New COVID-19 Relief Law Aims to Ease the Health Insurance Crisis

Even by U.S. government standards, $1.9 trillion is a lot of money. But that’s the money value of the COVID-19 relief under the American Rescue Plan Act of 2021 (ARPA) signed by President Biden on March 12. ARPA is an ambitious law that tackles the nation’s economic, healthcare, insurance and other challenges across a broad front. Key elements include:

• $1,400 stimulus checks for most adults and their dependents;
• $300-per-week unemployment supplements;
• Increased child tax credits; and
• Money for vaccination programs, state and local governments and schools.

The aspect of ARPA of particular significance for labs and other providers are its measures to address the nation’s health insurance crisis. Here’s an overview.

COVID-19 & the Health Insurance Crisis

In addition to wreaking economic havoc from coast to coast, the COVID-19 crisis exposed and exacerbated fundamental problems in the U.S. healthcare insurance system. According to the most recent National Center for Health Statistics (NCHS) report, some 30 million Americans were uninsured between January and June 2020. In all too many cases, loss of employment also meant loss of health insurance. Even the fortunate ones with Consolidated Omnibus Budget Reconciliation Act (COBRA) coverage weren’t spared from this one- two-punch to the solar plexis since many simply couldn’t afford to pay their COBRA premiums.

The Affordable Care Act (ACA), aka, Obamacare, was supposed to fix the problem of dependence on employer for health insurance. One way it does that is by providing tax credit subsidies to help individuals offset the costs of buying health plans. But under the current ACA rules, people who earn 400 percent of the federal poverty level aren’t eligible for the tax credits. In real world terms, this effectively excludes a single person who earns more than roughly $51,00; it also excludes families of three earning $87,000.

The new president has taken steps to address the systemic health insurance challenges. In January, he ordered the ACA’s health insurance marketplaces reopened to give people who lost insurance due to the pandemic another chance to get insurance coverage. He also initiated measures to restore coverage mandates that had been weakened by the previous administration, including protecting persons with pre-existing medical conditions.

In pursuit of that strategy, the new ARPA law makes important changes to the ACA and COBRA designed to benefit healthcare providers and insurers.

ACA Changes

ACA changes contained in ARPA, among the most significant made to the ACA since was adopted in 2010, is intended to fulfill Biden’s campaign promise to expand Obamacare and make health insurance affordable for lower-class and middle-class Americans. Among these is a provision long supported by Democrats and the healthcare industry that expands eligibility criteria for ACA subsidies to include people with incomes above 400 percent of the federal poverty level. It also limits the amount households pay to only 8.5 percent of their income on healthcare while boosting subsidies to lower-income consumers.

ARPA also includes new incentives to entice holdout states, most notably Texas, Georgia and Florida, to expand Medicaid to the in-betweeners, i.e., people who make too much money to qualify for the federal health program for the poor but not enough money to be able to afford private health insurance coverage.

These changes will last only for two years, but many Democrats are already signaling their determination to find a way to make them permanent. For example, the Congressional Budget Office (CBO) estimates that a 64-year-old earning $58,000 would see monthly ACA payments decline from $1,075 under current law to $412.

It’s estimated the changes will lower payments for almost 14 million people currently insured on the individual market. Furthermore, CBO estimates that the ACA changes will extend coverage to 2.5 million uninsured and cost about $34 billion.

COBRA Subsidies

ARPA also provides for free COBRA coverage over a six-month period for individuals who’ve lost group health coverage due to involuntary termination or reduced hours of employment. Any employee who lost coverage as of April 2020, is eligible for the entire six-month subsidy. Even employees who lost health coverage as far back as November 2019 may benefit from the subsidy, to the extent that their 18-month maximum COBRA period doesn’t expire until the end of April 2021. However, individuals who are eligible for other group health coverage or Medicare aren’t eligible for the new COBRA subsidy.

Significantly, the subsidy is available to employees who didn’t elect COBRA coverage during their original election period, as well as to those who initially did exercise their COBRA elections but let their coverage lapse. Those individuals must be offered an additional window of at least 60 days to elect COBRA coverage. Most notably, the special election opportunity allows these individuals to make a prospective COBRA election for the period beginning April 1, 2021, without requiring payment of premiums retroactive to the original loss of coverage. This is a significant departure from the normal COBRA rules. The maximum COBRA period, however, is not extended and is still counted from the date of the original qualifying event.

Plan administrators are required to begin notifying eligible individuals of the COBRA subsidy within 60 days of April 1, 2021. The U.S. Department of Labor is required to issue model COBRA notices addressing the subsidy.