While New Yorkers lined up for their COVID-19 vaccinations, Congress and President Biden provided a major shot in the arm for the 11-year-old Affordable Care Act as part of a broad stimulus package known as the American Rescue Plan Act.1 After years of neglect and outright hostility toward ACA programs by Congress and the Trump administration, the ARPA deepens affordability subsidies, provides premium tax credits to higher-income individuals and families, and creates new options for New Yorkers who lost job-based health coverage or collected unemployment insurance benefits in 2021. This issue brief focuses on the larger subsidies (tax credits) available for the purchase of coverage through New York’s health insurance marketplace (NY State of Health, or NYSOH), and the expansion of subsidy eligibility to households that earned too much for financial help under the original ACA standard.
This is the first in a two-part series on health coverage provisions in the American Rescue Plan Act. The next brief will highlight extra coverage help for people who have lost their jobs or job-based health insurance.
How the ACA Makes Coverage More Affordable
Under the ACA, premiums for eligible individuals and families purchasing qualified health plans through the marketplace are capped at a percentage of income on a sliding scale; federal premium tax credits make up the difference between the actual cost of the coverage and the enrollee’s share.2 Consumers have the option of applying all or a portion of their tax credit up front to lower monthly costs, or they can collect a refund later through their tax filings. The tax credit amounts are tied to the second-lowest-cost “silver” plan in a county, known as the benchmark plan,3 and the premium caps range from 2.07% at 100% of the federal poverty level (i.e., $12,760 for an individual and $26,200 for a family of four) up to 9.83% at 400% of the FPL (about $51,040 for an individual and $104,800 for a family of four).4 For the current year, an individual in Brooklyn earning about $30,000 (235% FPL) would pay around $200 monthly for coverage under the lowest-cost silver plan (8% of income), with the federal government sending another $429 per month in advanced premium tax credits directly to the health plan.5
The ARPA improves ACA affordability in two ways: substituting a lower sliding-scale cap for premiums than the original ACA income guide; and permitting individuals and families earning more than 400% FPL to qualify for subsidies if premiums for the benchmark plan in their county exceed 8.5% of income, the new cap at the top of the sliding scale. These changes apply to the 2021 and 2022 policy years, and are due to expire at the end of 2022.
Implementing the ARPA
After President Biden signed the ARPA into law in March 2021, New York State moved quickly to implement the act’s new provisions, extending the open enrollment period through the end of December 20216 and addressing the subsidy enhancements in a multi-phase process.7 In the first phase, the eligibility of two groups—current NYSOH enrollees with incomes at or below 400% of FPL who meet the standards for the enhanced tax credits and those who opened an online account but didn’t sign up for coverage—was recalculated. These individuals were advised of the ARPA changes through emails and letters, and they were invited to log into their accounts and apply the higher subsidies to lower their monthly premiums starting May 1, 2021. The marketplace also updated its “compare plans and estimate cost” anonymous shopping tool, issued a revised consumer guide,8 provided assistors that help consumers enroll with new toolkits9 and lists of clients eligible for enhanced subsidies, and launched digital10 advertisements, videos, and social media.
Next, NYSOH automatically adjusted the subsidy levels for all current enrollees earning less than 400% FPL (less than $51,000 for individuals and $104,000 for a family of four). Finally, the marketplace made tax credits available for consumers earning over 400% FPL in June, updating the “compare plans and estimate cost” tool to reflect the higher subsidies. Currently, consumers are permitted to enroll in the marketplace and pay the full premium at that income level (and some do), but now ARPA subsidy eligibility will drive down premiums for many.
In order to illustrate the affordability enhancements from the ARPA, “before and after” scenarios were developed using hypothetical individual and family units from different counties and with varying incomes, showing how the ARPA would affect the cost of their coverage. Premium reductions for existing and potential enrollees eligible for tax credits under the original ACA standards are highlighted first.
Increased Affordability of ACA Plans
Just as the ACA played out differently depending on states’ underlying insurance laws and regulations, the ARPA does too. First, New York’s Child Health Plus program is the most generous in the nation, charging zero cost sharing, and subsidizing premiums for families earning less than 400% of the FPL.11 As a result, many families package CHP coverage with qualified health plans purchased on the NYSOH marketplace for adults. And because New York (along with Minnesota) opted to take advantage of an ACA option to create a Basic Health Program (known in New York as the Essential Plan),12 enrollees earning less than 150% FPL in New York already enjoyed $0 premiums, and about 400,000 enrollees with incomes between 150% and 200% FPL ($19,140 and $25,529) paid $20 per month. But as part of the recently enacted state budget for fiscal year 2022,13 New York eliminated the $20 premium for the higher-income Essential Plan group, and also added no-cost vision and dental benefits beginning June 1, 2021. Increased ARPA premium subsidies for lower-income people will flow to the trust fund set up to operate the Essential Plan, which will help offset the cost of the new premium reductions and benefits. The ARPA subsidy increases will have a more visible—and dramatic—impact on premiums for individuals and families with incomes between 200% and 400% of the FPL.
As shown in Table 1, the new ARPA premium scale produces consistent savings across Queens County, Tompkins County (Ithaca), and Erie County (Buffalo), with the biggest premium reductions occurring for individuals earning between approximately 200% of the FPL and 300% ($25,600 to $38,200). Because the ACA formula for tax credits drives slightly higher subsidies to consumers living in areas where there is a larger difference between the lowest- and second-lowest cost silver plan, New York City residents pay slightly lower premiums. For example, a QHP individual purchaser in Queens earning about $25,600 annually would see monthly premiums fall from about $130 per month under the ACA calculation to $31 per month for the lowest-cost silver plan with the new ARPA rules, a roughly 75% reduction, while an individual with income of about $32,000 would save over $116 in monthly premium costs under the ARPA compared to the ACA. Even at the upper end of current scale (400% FPL or $51,040), Queens buyers would pay 14% less in premiums compared to the ACA subsidies. For a Queens family of four purchasing the lowest-cost silver plan, premium reductions follow the same pattern of percentage decreases, dropping by nearly 80% for a family earning about $52,600 annually (201% FPL) and over 40% for a family with an income of $78,600 (300% FPL). Families at the top end of the ACA premium cap scale (400% FPL or $104,800) would save over $100 a month.
Individuals and families in Tompkins County and Erie County would also benefit from sharp premium reductions. Premiums for individual lowest-cost silver plans would drop by about 70% for individuals earning just over $25,520 (200% FPL), and by over 40% for those earning about $38,000 (300% FPL). Family savings would mirror the savings for individuals in both Tompkins and Erie counties, with monthly premium reductions ranging from nearly $200 at the low end of the income scale (200% FPL, or $52,500 annually) to $117 at the high end (400% FPL, or $104,800 annually).
Source: See Methodology.
Smoothing Out the ACA Cliff for Moderate-Income New Yorkers
The abrupt end of ACA subsidy eligibility at 400% FPL (about $52,400 for individuals and $104,800 for a family of four)—commonly known as the “ACA cliff”—means that individuals with incomes just over that border face sharp premium increases for coverage. For example, in Queens, an individual with income of just under 400% FPL paid about $406 per month for the lowest-cost silver-level plan in 2021, while a person earning slightly more needed to come up with about $611 per month, a 35% difference. For a family of four without subsidies, the difference is even more extreme: $21,000 in annual premiums—over 20% of annual income—compared to a subsidized premium of $8,400.14
Along with increasing subsidies for current enrollees, the ARPA effectively replaces the cliff with a gentle incline by eliminating the 400% FPL cutoff for premium tax credits, and replacing it with a cap at 8.5% of income, thus authorizing subsidies for families earning more than 400% FPL. The different scenarios (Table 2) comparing pre- and post-ARPA premiums for the lowest-cost silver plan for these higher-income individuals and families in the same three counties illustrate the significant affordability improvements that will kick in, and how regional premium variations are eliminated.
Individual enrollees ineligible for help under the ACA will now benefit from sizeable premium reductions, with the deepest savings going to those with incomes just over 400% FPL, up to 600% FPL ($76,500). The amount of premium reductions is tied to the cost of coverage in these areas. Compared to the ACA subsidy schedule, enrollees in medium-cost Queens with incomes just over the current limit could see premium decreases of over 40% for the lowest-cost silver plan—$255 per month—and 28% at 500% FPL ($63,800). Cost reductions end at the 700% FPL income bracket in Queens, but even at 600% FPL, consumers will see modest savings of about 13% or $81 per month compared to ACA costs. In high-cost Tompkins County, premium reductions are deeper and wider, with consumers earning between 400% FPL and 700% FPL paying much lower premiums under ARPA than under the ACA, including a 44% reduction at incomes just above the current cap, down to 4% at the upper end of eligibility ($89,320). Premium costs in Erie County are already among the lowest in the state, so consumers will see smaller premium reductions from current rates, about 22% ($104 per month) at incomes slightly higher than 400% FPL and 4% at 500% FPL ($63,800).
ARPA premium reductions for moderate-income families follow the same general patterns as individual coverage—deeper savings for families in the 400%–600% FPL range and in higher-cost areas—but because of the sky-high costs of family policies (in this scenario, couples with children between the ages of 19 and 26), the savings are wider across income categories, and in some cases are quite dramatic. Queens County families will experience monthly reductions, ranging from 59% at just over 400% FPL for a family of four to 6% in the 900% FPL bracket ($235,800), compared to their costs under the original ACA. In higher-cost Tompkins County, monthly premium reductions start at 61% (about $1,140 per month) at just over 400% FPL ($105,000) and extend all the way up to 1,000% FPL ($262,000) for a 2% monthly savings. Premium reductions are more modest in low-cost Erie County, phasing out beginning at just over 700% FPL, but still significant: a 45% premium reduction (over $600 per month) is in store for families earning just more than 400% FPL, and premiums for families at 500% FPL ($131,000) will drop by nearly one-third.
Source: See Methodology.
Regaining Momentum on Expanding Access to Coverage
New York used ACA tools—Medicaid expansion, the Basic Health Program, and premium tax credits for purchasers on the NYSOH marketplace—to drive the uninsurance rate down to the 5% range in 2018–19, a historic low.15 How many New Yorkers will the enhanced ARPA subsidies reach, and how many uninsured will gain new coverage? It’s helpful to look at early national estimates on coverage gains alongside New York data on enrollees who will automatically receive enhanced credits, those currently uninsured but eligible for assistance under ACA standards, and New Yorkers who became newly eligible for support under the ARPA.
A Congressional Budget Office analysis of legislation similar to the ARPA16 estimates that by 2022, the additional—but at this point temporary—premium tax credits would boost marketplace enrollment nationally by 1.7 million before phasing out. That total includes 1.3 million Americans who are uninsured, among them 680,000 with incomes above 400% of the FPL. Of the total of $35 billion in estimated premium tax credits for the two-year expansion, about two-thirds would go to existing enrollees, and one-third to new enrollees. Recent modeling17 on the ARPA impact conducted under the assumption that the enhancements would be made permanent found a much greater impact: 5.1 million more enrollees in the marketplace nationally (nearly half the total current enrollment), including 4.1 million fewer uninsured, and a 15% decrease in marketplace premiums, as healthier individuals join the market.
Of the 214,000 marketplace enrollees reported by NYSOH as of the end of February 2021, about 111,700 were receiving financial assistance and 102,700 were not;18 it’s likely that most of the first group will see premium decreases and many in the second will as well, given the availability of help for incomes above 400% FPL, particularly for those who live in higher-cost areas. A third category to consider is the roughly 56,000 individuals19 who purchased coverage directly from health plans in 2020, some of whom may be eligible for the new credits for moderate-income earners. Health plans could play an important role in this process; California’s exchange recently announced that health plans had agreed to help switch subsidy-eligible enrollees from off-exchange plans to on-exchange plans, with out-of-pocket expenses during 2021 credited to any new deductible or out-of-pocket limit that might otherwise apply.20 According to the Cuomo administration, more than 150,000 New Yorkers are expected to receive increased tax credits and nearly 120,000 already have.21
The final category of potential ARPA beneficiaries are uninsured New Yorkers with incomes in the 200%–400% FPL range or above. According to a recent federal analysis,22 about 175,000 New Yorkers earning above 400% of the FPL, and 161,000 between 250% and 400% FPL, were eligible for marketplace coverage but uninsured.
The ARPA boost in credits should make a real difference with both categories of these uninsured, and there are two other New York factors that might help. First, while coverage will soon be free to all individuals earning less than 200% FPL through the Essential Plan—New York officials projected an enrollment increase of 100,000 because of that change23—the ARPA smooths out a smaller cliff for those earning just beyond Essential Plan eligibility by reducing the monthly premiums from about $139 to $47.24 And because New York (like Vermont) does not permit premium differentials based on age,25 younger New Yorkers ineligible for the Essential Plan will catch up somewhat to their other-state peers since ARPA subsidies will be distributed equally in New York based on income; in other states, younger people are already paying close to the new premium caps because of the age rating formulas in place, so older enrollees will receive larger tax credits under the ARPA in those states.
Still a Few Glitches
A recent federal survey found that over 30% of New York’s adults lived in households having trouble paying normal bills, 22% feared the loss of job income for someone in the household, and 24% were worried about eviction or foreclosure.26 The ARPA provides New York with well-targeted, timely, and significant support—both for families who are uninsured and for those with coverage who are struggling during these difficult economic times. At the same time, the ARPA did not address all the ACA’s shortcomings, such as high cost sharing and barriers to marketplace purchasers based on immigration status.
One other problem may yet be addressed: the “family glitch” that prevents families from applying for ACA tax credits when there is an offer of “affordable” employee-only coverage on the table (the contribution does not exceed 9.83% of the worker’s income), even if the cost of family coverage for dependents far exceeds that cap.27 One recent analysis found that over 201,000 New York dependents fell into the family glitch, some paying more for coverage than they would at the marketplace, and others uninsured.28 An early executive order by the Biden administration29 suggests an interest in removing that stumbling block through a regulatory change that could provide thousands of New Yorkers with access to the marketplace.
Some potential enrollees may still balk at the considerable out-of-pocket costs they may incur, unaltered by the ARPA. For example, bronze-level coverage, the most popular on the NYSOH marketplace, carries a deductible of $4,700 for individuals and $9,400 for families for 2021.30 At the same time, some families might find cost-sharing amounts more manageable with the considerable savings generated by new ARPA premium subsidies: families newly eligible for premium subsidies with incomes just above the old cutoff could bank savings of over $13,700 annually in Tompkins County, about $12,400 in Queens, and more than $7,200 in Erie. A person in Queens earning about $38,000 annually and buying an individual silver plan can expect about $1,400 in savings annually. Since the ARPA applies to the 2021 and 2022 coverage years, consumers enrolled in marketplace plans may be eligible for retroactive subsidies for the first few months of 2021, accessed through 2021 tax filings.31
Another option for consumers fearful of out-of-pocket costs is to use the premium savings to “buy up” to a gold-level plan ($600 individual deductible and $1,200 for families). Although it recommends that consumers check with their health plan first, NYSOH is requiring insurers to allow consumers to choose a different product from the same insurer during the extended enrollment period, and to carry over any health expenses and apply them towards a new deductible or maximum out-of-pocket limit.32 At mid-year, that might not make sense for some consumers with higher expenditures, and some may also choose to use their ARPA savings to “buy down” to one of the lower-cost or $0 premium plans, which will be more plentiful, or access the higher tax credits through their 2021 tax filings.
As a presidential candidate, Joe Biden supported additional ACA improvements; it may be that the Biden administration and Congressional allies will take action to “build on the ACA” some more,33 but their first goal will be to make the ARPA changes permanent.34 Effective outreach and strong consumer assistance will be the key to wringing the most out of ARPA enhancements that effectively target two segments of New York’s uninsured population—those eligible for financial help but not enrolled, and families earning too much for help under the ACA.
Numerous studies have demonstrated the value of consumer assistance—and the difficulty consumers have finding it,35 even at a time when many families have lost job-based coverage. A survey36 conducted in September 2020 found that, despite the ongoing economic dislocation caused by the COVID-19 pandemic, nearly half of uninsured adults had neither looked for information on marketplace coverage nor tried to obtain Medicaid or Child Health Plus; the survey cited “perception of Marketplace affordability” as a reason why consumers failed to investigate coverage options.
Many New Yorkers, especially those with incomes too high previously for ACA premium tax credits, might assume that pandemic relief began and ended with stimulus check #3, and additional help to make coverage more affordable might be too good to be true. NYSOH and its statewide network of coverage assistors and brokers will have their work cut out for them,37 but they have a strong message to convey: health insurance coverage in New York just got more affordable.
Table 1. Federal poverty level percentages were based on the 2020 Federal Poverty Guidelines published by the Office of the Assistant Secretary for Planning and Evaluation, Department of Health and Human Services, which are used for the 2021 plan year under the ACA. ACA monthly premiums were based on the lowest-cost monthly premiums for a silver-level medical policy, using the NYSOH “compare plans and estimate cost” tool in February and March 2021. (If this direct hyperlink to the tool does not work, the tool may also be reached from the marketplace home page, https://nystateofhealth.ny.gov/.) ARPA monthly premiums were developed from the updated tool in July 2021. Family premiums were based on a family of four with two adults and two children between the ages of 19 and 26.
Table 2. ACA monthly premiums were based on the lowest-cost monthly premiums for a silver-level medical policy, using the NYSOH “compare plans and estimate cost” tool in February and March 2021. (If this direct hyperlink to the tool does not work, the tool may also be reached from the marketplace home page, https://nystateofhealth.ny.gov/.) ARPA monthly premiums for the lowest-cost silver plan were developed using the updated “compare plans and estimate cost” tool in July 2021. Family premiums were based on a family of four with two adults and two children between the ages of 19 and 26.
This work was made possible by a grant from The New York Community Trust. Several officials at the NY State of Health marketplace, health plan officials, and consumer counselors in the state assistor network provided useful comments and insights. From UHF, Miles P. Finley, Managing Editor, edited and designed this report; Catherine Arnst, Director of Public Information, and Francesca Demane, Digital Marketing Manager, handled a number of tasks related to media and dissemination.
1. H.R. 1319, American Rescue Plan Act.
2. Kaiser Family Foundation. October 30, 2020. Explaining Health Care Reform: Questions about Health Insurance Subsidies.
3. The Affordable Care Act provides for five main coverage options, based on their actuarial value (the percentage of total health care expenses for an average individual that the policy will pay): catastrophic, bronze, silver, gold and platinum. Silver plans cover about 70% of a typical consumer’s health expenses, while platinum plans cover about 90%, but carry a much higher monthly premium.
4. Income figures as a percent of federal poverty levels based on 2020 Federal Poverty Guidelines published by the Office of the Assistant Secretary for Planning and Evaluation, Department of Health and Human Services, the basis for tax credit calculations during the 2021 plan year.
5. Premium estimates based on the NY State of Health “compare plans and estimate cost” tool.
6. NY State of Health. March 31, 2021. Press Release. NY State of Health Announced Significant New Tax Credits. Now Available to Lower the Cost of Health Coverage.
7. NY State of Health. March 26, 2021. How NY State of Health Enrollees Benefit from the American Rescue Plan.
8. NY State of Health. April 15, 2021. The American Rescue Plan: Frequently Asked Questions.
9. NY State of Health. April 2020. Assistor Newsletter. Special Edition. New Increased Financial Assistance Now Available Through American Rescue Plan Reduces the Cost of Health Coverage for New Yorkers; Outreach Toolkit.
10. NY State of Health digital advertisements, viewed online on April 22, 2021, include “New funding is here to lower your health costs, call or go online to apply for financial assistance to lower your premiums” and “Health care just got more affordable! With the new federal funding to save you money, you could find a health plan at little or no cost;” Videos (Big news, New York) in multiple languages can be viewed here; and social media have also been produced (link).
11. New York State Department of Health. Child Health Plus.
12. NY State of Health. Essential Plan.
13. FY 2022 NYS Budget. Enacted Budget Article VII Bills. Health and Mental Hygiene (S2507-C/A3007-C), Part H.
14. Personal communication with officials at the NY State of Health Marketplace.
15. Keisler-Starkey K and Bunch L. September 2020. Health Insurance Coverage in the United States: 2019. Current Population Reports. United States Census Bureau; Cohen RA, Terlizzi E and Martinez M. May 2019. Health Insurance Coverage: Early Release of Estimates from the National Health Interview Survey, 2018. U.S. Department of Health and Human Services, Centers for Disease Control and Prevention, National Center for Health Statistics.
16. Congressional Budget Office. Revised February 17, 2021. Cost Estimate. At a Glance. Reconciliation Recommendations of the House Committee on Ways and Means.
17. Banthin J, Buettgens M, Simpson M and Wang R. April 2021. What If the American Rescue Plan’s Enhanced Subsidies Were Made Permanent? Estimates for 2022. Urban Institute.
18. NY State of Health. Press Release. March 9. 2021. NY State of Health Announces Enrollment Surges, More than 5.8 Million New Yorkers Enrolled in Health Coverage; personal communication with NY State of Health officials, April 2021.
19. Personal communication with officials at NY State of Health, March 2021.
20. Covered California. March 18, 2021. Press Release. Covered California, Community Leaders and Health Plans Highlight Key American Rescue Plan Provisions and Lay Out a Roadmap to Lower Premiums and Help Millions Get Covered.
21. Governor Andrew Cuomo. June 3, 2021. Press Release. Governor Cuomo Announced Enrollment Through New York State of Health Tops 6 Million.
22. Department of Health and Human Services, Assistant Secretary for Planning and Evaluation. March 12, 2021. State and Local Estimates of the Uninsured Population: Prevalence and Key Demographic Features.
23. New York State Division of the Budget. FY 2022 Executive Budget Briefing Book.
24. UHF analysis of the effect of ACA premium caps on premiums in this income category before and after enactment of the ARPA.
25. Centers for Medicare & Medicaid Services, Centers for Consumer Information and Insurance Oversight. Market Rating Reforms. State Specific Rating Variations. States typically use ratios of 3:1 or 2:1, meaning health plans can use rating methodologies that charge older enrollees rates that are three or two times higher than its younger enrollees. The CBO analysis (see note 17) estimates that nationally, 21-year-olds will not receive additional ARPA subsidies for coverage on average, while 64-year-olds will receive an added $7,900 annually in tax credits.
26. U.S. Department of Commerce, Census Bureau. Household Pulse Survey, Week 27.
27. In New York, the average employee contribution for employee-only coverage at a private sector firm was $1,683 in 2019, well below the ACA 9.83% threshold for marketplace eligibility for a household with $25,000 in income. But the average employee contribution for family coverage was $5,149, over 20% of income for the same family (Agency for Healthcare Research and Quality, Center for Financing, Access and Cost Trends. 2019 Medical Expenditure Panel Survey-Insurance Component). For additional background information on the family glitch, see Brooks T. November 2014. Health Policy Brief: The Family Glitch. Health Affairs.
28. Cox C, Amin K, Claxton G and McDermott D. April 7, 2021. The ACA Family Glitch and Affordability of Employer Coverage. Kaiser Family Foundation.
29. Executive Order, President Joseph R. Biden. January 28, 2021. The White House. Executive Order: Strengthening the Affordable Care Act.
30. NY State of Health Invitation. Attachment B. Standard Benefit Design Cost Sharing Description Chart (05/07/20).
31. For information on the process for filing for ACA tax credit refunds, see U.S. Department of Treasury, Internal Revenue Service, The Premium Tax Credit: The Basics.
32. NY State of Health. April 15, 2021. The American Rescue Plan: Frequently Asked Questions.
33. Cox C et al. September 28, 2020. Affordability in the ACA Marketplace Under a Proposal Like Joe Biden’s Health Plan. Kaiser Family Foundation.
34. The White House. April 28, 2021. Fact Sheet: The American Families Plan. Statements and Releases.
35. Pollitz K, Tolbert J, Hamel L and Kearney A. August 7, 2020. Consumer Assistance in Health Insurance: Evidence of Impact and Unmet Need. Kaiser Family Foundation.
36. Haley JM and Wengle E. January 2021. Many Uninsured Adults Have Not Tried to Enroll in Medicaid or Marketplace Coverage. Urban Institute and Robert Wood Johnson Foundation.
37. NY State of Health. Navigator Directory; Find Navigator/Broker online tool.