States Expanding Obamacare Subsidies Using Rescue Act Funds

Many state-run Obamacare exchanges are ahead of the federal government in administering the American Rescue Plan Act, which provides a major expansion of premium subsidies for 2021 and 2022.

Marketplaces in California, Maryland, Nevada, Pennsylvania, Rhode Island, Washington state, and the District of Columbia will increase subsidies for people already receiving them, with implementation scheduled at different dates. The higher subsidies will be applied immediately for new enrollees.

People in the federal HealthCare.gov system used by 36 states must take the additional step of coming back to the exchange to get the extra subsidies or wait until they file 2021 tax returns to receive refunds, and the federal exchange hasn’t said when it will begin serving the unemployed.

State exchange officials are excited about the prospect of bringing more people into exchange coverage, including the uninsured and people who have found the coverage unaffordable. But, with HealthCare.gov planning to begin making expanded subsidies available to new enrollees April 1, some state exchanges with old information technology systems face a time crunch to get their systems up and running, and officials worry it will be particularly challenging to get the unemployed signed up.

All of the 15 state-based marketplaces are looking for word from the Department of Health and Human Services on how the $20 million for modernizing their systems provided by the rescue plan (Public Law No. 117-2) will be made available. The law was signed by President Joe Biden on March 11.

The law expands premium subsidies to households with incomes above 400% of the federal poverty level—$106,000 for a family of four in most states—which will reduce premiums to no more than 8.5% of income. The law also makes subsidies more generous for people already receiving them, and extends subsidies to people who received unemployment compensation in 2021.

The Congressional Budget Office estimates ACA exchange enrollment could increase by 1.7 million people in 2022, with growth predominantly coming from the uninsured. An analysis by health policy consulting firm Avalere Health finds the law will expand subsidies for as many as 18.3 million people.

Increasing Subsidies for Enrollees

Minnesota, which has an older system designed to link Medicaid and exchange enrollment and eligibility, expects to make the new subsidies available to new and current enrollees, likely in June, and Connecticut expects to start applying the expanded subsidies by May 1.

People already in exchange plans as well as new enrollees will be able to get the subsidies retroactive to Jan. 1, 2021, when they file 2021 tax returns in 2022.

Many of the state exchanges are considering extending their enrollment periods to accommodate people signing up, and the HHS on Tuesday extended its enrollment period from May 15 to Aug. 15 and announced that people who receive unemployment benefits will be able to get ACA subsidies starting in early July.

HealthCare.gov is spending $50 million in marketing and outreach for the current special enrollment period, which state directors say will help them promote enrollment for their own exchanges. Nevertheless, the states face challenges with their own limited marketing budgets in reaching new enrollees.

Like a `Get-Out-the-Vote Campaign’

“We almost have to think of this as a get-out-the-vote campaign,” Michele Eberle, executive director of the Maryland Health Benefit Exchange, said in an interview. An additional $250,000 is being added to the Maryland Health Connection’s $3 million budget for marketing, she said.

Maryland covers more than 160,000 people in its exchange, and another 185,000 could benefit from the additional subsidies, Eberle said. Maryland will be ready April 1 to start applying the additional subsidies for people not receiving subsidies as well as for people who have gotten unemployment benefits in 2021. Maryland will recalculate benefits for people already receiving subsidies, she said.

“This is complicated,” Mila Kofman, executive director of the DC Health Benefit Exchange Authority, said in an interview about the process of getting people enrolled under the rescue plan law. But it’s a good opportunity to get more people enrolled, she said. “This is really the biggest expansion of the Affordable Care Act at the time when people need it the most, and we’re ready.”

Over 92% of the more than 16,000 people in DC Health Link’s individual exchange pay full premiums without subsidies, according to data supplied by Kofman. For people who are full-pay, “40% of the premium for the pool will be paid for by APTC,” she said, referring to the advance premium tax credit subsidies. “Forty percent premium reductions overall is huge.”

Unlike HealthCare.gov, on April 1, the district will be able to provide “almost free coverage” for people on unemployment, Kofman said.

`Substantial’ Resouces Needed

For Access Health CT, which has about 105,000 Connecticut residents enrolled, “the amount of energy, the amount of resources we have to spend will be substantial,” because extensive changes will need to be made to the system, CEO James Michel said in an interview. The Connecticut exchange expects to be ready to apply the expanded subsidies by May 1, he said.

About 20,000 to 30,000 people are in the individual market outside of the Connecticut exchange, the small business market, or are uninsured, “and we’re hoping to get at least half of that population,” Michel said.

Access Health CT’s current enrollment ends April 15, and it will hold a special enrollment period starting May 1. But officials are “trying to figure out what we’re doing with that two-week gap,” Michel said.

The rescue plan waives penalties for people who received subsidies that they weren’t eligible for in 2020. But that is complicated by the fact that some consumers have already filed their 2020 returns, “and that means they are seeing that they owe money,” Heather Korbulic, acting director of Nevada’s Silver State Health Insurance Exchange, said in an interview. “Our call centers are getting those calls, and we don’t really have a good answer for them.”

An IRS spokesman said in an email that the agency is reviewing the tax provisions of the rescue plan, and affected taxpayers “should not file an amended tax return only to get a refund,” The IRS will provide “more details soon.”

Focus on Uninsured

The Washington Health Benefit Exchange, which has more than 225,000 enrollees, could attract 50,000 to 100,000 more people, CEO Pam MacEwan said in an interview. “I really want to focus on people who are uninsured. We need to persuade them to come take a look because it’s been expensive, and now it’ll be more affordable,” she said.

People already enrolled through the exchange are the easiest to reach, although people who don’t currently receive subsidies will have to come to the exchange to report their income, MacEwan said.

“The challenge will be the uninsured and people who are off the exchange, because we need to persuade them that they actually have something to gain,” MacEwan said.

Covering people who receive unemployment benefits also will be difficult to add to their system, she said.

“You have to flag a different population, so you have to have something that tells us they’re unemployed, and then get them into a different pathway,” she said.

Washington hopes to have its system ready to cover the unemployed as well current enrollees in early May, she said.

Health insurers who cover people enrolled in the individual market outside of the exchange also will face complications because the new enrollment period is coming in the middle of the year rather than during the normal open enrollment period, MacEwan said. However, “their enrollment’s going to grow,” and the market will stabilize, she said.

People who move from off-exchange plans to plans on the exchange to get subsidies will benefit from being able to carry over deductibles they have already met.