American Rescue Plan Act and Your Money

The American Rescue Plan Act: March 2021

On March 11, 2021, President Joe Biden signed the American Rescue Plan Act (ARPA). It’s an economic stimulus bill to help Americans and our economy recover from Covid-19.

And, it could affect your health insurance premium.

In a Nutshell:

The ACA limits the amount you pay for individual health insurance. Based on a “benchmark” plan in each county, tax credits (subsidies) are based on the cost of the benchmark plan vs your income. Original ACA rules state that in 2021, your maximum responsibility is 9.83% of your Modified Adjusted Gross Income (MAGI). The ACA rules also state that you can only receive subsidies until your MAGI reaches 400% of the Federal Poverty Level. For a lot of people (especially if you’re older), that “cliff” cutoff to receive assistance is really significant.

The new Rescue Plan lowers your maximum responsibility from 9.83% down to 8.5% of your income. It also removes the “cliff” of 400% of the Federal Poverty Level as the maximum income to receive tax credits.

Here’s how the math works out:

For our example, let’s look at a single 57 year old person living in Larimer county, CO. Their income for 2021 is expected to be $60,000 MAGI.

What’s the possible tax credit change?

Original ACA
Tax Credit estimate
$0
(above 400% FPL)

Under ARPA
Tax Credit Estimate:
$290 per month
(no more “cliff”)

What’s the maximum income possible to receive tax credits in this scenario?

ORIGINAL ACA: $51,040 (which is 400% of the Federal Poverty Level, aka the “cliff”)
NEW UNDER ARPA: $101,400

Basically what this means is that if you were not receiving tax credits before, you might now be eligible! If you’re already receiving tax credits, this could increase the amount of your tax credits. The ARPA puts these new percentage maximums in place for the next 2 years.

What we don’t know…Yet:

We are waiting for guidance from the Colorado Division of Insurance and Connect for Health Colorado on what happens next. Here’s a few common questions that we are hoping to get answers to soon:

Will you get to change plans?
Are the changes automatic?
Would this create a Special Enrollment Period for you to move to the exchange to get tax credits?

Regardless of what the answers to these questions are, we anticipate a pretty big shake-up in health insurance this year. Be sure to email us if you have questions or want to start discussing details about your situation. Don’t forget to share with your friends and family!