NASHP

Understanding the Impact of ARPA Subsidies on State-Based Marketplace Plans

September 13, 2021/by Maureen Hensley-Quinn, Christina Cousart and Hemi Tewarson

Most state legislatures have adjourned after busy sessions focused on addressing the COVID-19 public health emergency. Nonetheless, lawmakers introduced over 200 bills to curb health system costs. Eighteen states and DC enacted 28 laws in 2021, with different strategies and frameworks to reign in rising healthcare costs in the United States.

What did ARPA do? ARPA provided a two-year enhancement of premium tax credits (PTCs) for individuals who qualify to purchase coverage through health insurance marketplaces. The enhancement increases the amount of PTCs available at all income levels and eliminates the earnings limit to qualify for PTCs, formerly set at 400 percent of federal poverty level (FPL) or $51,520/ year. The enhancements cap enrollees’ monthly premium payments at 8.5 percent of enrollees income. PTC enhancements (or subsidies) are currently available for the 2021 and 2022 plan years.

What is the impact of ARPA on affordability? Although ARPA was just enacted in March 2021, state-based marketplaces rapidly implemented changes to their systems, operations, policies, and marketing to ensure consumers received the law’s benefits. Initial data illustrates a significant impact on consumer affordability. Of the 13 of the state-based marketplaces that shared data (CA, CT, DC, ID, MD, MA, MN, NV, NJ, NY, PA, RI, and WA):

  • 10 states report that over 50 percent of their enrollees pay less than $100 per month in premiums
  • 6 of those states report that over 25 percent of their enrollees pay $1 or less per month in premiums

Digging a little deeper in the data, across both subsidized and unsubsidized households, ARPA’s subsidies are improving affordability for key populations. Of the 13 state-based marketplaces that shared data:

  • 9 states report an average of least 50 percent in average premium reductions for households with income below 250 percent FPL, which is approximately $66,000 annually for a family of four.
  • 10 states report average premium reductions of over $50/month for individuals who are 55 years old or older. (See visuals in this slide deck.)

State-based marketplace officials are quick to underscore these statistics are an average, so they don’t adequately highlight some of the truly significant savings some households are experiencing. Officials across multiple states shared stories of real families with children saving hundreds of dollars per month on their premiums and couples who are over 55 years old saving over a thousand dollars per month in premiums.

What is the impact of ARPA on plan choice? Another emerging trend that state-based marketplace officials are watching is whether and how the enhanced subsidies are impacting consumer plan choice. Early evidence suggests that increased affordability allows consumers choice and greater flexibility in purchasing their health plans.  Rather than choosing a plan solely based on monthly premium costs, enrollees can consider its overall value. For instance, those with income between 100-250% of FPL also qualify for cost-sharing reductions that reduce their out-of-pocket costs specifically for silver level plans. So, it’s not surprising that 12 state-based marketplaces identified that at least 25 percent of post-ARPA enrollees are electing silver-level plans, with five of those states reporting over 50 percent choosing silver.

What is the impact of ARPA on coverage stability? The marketplaces, one of the three M’s of coverage – Medicaid, Marketplace, and Medicare – are an essential component to the country’s coverage continuum. As consumers have changes in life circumstances, including employment, the marketplaces provide stable access to comprehensive coverage. ARPA’s subsidies are already achieving the goal of ensuring coverage stability for consumers, across income and age, during a very uncertain time.

Marketplaces are well positioned to market low-cost premiums ahead of and during the upcoming 2022 open enrollment period, which is expected to help retain existing and recently enrolled consumers, as well as encourage the remaining uninsured to purchase coverage. However, state-based marketplace directors are wary about the potential impact on consumers’ coverage without a long-term federal investment in these subsidies. Urban Institute estimates that a permanent extension of ARPA subsidies by 2022, will result in 4.4 million fewer uninsured, 5.1 million additional marketplace enrollees, and a 15% reduction in premiums.

What should follow ARPA’s two-year provision? The pandemic is predicted to have reverberating effects on both the health care system and the economy for years to come. When the public emergency ends, millions of Medicaid individuals and families may be disenrolled from the program. Ensuring access to alternative affordable coverage through the marketplaces will be critical for many of these low-income individuals. Given the initial findings of the significant increase in affordability and stability for consumers enrolled in state-based marketplaces, a permanent extension of ARPA subsidies would ensure consistent affordability for existing and new enrollees.

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