The American Rescue Plan Explained: What’s in the $1.9 Trillion COVID-19 Relief Package?
Key takeaways:
Along with stimulus checks, the American Rescue Plan offers several benefits for healthcare during the ongoing pandemic.
The plan eliminates the income cap for financial help on the health insurance marketplace and lowers monthly premiums for many consumers for 2021 and 2022.
Under the new law, if you receive unemployment benefits or are enrolled in COBRA coverage, you can receive 100% subsidized health insurance through September.
The plan encourages 12 states to expand Medicaid by offering increased federal funding.
The American Rescue Plan is a $1.9 trillion COVID-19 relief package signed by President Joe Biden on March 11. It’s one of the largest federal stimulus packages in U.S history, only slightly less than the $2.2 trillion CARES Act of March 2020
Along with other support for people during the pandemic, the new American Rescue Plan provides a way for millions of people to get a big break on their healthcare costs. Read on to find out how the new law could save you money.
What does the American Rescue Plan do for healthcare?
The American Rescue Plan includes several ways for you to save on your healthcare costs and offers direct financial assistance. The new law provides:
Increased tax credits that lower what you pay for health insurance through the exchanges created by the Affordable Care Act (ACA)
100% subsidized COBRA health insurance coverage through September for people who have lost their jobs
Funding to help state and local governments add additional public health workers
Grants to support rural healthcare providers and to address mental health care
Incentives for states that haven’t expanded Medicaid to do so
Money to support COVID-19 vaccines and testing
Higher child tax credits — $3,600 for children under age 6 and $3,000 for children age 6 and older
$1,400 direct payments to millions of Americans
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How does the stimulus plan affect the health insurance marketplace?
As part of the ACA’s effort to expand access to healthcare, the government created a federal Health Insurance Marketplace. It provides premium subsidies to help moderate-income people afford health insurance.
Starting April 1, the American Rescue Plan will increase premium tax credits to further cut monthly health insurance costs across all income levels for the rest of 2021 and all of 2022.
It’s estimated the relief bill will lower monthly premiums by $50 per person and $85 per policy. In addition, 80% of enrollees will be able to get a plan for $10 or less per month after tax credits. About half will be able to enroll in a silver plan for $10 or less per month.
Before the American Rescue Plan, households with incomes greater than 400% of the federal poverty level were not eligible for tax credits. This was known as the subsidy cliff. The new law will remove the maximum income cap.
Households with incomes greater than 400% of the federal poverty level can now receive subsidies for the next 2 years (2021 and 2022). This will help many people who were previously left behind on the subsidy cliff.
Older people who aren’t eligible for Medicare yet but don’t qualify for financial assistance will also benefit.
For example, a 64-year-old earning just above the income cap — 401% of the federal poverty level — currently isn’t eligible for subsidies. They might pay an annual premium of nearly 25% of their income. After the American Rescue Plan, this 64-year-old is eligible for a yearly premium tax that significantly cuts what they pay each month.
Finally, Americans with incomes below 150% of the poverty line — $19,320 per year for an individual or $39,750 for a family of four — now qualify for higher subsidies. Because of the American Rescue Plan, you’ll have the option of a 100% subsidized plan on the exchange.
How can I enroll in ACA marketplace health insurance?
On April 1, current enrollees and new consumers can receive increased subsidies for 2021 marketplace coverage by visiting HealthCare.gov. This site serves 36 states that use the federal platform.
The U.S. is in the middle of a special enrollment period after President Biden reopened the marketplace in February. This period has been extended through August 15.
The special enrollment period allows any eligible individual to enroll in marketplace coverage through August 15. If you are not currently enrolled but want to receive extra subsidies under the American Rescue Plan, you can still enroll.
If you are already enrolled in the marketplace, you can get the subsidies by doing the following:
Visit HealthCare.gov and log into your account on or after April 1.
Update your application by either reselecting your current plan or choosing a new plan.
You will start receiving additional benefits on May 1.
The increased subsidies are retroactive to January 2021.
When you file your 2021 taxes next year, you can collect your January through April subsidies as tax refunds.
If you are a new consumer and need coverage starting on or after April 1, here’s what to do:
Visit HealthCare.gov to create an account, apply, and select a plan by March 31.
You will start receiving coverage on April 1.
On or after April 1, update your application by reselecting the plan you selected in March.
You will start receiving your additional benefits on May 1.
If you do not need coverage immediately, you can wait until April 1 to enroll and avoid resubmitting your application.
To be eligible for marketplace insurance, you must:
Live in the United States
Be a U.S citizen, a U.S national, or lawfully present
Not be incarcerated
If you already have marketplace insurance and want to switch your health plan, check how much you’ve already paid toward your deductible. When you switch plans your new deductible may be reset to zero.
If you live in a state that does not participate in the federal marketplace, your state may offer similar subsidies. For example, if you are enrolled in health coverage through Covered California, the California state marketplace, you will start automatically receiving savings in May.
Other state exchanges have announced that premiums for enrollees will go down in response to the American Rescue Plan. Those states include:
Check your state’s exchange to see what’s available. You can search online or enter your state into HealthCare.gov to find your marketplace.
Does the new law help people who are unemployed?
Many people have been left unemployed without affordable health insurance as a result of the COVID-19 pandemic. The American Rescue Plan offers health insurance subsidies for unemployed Americans enrolled in COBRA and those receiving unemployment insurance.
COBRA is a federal health insurance program that allows you to stay on your employer’s health plan after losing your job. At that point your employer no longer has to cover your health insurance costs.
With COBRA, you are typically responsible for paying the full premium plus an extra 2% administrative fee. This makes the cost out of reach for many workers who were laid off. Under the American Rescue Plan, the government will subsidize 100% of COBRA premiums from April 1 to September 30.
Keep in mind you are not eligible for COBRA if you quit your job or lose your job due to misconduct. If you get a new job that offers health insurance, you will no longer qualify for COBRA or the new subsidies.
The subsidy period also doesn’t extend COBRA coverage. If your coverage ends before September 30, you will no longer receive subsidies after that date. COBRA coverage usually lasts for 18 months after you lose your job.
If you are the spouse or dependent of a COBRA enrollee, your coverage can be extended to 36 months if you experience another qualifying event. This may include divorce from the covered employee or if the covered employee becomes eligible for Medicare.
How do I get the new COBRA benefit?
If you lost your job after November 1, 2019, but didn’t choose to enroll in COBRA coverage, you will have a chance to enroll during a special enrollment period. Employer plan administrators will send COBRA notices within 60 days of April 1, 2021. After receiving a notice, you will have 60 days to enroll in COBRA and start receiving government subsidies.
If you lost your job and were not able to receive coverage through COBRA, you can now enroll in the federal health insurance marketplace and receive maximum subsidies. Even if you’re not usually eligible, if you received unemployment in 2021, you’ll now qualify.
How does the American Rescue Plan affect Medicaid?
The American Rescue Plan offers extra financial assistance to the 12 states that have not expanded Medicaid eligibility. Under the new law, if states expand Medicaid they’ll receive a 5% increase in their financial support from the federal government for the next 2 years.
To expand Medicaid eligibility, states must include all adults with incomes up to 133% of the federal poverty level. Increased federal funding will also be given to Missouri and Oklahoma, two states that already adopted Medicaid expansion but haven’t yet implemented it.
The states targeted for Medicaid expansion are:
Alabama
Florida
Georgia
Kansas
Mississippi
North Carolina
South Carolina
South Dakota
Tennessee
Texas
Wisconsin
Wyoming
Medicaid expansion in these states would provide coverage for 4 million uninsured Americans. Medicaid expansion is associated with better health outcomes. It also helps reduce racial disparities in access to healthcare.
State action on Medicaid expansion appears to be in the works in a few of the 12 states:
Wisconsin, North Carolina, and Kansas all included funds for Medicaid expansion in their 2022 budgets.
In March 2021, Wyoming introduced legislation to expand Medicaid.
The American Rescue Plan also offers states the option of a 10% increase in the federal matching rate for Medicaid home and community-based services. This option is available starting April 1, and the increased funding lasts for one year.
In addition, the stimulus plan gives states the option to extend Medicaid to postpartum women up to 12 months after giving birth. Research suggests Medicaid coverage helps lower infant and maternal mortality rates, especially among Black mothers.
Prior to the new law, states were required to provide Medicaid coverage for only 60 days after giving birth. The option to extend coverage to 12 months and receive federal funding will be available for the next 5 years starting April 1.
The bottom line
The American Rescue Plan offers healthcare savings for many Americans as the COVID-19 pandemic continues. If you have health insurance through the federal marketplace, you may qualify for new tax credits or lower costs. To start receiving benefits, visit HealthCare.gov on or after April 1 and create or update your account. If you are uninsured, you have until August 15, the end of a special enrollment period, to enroll and start receiving savings. If you are unemployed, you may also be eligible for lowered costs on COBRA insurance.
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