The latest Covid-19 stimulus, the American Rescue Plan is a very large bill that may affect your health insurance. Today we’ll go over exactly how the stimulus plan may affect you. Individuals who currently rely on (or are hoping to rely on) COBRA, Marketplace Plans, or Medicaid may suddenly find themselves eligible for tax credits, lower premiums or expanded eligibility.
First, let’s talk about COBRA. COBRA is a way for you to keep your exact same employer-sponsored health insurance even after you are no longer at your job. There are, of course, some stipulations:
- You are only able to keep COBRA for a period of up to 18 months (possibly 36 under certain circumstances)
- You must pay for your portion, your employer’s portion, and up to a 2% administrative fee
- You are ineligible if you are fired for gross misconduct (such as stealing). You are eligible if you quit, are terminated, or are laid off.
COBRA & the American Rescue Plan
COBRA is meant as a stop-gap, but it can be very cost prohibitive. The American Rescue Plan has sought to change that (for the time being).
If you are currently utilizing COBRA because you were terminated or your hours were cut on or after Nov. 1, 2019, you will now be eligible for a 100% subsidy of your premiums. So, what does this mean? You will no longer have to pay your health insurance premiums for up to six months, so up to Sept. 30, 2021.
Also, if you chose not to enroll in COBRA because it was too expensive, there is good news. If you were terminated or had your hours cut on or after Nov. 1, 2019, but did not elect to take part in COBRA, you are still eligible. Your employer has 60 days to contact you letting you know that you have the option to enroll. You’ll then have 60 days to enroll 100% subsidized. Although your employer technically has to contact you, it is in your best interest to be proactive and contact them if need be.
Things to Know:
- Usually, COBRA is retroactive. Under the American Rescue Act, it will be active once you enroll.
- The American Rescue Act will NOT extend COBRA past the 18-month period.
- If you are eligible for group health insurance elsewhere or you become eligible for Medicare, you will not be eligible for the subsidy.
Another major way that the American Rescue Plan is lending a helping hand is through expanded marketplace tax credits. It can affect you in the following ways:
- Increased Eligibility for Tax Credits
- Increased Tax Credits
- Tax Credit Forgiveness
Increased Eligibility Under the American Rescue Plan
Prior to the American Rescue Plan, people purchasing a marketplace plan could only be eligible for a premium tax credit if they made up to 400% of the Federal Poverty Level for their household size. The American Rescue Plan expands the availability of these tax credits to those potentially making more than 400% of the FPL. You can log on to healthcare.gov or work with a licensed broker to determine your eligibility.
Increased Tax Credits
Tax credits are usually reflected as a discount on your monthly premiums. The size of these discounts is also increased under the American Rescue Plan. As of April 1st, you may notice that your bill is significantly lower. It is estimated that:
- On average, premiums will decrease by $50 per person or $85 per month
- Four out of five enrollees will be able to find a plan for less than $10 per month
Plans will now be available with a $0 monthly premium for those at or below 1.5 times the FPL and those who have had to rely on unemployment may also be eligible for a plan with a $0 monthly premium.
***Make sure to apply now either on Healthcare.gov or with a broker. The Covid-19 special enrollment period runs until May 15th in most states. It is also suggested that you update your information after April 1st to ensure that you see the tax credits reflected on your monthly premiums.
Tax Credit Forgiveness
There’s also one more bit of good news with regards to past subsidies. If you enroll in a Marketplace Plan you may be eligible for a premium tax credit aka subsidy. You can receive this tax credit in one of two ways. If can either be credited to you upfront resulting in a discount on your monthly premiums or it will be deducted when you file your taxes. Most people choose to have it applied as a credit to their monthly premiums.
There is one caveat. In order to be eligible for a premium tax credit, healthcare.gov will ask you to estimate your MAGI (modified adjusted gross income) for the upcoming year. If you underestimate and you end up making more money than anticipated you may make yourself ineligible for that upfront tax credit that you claimed. If this is the case, you would have to pay that tax credit back comes tax time.
The American Rescue Plan would forgive you from having to pay back this subsidy for 2020. Remember, this is a one time provision!
The American Rescue Plan also provides additional funding for Medicaid and CHIP to serve as incentives for the individual states. States that have yet to adopt an expanded Medicaid program, but do so now, would receive additional funding. This would allow expanded Medicaid benefits for those now eligible.
Additionally, pregnant women must be provided Medicaid coverage for at least 60 days after birth if their income is under 138% of the FPL. Now, the state can extend this for a period of up to 12 months with the federal government helping to provide funding.
Finally, for those enrolled in Medicaid or CHIP, there can be no charge for treatment or preventative treatment of Covid-19 for one year after the end of the Public Health Emergency. You can contact your local Medicaid office or visit Medicaid.gov for more information.
The Covid-19 Special Enrollment Period lasts until May 15th in most states. Give us a call at 888-918-0518 or schedule a call today. Our services are 100% FREE!
Jesse Smedley is the Principal Broker for iHealthBrokers and the founder, president, and CEO of Smedley Insurance Group, Inc. and iHealthBrokers.com. Since the inception of SIG in 2007, Jesse has been dedicated to helping people save money on their health insurance by providing them with resources to educate themselves on all their health insurance options, both under age 65 and Medicare beneficiaries. He is featured in many publications as well as writes regularly for expert columns regarding health insurance and Medicare.