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And the Other Shoe Drops… ACA Premiums and the ARP

When the American Rescue Plan Act (ARPA) passed, advocates of the coverage-at-all-costs approach to health insurance were thrilled that it enhanced the premium tax credits (PTCs) (the health insurance subsidies in the individual market) and removed the limit that subsidies were only available to those under 400 percent of the federal poverty level (FPL). The bad news is that the provisions were put into place only for 2021 and 2022. This turned out to be a self-inflicted trap, as the same advocates were counting on using the Build Back Better Act (BBBA) to make the richer subsidies permanent (or as close to permanent as federal budgeting permitted). In 2023, the subsidy structure will return to the original vision of the Affordable Care Act (ACA).

How big a deal is this? When viewed from the perspective of a pandemic, it is easy to make the case that health insurance is now more valuable than ever. Accordingly, greater subsidies might make sense temporarily. From this perspective, having them expire as the pandemic fades is not a major event.

How big a difference is this? Christopher Holt and Margaret Barnhorst ran the numbers. In 2022, 89 percent of the 14.5 million ACA Marketplace enrollees were eligible for PTCs. Accordingly, roughly 12.9 million people who enrolled in ACA coverage in 2022 will likely be required to pay a greater share of their premium in 2023. How much? According the Holt and Barnhorst:

  • “About 4.8 million enrollees below 150 percent of the federal poverty level (FPL) pay no premiums in 2022 under the ARPA. In 2023, those with income at 100 percent of FPL ($12,880 for an individual) will contribute $22 per month toward their premium, while those at 150 percent of FPL ($19,320 for an individual) will pay $67 per month.
  • The roughly 4.7 million enrollees with income between 151–250 percent of FPL will see the largest percent increases from 2022 to 2023, with those at 200 percent of FPL ($25,760 for an individual) seeing a 226 percent increase, or about $97 a month.
  • Those making 300 percent of FPL ($38,640 for an individual) will see the largest dollar increase in monthly premium contributions among those who will remain PTC eligible in 2023 at $123.
  • Of those above 400 percent of FPL (above $51,520 for an individual) who will no longer be eligible for PTCs after 2022, the impact will vary dramatically by age, with younger individuals seeing virtually no difference in cost, while those age 64 will have the most significant increases.”

The largest percentage increases are roughly $100 per month for someone making $25,000. This is roughly 5 percent of income. Certainly not nothing (and less than inflation these days), but seemingly reasonable for something as important as health insurance. Be prepared for the drumbeat about an incipient apocalypse to rise as the year goes on, but that doesn’t match facts. Instead, insurance subsidies will simply revert back to those passed in the ACA.

Disclaimer

Fact of the Day

In 2023, those with income at 100 percent of federal poverty level ($12,880 for an individual) will contribute $22 per month toward their ACA premium.