Biden administration’s American Rescue Plan Act of 2021 will improve the affordability of silver-level coverage for all subsidized exchange enrollees, regardless of income. The key changes include:
- Reducing the maximum premium limit to 8.5% of income: This will lower the out-of-pocket premium maximums for all income levels, resulting in increased subsidies. For example, for those with incomes between 300% and 400% FPL, the annual impact to premium subsidies will be $1,466 and $1,466 respectively. This change will create zero-premium opportunities for enrollees with incomes up to 150% FPL, and increase the affordability of non-benchmark plans.
- Extending premium subsidies past 400% FPL: This will eliminate the "subsidy cliff" and allow enrollees in the highest income brackets to increase their income and be more likely to retain coverage without incurring a net financial penalty. Approximately 3 million individuals are uninsured in households with incomes above 400% FPL and have no access to subsidized employer sponsored coverage. However, only around 700,000 are expected to take coverage with the additional subsidies available.
- Indexing premium subsidies to gold instead of silver premiums (gold standard): This proposal would mean that, all else equal, a subsidized individual who has currently selected the benchmark silver plan and is receiving a subsidy could receive gold level coverage for no additional cost. This would reduce the individual’s annual out-of-pocket expense on average by a third. There are three alternatives for cost-sharing reduction (CSR) plans under a gold standard:
- Gold standard, silver CSRs: This scenario would likely shift non-CSR silver members to gold plans and increase the silver load to an estimated 29%.
- Gold standard, gold CSRs: This scenario would eliminate the 73% silver variant and reduce the CSR load to premiums from about 23% to about 10%.
- Gold standard, funded CSRs: This scenario would restore federal funding for CSRs and remove the silver loading.
Modeling the change to gold as the benchmark plan shows that the gold standard/gold CSRs scenario is the most favorable to consumers and substantially increases the likelihood of zero-premium plan availability across income levels, geographic areas, metallic levels, and ages. The gold standard/federal-funded CSRs scenario also increases the availability of zero-premium plans, especially for silver plans.
The increased enrollment in the ACA individual market due to the subsidy increases in the ARP and the potential change to a gold-level benchmark plan would significantly improve affordability and increase the affordability of a number of other plan choices. Carriers will need to re-tool their product portfolio and carefully design plans at all metallic levels with prudent pricing to win share and remain profitable as overall market size increases.
