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Senate OKs Package With COBRA, ACA Premium Subsidy Provisions

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What You Need to Know

  • One section provides unemployed workers COBRA continuation benefits at no cost.
  • Another provision caps what high-income people pay for individual coverage at 8.5% of income.
  • In the past, some temporary federal health finance provisions have stayed in place for years.

The Senate has approved a $1.9 trillion COVID-19 response and budget package that could lead to a big, temporary increase in federal subsidies for commercial health coverage. The vote was 50-49.

The heart of the bill, H.R. 1319, the American Rescue Plan Act of 2021, consists of the funding needed to extend enhanced unemployment insurance benefits and to send cash payments of up to $1,400, but it also contains other provisions would help the unemployed pay for health care coverage.

Democrats in the House, which passed an earlier version of the bill, are trying to pass the final package and get it to the desk of President Joe Biden for his signature by March 14, when the current supplemental unemployment insurance benefits legislation expires. Biden has expressed strong support for the package.

The Health Insurance Provisions

In addition to the unemployment insurance and cash stimulus payment provisions, H.R. 1319 includes a provision, in Title IX, Subtitle F, that would help workers who lose employer coverage keep their group health coverage in place through Sept. 30.

The provision would provide tax credit that employers could use to pay to keep coverage for departing workers in place, through the COBRA group health benefits coverage continuation program, without the workers having to pay anything out of pocket for the coverage.

Currently, employers can ask departing employees to pay up to 102% of the full cost of group coverage to keep coverage in place. For many employees, the ordinary cost of keeping coverage in place through COBRA is more than $1,500 per month.

Another provision, Title IX, Subtitle A, Part 7, would lead to a temporary, dramatic expansion in the subsidies that people can use to pay for health coverage purchased through the Affordable Care Act public exchange system.

One part would treat unemployed people who apply for exchange plan coverage as if their income was 133% of the federal poverty level, for ACA premium tax credit subsidy calculations. For many unemployed people, that could reduce the out-of-pocket cost of ACA exchange plan coverage to close to zero, even if those unemployed people have income well over 133% of poverty level. Unemployed people would get the extra subsidy helped through the end of 2022.

Another part of the premium tax credit provision would help other, relatively high-income people pay for ACA exchange plan coverage, by capping what people would have to pay for coverage, without help from subsidies, at 8.5% of their modified adjusted gross income. The government would make up the difference between 8.5% of a person’s income and the cost of coverage.

Under current rules, the Affordable Care Act allows for federal premium tax credit subsidies only for people with income up to 400% of the federal poverty level. Some states, including California, however, have added state-run premium subsidy programs that help people with income over 400% of the federal poverty level pay for coverage.

Possible Implications

The text of H.R. 1319 calls for all of the health coverage subsidy provisions in the bill to expire by the end of 2022.

Congress also provided a temporary COBRA coverage subsidy in the American Recovery and Reinvestment Act of 2009. That subsidy reduced workers’ share of the COBRA coverage continuation premiums to 35% of the normal premium payments. Congress let that provision expire on schedule.

In some other cases, however, Congress let temporary health finance arrangements stay in place for years. One was an effort to suspend the full implementation of a Medicare physician reimbursement curb, the sustainable growth rate formula, that was adopted in 1997. Congress moved to temporarily suspend the use of the formula, one year at a time, for most years from 1997 through 2017, when the provision was finally repealed.

(Photo: Bloomberg)