What You Need to Know
- The premium subsidy provision could help people with income over 400% of the federal poverty level who buy their own coverage.
- The paid leave program could pay up to $4,000 in benefits per month.
- The paid leave program financing mechanisms were not discussed.
President Joe Biden wants Congress to help him make the current Affordable Care Act (ACA) health insurance premium subsidy levels permanent.
His administration has included an ACA premium tax credit subsidy provision in a fact sheet summarizing his American Families Plan proposal.
The $1.8 trillion package includes ideas for many different family support programs, including sections that would provide free preschool for all 3-year-olds and 4-year-olds, and another provision that would provide two tuition-free years of community college for all first-time community college students.
The health insurance premium subsidy section would affect people who buy their own individual or family health insurance through HealthCare.gov or another ACA public exchange program, such as Covered California or NY State of Health.
The Original ACA Premium Tax Credit
In the past, the ACA helped people with income from 100% of the federal poverty level to 400% of the federal poverty level pay for exchange plan coverage using premium tax credit subsidies.
California, New Jersey and other states added extra subsidies for exchange plan users earning up to 600% of the federal poverty level.
The New ACA Premium Tax Credit
The new federal American Rescue Plan Act now increases the premium tax credit subsidy amount for exchange plan users with income under 400% of the federal poverty level.
The tax credit formula caps what a family has to pay out of pocket for coverage to 8.5% of income.
The new formula makes tax credits available to families that earn well over $100,000 a year.
The Biden Proposal
The Biden administration says in the fact sheet that “the American Rescue Plan provided two years of lower health insurance premiums for those who buy coverage on their own, saving families an average of $50 per person per month.”
“The American Families Plan will make those premium reductions permanent, a $200 billion investment,” according to the Biden administration. “As a result, 9 million people will save hundreds of dollars per year on their premiums, and 4 million uninsured people will gain coverage.”