) marketplace. This assistance has made it easier for millions of Americans at all income levels to afford health coverage, but is only available in 2021 and 2022.

A new study from actuarial consultancy Oliver Wyman examined the impact of extending ARPA tax credits beyond 2022 and the benefits are clear.

Permanently expanding ARPA tax credits would significantly increase number of people with health coverage

Before ARPA, Americans with household incomes above 400 percent of the federal poverty level (FPL) were not eligible for premium tax credits for ACA coverage. This is commonly known as the “subsidy cliff.” However,  ARPA eliminated the subsidy cliff for 2021 and 2022 and now caps premiums at 8.5 percent of household income for those at 400 percent FPL or higher.

Coupled with more generous tax credits for lower income households, permanently expanding this assistance would increase the number of Americans covered under the ACA by an estimated 7.4 million. The number of uninsured Americans would also decline by an estimated 5.6 million.

Premiums for ACA coverage would decline by 10 percent

According to the study, average premiums — before tax credits — would also decline by an estimated 10 percent, from $556 per person, per month to $501. This is primarily due to younger, healthier people seeking coverage under the ACA.

So far, millions of Americans have taken advantage of ARPA’s temporary financial assistance. The Centers for Medicare & Medicaid Services (CMS) recently reported that 2.5 million people signed up for ACA coverage during the special enrollment period running from Feb. 15, 2021, through July 15, 2021.

To protect Americans’ coverage and lower health care costs, BCBSA strongly recommends that policymakers:

  • Make permanent the enhanced premium tax credits under the ARPA and adjust them for younger consumers to encourage them to purchase coverage
  • Lower cost-sharing requirements for enrollees with ACA coverage and eliminate the subsidy cliff

Taken together, these steps will help expand access to care and help to ensure health care remains affordable for millions of Americans.


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