After months of negotiations with recalcitrant U.S. Senator Joe Manchin on the Biden Administration’s sweeping Build Back Better Plan, the enactment of the slimmed-down Inflation Reduction Act (IRA) in August was a surprising and timely achievement by Congress.
The $437 billion measure includes major investments to slow climate change, relief from high drug costs for Medicare enrollees, and a three-year extension of enhanced premium assistance for consumers purchasing qualified health plans (QHPs) from the NY State of Health (NYSOH) marketplace. The premium assistance program was enacted as part of the 2021 American Rescue Plan Act (ARPA) and was scheduled to expire in December of this year.
The ARPA built on the Affordable Care Act by deepening premium tax credits for enrollees earning less than $51,520 for an individual and $106,000 for a family of four, and, for the first time, capped premiums at 8.5% for families earning more than that upper limit. These enhanced subsidies, as shown in a UHF issue brief, improved affordability dramatically: A family of four in upstate Tompkins County earning about $105,000 saved over $13,715 on premiums in 2022. These premium reductions would have been reversed without the IRA extension.
The NYSOH marketplace estimates that as of May 2020, about 140,000 enrollees were eligible for the expanded subsidies and would have faced premium increases averaging 58% without them. Because of New York’s successful Essential Plan program, which offers free coverage with minimal cost sharing to enrollees earning less than about $26,000, the number of QHP policyholders that benefit is smaller than in many states. But the tax credits for lower-income enrollees will instead buttress a special state fund earmarked for the Essential Plan by an estimated $600 to $700 million. Finding a creative way to put the added funds to work to expand coverage further is an important opportunity. Recent improvements to the Essential Plan have included a modest increase in provider rates, a quality incentive program for participating plans, the elimination of monthly premiums, expanded vision and dental benefits, and a pending increase in the income limit for the program.
Action on the subsidy extension is timely for several reasons. The 2023 Open Enrollment Period begins in two months; now, consumers will be able to shop for plans based on actual costs, rather than paying a higher premium up front, with a potential retroactive bump in tax credits further down the road. The extension will also help offset the impact of the weighted average 9.7% premium increase approved by the Department of Financial Services for 2023 individual plans. This was less than insurers sought but still a burden for many consumers, who are struggling with other cost increases. And since many healthier consumers might have dropped coverage without the deeper subsidy (one plan estimated that costs would increase about $10 per member per month without the extension), rates will be more stable overall.
Finally, sometime soon, the federal government will allow the COVID-related “public health emergency” (PHE) determination—first adopted in January 2020 and last extended in July 2022—to expire. When it does, New York officials will have to redetermine income eligibility for all Medicaid, Essential Plan, and Child Health Plus enrollees. Experts have warned of risks of significant Medicaid coverage losses once the PHE expires. The IRA subsidy extension means that Medicaid enrollees who are no longer eligible and who have incomes exceeding the limit for the Essential Plan ($25,600 for individuals)—as well as current Essential Plan enrollees determined to no longer be eligible—will have a softer landing in the QHP market. Premiums will be capped at 2% of income rather than 6.53%. In 2022, this change translated to a premium of roughly $33 per month for a Queens resident instead of almost $100.
The ARPA extension allows state regulators to sidestep a major administrative headache and frees policymakers from the task of somehow backfilling the lost federal subsidies with state dollars. Instead, the focus can be on tackling other pressing issues, such as the hundreds of thousands of immigrants who still lack coverage and the need to improve health equity overall.
Peter Newell is the director of UHF’s Health Insurance Project and its Patricia S. Levinson Fellow.