The American Rescue Plan Act of 2021 (the Act) was signed into law on March 11, 2021. This sweeping law provides funding to address the impact of the COVID-19 pandemic on the economy, public health, state and local governments, individuals, and businesses. Provisions include stimulus payments for individuals and families; funding for states, localities and tribes; funding for schools, childcares, and small businesses; extended unemployment benefits and sick leave; funding for nutrition programs and housing assistance; and support targeted at key populations. This article focuses on the healthcare-related provisions of the Act, as well as other COVID-19 policy developments from the federal level.
Funding to Address the Virus and Support Healthcare Providers
The Act includes funding to increase production, distribution and tracking of the COVID-19 vaccine, as well as for treatment, testing and prevention (including funds granted to states, localities and tribes for testing, contact tracing and other mitigation activities).
The Act also provides additional funding for the CARES Act Provider Relief Fund as well as funding for rural healthcare providers.
Increased Access to Private Insurance
The Act includes several temporary provisions aimed at increasing access to commercial insurance coverage through expansion of the Premium Tax Credits (PTCs) for Health Insurance Marketplace coverage and new temporary COBRA subsidies.
Temporary Enhancement of Premium Tax Credits
Under the Affordable Care Act (ACA), the amount of PTC for which individuals are eligible is based on income, with the individuals’ premium contributions limited to a set percentage of their income and PTCs available to cover the remainder of the premium for the Second-Lowest Cost Silver Plan (the benchmark plan). For 2021 and 2022, the Act decreases the percentage of income individuals are expected to contribute for the benchmark plan, thereby increasing the amount of the PTC and making comprehensive coverage more affordable. Unlike with PTCs in general, the amount of these reduced expected contributions are not indexed, but will remain the same for those two years.
As a result of this change, for the first time, the lowest-income eligible individuals will qualify for PTCs that cover the full amount of benchmark plan premiums with no expectation of individual contribution for that coverage. This allows those individuals to now access more comprehensive coverage at no cost; in the past, individuals could obtain $0 coverage via PTCs only by buying down to Bronze plans with PTCs based on Silver benchmark plans. This is particularly meaningful, as these individuals are also income-eligible for cost sharing reductions (CSRs), which are only available if they purchase Silver-level coverage.
Even for those who will still have an expected contribution and who are not eligible for CSRs, these increased PTCs may make it easier for them to purchase a plan at a higher metal level—and, therefore, with less cost sharing.
These lower expected individual contributions also have the potential to impact those who are currently income-eligible for PTCs, but not eligible to receive assistance because the benchmark plan premiums do not exceed their expected contribution. Those individuals may see their expected contribution drop below the cost of the benchmark plan, making them eligible for a PTC. This is most likely to impact younger individuals (who have lower age-rated premiums) at relatively higher incomes (and, therefore, higher expected contributions). They will also now have the option of using their new PTCs to purchase more expensive coverage with lower cost sharing.
It also will impact the amount of pass-through funding available to states with Section 1332 Waivers, as explored below.
Temporary Extension of Premium Tax Credits
The Act also temporarily eliminates the income cutoff for PTC eligibility. For 2021 and 2022, those with incomes over 400 percent of the federal poverty level (FPL), which is the current eligibility cutoff, will be eligible for PTCs if their cost of coverage is more than 8.5 percent of their income. As outlined in the chart above, the size of their PTC will be equivalent to the amount that their benchmark plan premium exceeds 8.5 percent of their income. This eliminates the ACA’s “subsidy cliff,” which disproportionately impacts older individuals with incomes just over 400 percent FPL because of age rating.
Other Changes to Premium Tax Credits
The Act deems anyone who receives unemployment benefits at any point in 2021 to have an income of no more than 133 percent FPL for the purposes of PTC and CSR eligibility. This ensures that those individuals will not have a contribution for premiums for the benchmark plan and will be eligible for CSRs. This provision is only applicable for the 2021 calendar year.
Finally, the Act eliminates reconciliation for 2020 PTCs. If individuals’ actual income exceeded the estimated income on which their advance premium tax credit (APTC) eligibility was based, those individuals will not be liable for repayment. This provision was included with the understanding that the COVID-19 public health emergency (PHE) made it difficult for many to predict their income—including for front-line and essential workers who unexpectedly saw increased hours as a result of the pandemic—and that an increased tax bill would be especially burdensome this year. The provision in only applicable for PTCs granted in 2020.
Implementation of PTC Changes and Potential Impact on Section 1332 Pass-through Funding
Many implementation-related questions regarding the Act’s PTC provisions have already been addressed in follow-up guidance. In a recent fact sheet, the Centers for Medicare and Medicaid Services (CMS) confirmed that enhanced PTCs (both the higher amounts for those currently eligible and eligibility for certain individuals above 400% FPL) will be available through Federally-facilitated Marketplaces (FFMs) starting on April 1, 2021. The administration also announced just this week that the current Special Enrollment Period (SEP) for Marketplace plans will be extended until August 15th, giving eligible individuals more time to shop for coverage or make coverage changes with their new PTCs. Those seeking to change plans, however, may find that their annual deductible restarts.
It is important to note that new and enhanced PTCs will not be automatically applied to plan premiums; current enrollees must also visit the FFM after April 1st to claim their new PTCs and determine if they want to change their plan selection. Because PTCs are ultimately administered through the tax system, individuals can claim the entire amount for which they are eligible through the income tax process Receiving this credit after the end of the year is unlikely to help them afford new or more comprehensive coverage up-front; however, the PTC changes are in effect for the entire year of 2021 (as well as 2022), so current enrollees will be able to claim their enhanced credits for the past 3 months through the tax process.
The enhanced PTCs for those receiving unemployment benefits will not be available until July 1st, and will also require individuals to visit the FFM to claim them. The extended SEP will provide time for those individuals to utilize their new PTCs as well. In the meantime, starting in April and until July 1, those individuals can avail themselves of the general enhanced PTCs.
It is unclear how long it will take State-based Marketplaces (SBMs) to implement these changes, or whether SBMs will provide an SEP to allow eligible individuals to newly enroll or make plan changes with the enhanced PTCs, though California, Rhode Island and DC have announced they will automatically adjust current enrollees premiums and many have extended SEPs like the FFM. The Act includes $20 million to help SBMs update their systems to implement the changes. This funding is available through September of 2022.
Beyond their effect on individuals’ access to coverage, these provisions also stand to have a significant impact for states with Section 1332 Waiver-authorized reinsurance programs. These programs are funded, in part, through pass-through funding (PTF) based on savings to the federal government related to payments for PTCs resulting from the waiver. More waiver-driven savings are likely to accrue from reinsurance programs (which, by decreasing premiums, decrease the PTC subsidy amounts that are calculated based on premiums) as a result of increased eligibility for PTCs and higher amounts of PTCs.
Because PTF estimates for 2021 have already been released, there is some question as to whether the final amounts for this year will reflect the Act’s PTC provisions. However, each state’s Specific Terms and Conditions for Section 1332 Waivers specify that the PTF amounts can be updated to reflect changes in law. Regardless, 2022 PTF estimates will certainly account for that year’s increased PTC amounts and enhanced PTC eligibility.
Employer-Sponsored Insurance / COBRA
The Act also includes assistance for workers who were involuntarily laid off or had their hours reduced, impacting their access to employer-sponsored insurance (ESI) and making them eligible for COBRA continuation coverage. Individuals in that situation and without other coverage options are eligible for subsidies covering 100 percent of COBRA premium costs from April 1, 2021 through September 30, 2021. Under the Act, employers and group health plans are required to provide notice of this new support; model notices will be provided.
In light of this change – understanding that some individuals may have chosen not to elect COBRA when first offered because it was unaffordable – eligible individuals will have a new opportunity to elect coverage for 60 days after receiving a notice from the employer or group health plan, with coverage retroactive to April 1, 2021. Additionally, most individuals currently enrolled in COBRA who are now eligible for these subsidies will have up to 90 days to change plans if more than one COBRA plan is available to them.
Importantly, however, many individuals who were laid off may also be eligible for Medicaid in states with expansion or for enhanced PTCs and CSRs. Individuals will want to explore all of their options before enrolling in COBRA since ESI typically includes cost sharing, likely making it a more expensive option. Additionally, unlike the Act’s COBRA subsidies, Medicaid and APTCs have no end date. If individuals wait until the COBRA subsidies end to seek ATPCs, they may have to wait until the next Marketplace Open Enrollment Period to change coverage and pay full COBRA rates until that time.
The Act seeks to provide greater access to Medicaid by incentivizing the 12 states that have not yet adopted the Medicaid expansion to do so. In an interesting twist, that incentive is tied to funding for the non-expansion population. If a state decides to newly implement expansion (Missouri and Oklahoma, where implementation of expansion is pending, are eligible), they will receive a temporary increase of five percentage points in federal match (FMAP) funding for their non-expansion populations. Like all other expansion states, they will also receive a 90 percent FMAP for the expansion population.
By tying the FMAP funding increase to states’ non-expansion population—which account for the majority of state Medicaid costs—the incentive is more valuable than if it were tied to the expansion population. The federal match increase will be available for two years from the date a state expands coverage.
The Act also includes the following Medicaid-related provisions:
- Expands the state option to provide postpartum coverage for 12 months after pregnancy (currently limited to 60 days without a waiver); this option is available for up to five years starting April 1, 2022;
- Expands the option for states to provide limited COVID-19-related coverage for the uninsured (with 100% federal funding) for the duration of the PHE—including coverage of the COVID-19 vaccine and administration, COVID-19 treatment and treatment for conditions that complicate COVID-19, in addition to testing; and
- Includes a higher federal matching rate (a 10 percent FMAP increase) for home- and community-based services for one year starting April 1, 2021.
Finally, the Act requires Medicaid and the Children’s Health Insurance Program (CHIP) to provide coverage of COVID-19 vaccines and treatment without cost sharing—where previously, zero-dollar coverage of only COVID-19 testing was required. This stipulation applies through the end of the calendar year quarter beginning one year after the PHE ends. Along with that requirement, the Act increased the FMAP rate for COVID-19 vaccines and administration to 100 percent.
Other Healthcare Funding
The Act provides healthcare workforce funding—which encompasses jobs related to mental health, substance use disorder treatment and public health—as well as funding for mental health and substance use disorder block grants.
As outlined above, quick implementation of these provisions will maximize the benefit for individuals and states (relative to Section 1332 PTF) alike. In the longer term, however, this is unlikely the last word on most of these provisions; while the changes are largely temporary, there is a good chance they will be extended until at least the end of the PHE. For instance, there is already talk about whether the halt on PTC reconciliation for 2020 will be extended through 2021. This would not only impact eligible individuals, but potentially states with Section 1332 Waivers as well—since PTF calculation includes an automatic percentage reduction to account for APTC to PTC reconciliation. If reconciliation is eliminated, that adjustment should be too; however, for that to occur, an extension would likely have to be in place before PTF amounts are finalized (which typically happens by the end of April).
Longer term, the Biden administration was expected to make changes related to PTCs and Medicaid expansion, irrespective of the PHE. While all of the administration’s health policy developments to-date have, unsurprisingly, been COVID-19-focused, we are likely to see similar, permanent changes to related to enhanced access to commercial insurance (via PTCs and otherwise) and incentives for the remaining states to adopt Medicaid expansion as the PHE ends and the administration can focus longer term. It is likely that the permanent changes to PTCs will address provisions not addressed in the Act’s narrower package—such as the “family glitch” (which makes families ineligible for PTCs on the basis that one family member has access to employer-only ESI that meets affordability standards, even if the family coverage does not), as well as making the benchmark plan on which PTCs are calculated a Gold plan.
Other COVID-19 Policy Updates
At the end of February, CMS issued new commercial insurance guidance in the form of frequently asked questions. Among other topics, the guidance clarifies that the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) requirement that plans cover COVID-19 tests without medical management means that carriers must cover asymptomatic tests as long as the tests were provided or referred by a health care provider. This includes testing performed at state- and locally-administered testing sites. As such, all tests for individualized diagnoses or treatment of COVID-19 must be covered. Plans are not required to cover testing for public health surveillance or employment purposes but may choose to. The FAQ also addresses how quickly plans must begin covering newly-approved vaccines, and what that coverage must include—as well as stating that carriers cannot deny coverage for vaccines based on state rules for vaccine distribution.
The guidance also addresses excepted benefits and the CARES Act Provider Relief Fund.
Finally, CMS approved 47 new Section 1135 Medicaid Waivers related to the COVID-19 pandemic over the last month. The vast majority relate to the timeline for required submission of State Plan Amendments for medication-assisted treatment of opioid use disorders under the Substance Use Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities (SUPPORT) Act.