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Home ACA Reform Millions to Lose Coverage if American Rescue Plan PTCs Expire

Millions to Lose Coverage if American Rescue Plan PTCs Expire

4 minute read
by Robert Sheen

Enhanced Premium Tax Credit (PTC) subsidies introduced via the American Rescue Plan (ARP) are set to expire this December, and the consequences could be serious.

Before diving into what could happen if the subsidies aren’t extended or made permanent, it’s first essential to understand what the expansion did for healthcare in the U.S.

How did the ARP impact U.S. healthcare?

First signed into law in March 2021, Biden’s ARP introduced substantial healthcare savings for Americans. The plan expanded PTC eligibility to individuals with income up to 150% of the federal poverty level (FPL) and allowed them to obtain health plans for $0 monthly premiums and substantially lower deductibles. 

The plan also expanded eligibility to individuals who had larger household incomes. ARP’s PTCs applied to people with incomes at 400% and beyond the FPL and allowed them to obtain coverage for no more than 8.5% of their household income. 

The ARP resulted in a record-breaking 14.5 million enrollees during the 2022 open enrollment period, representing over 20% more participation compared to open enrollment of the 2021 tax year. Nearly 6 million of the ACA marketplace enrollees were new. 

Overall, the ARP made it possible for four out of every five people to obtain healthcare coverage for less than $10 a month. The ARP helped reduce the uninsured rate from 10.3 in quarter 4 of 2020 to 8.8% in quarter four of 2021, with the current uninsured rate hovering around 8%. 

In short, the ARP is one of the largest driving factors in why healthcare benefits and enrollment are doing as well as they are.

What’s at stake if enhanced PTCs end this year?

The ARP had a significant impact on healthcare in the U.S., and if the enhanced PTCs expire in a few months, millions could lose coverage. 

A new analysis conducted by the Kaiser Family Foundation (KFF) in conjunction with Peterson Center on Healthcare finds that premiums could increase more than 25% for some ACA marketplaces. The analysis states that the median increase in premiums would be 10%.

Health and Human Services (HHS) also point out that if the enhanced ACA subsidies end this year, roughly 3 million Americans could lose coverage

Moreover, approximately 8.9 million individuals will receive fewer PTCs thereby reducing their coverage, and 1.5 million will lose subsidies completely. HHS estimates that the subsidy loss would amount to an average of $3,277 per person annually.

While the overall possibility of how the expiration of subsidies affects the U.S. may seem marginal, the impact varies a great deal and some states will be hit harder than others. California, Florida, Pennsylvania, and Texas are among some of the states likely to be affected the most.

It’s clear that the expiration of the American Rescue Plan’s PTC subsidy expansion could have adverse consequences for U.S. healthcare, so the need to extend them is dire.

Navigating the future of U.S. healthcare

Making the PTC subsidies under the ARP permanent would be widely welcomed. The American Academy of Family Physicians, American Hospital Association, and American Medical Association, among others, penned a letter to Congress urging them to make the expansion permanent. 

Centers for Medicare and Medicaid Services Administrator Chiquita Brooks-LaSure echoed the various medical organizations’ sentiment when she pushed Congress to take action. “Time is of the essence,” she said in a statement. “The bottom line is the American Rescue Plan lowers costs around health insurance.”

The Biden administration has previously attempted to make the premium subsidies under the ARP permanent via the American Families Plan, but unfortunately, was unsuccessful.

It is unclear at this time how the administration will move forward but the clock is ticking and open enrollment for 2023 will be here in a few short months. The National Association of Insurance Commissioners asked Congress to extend the enhanced PTC subsidies by July, as most insurers lock in premium amounts for 2023 by August.

We will know for certain in the coming weeks whether the PTCs will be extended.

Employers and PTCs

While making PTCs more accessible to the general public is good, it also has some downsides for employers. PTCs are the trigger for the IRS identifying non-compliance with the ACA’s Employer Mandate

Any time an employee obtains coverage through a state or federal marketplace, the IRS cross-references the PTC received from the marketplace with an employer’s ACA filings. Through this process, the tax agency is able to identify which organizations complied with the healthcare law and extended offers of affordable, quality coverage.

Under the ACA’s Employer Mandate, ALEs, or employers with 50 or more full-time employees and full-time equivalent employees to:

  • Offer Minimum Essential Coverage (MEC) to at least 95% of their full-time employees (and their dependents) whereby such coverage meets Minimum Value (MV); and 
  • Ensure that the coverage for the full-time employee is affordable based on one of the IRS-approved methods for calculating affordability.

For the first time in years, the ACA has had an opportunity to flourish. Thanks to the efforts made by the Biden administration, enrollment is at an all-time high and costs are down. It’s up to members of Congress and elected officials to ensure that it remains that way.

If you are interested in learning more about ACA responsibilities and employer obligations, download What is The ACA’s Employer Mandate?

Download: What is The ACA's Employer Mandate

For information on ACA penalty amounts, affordability percentages, important filing deadlines, steps for responding to penalty notices, and best practices for minimizing IRS penalty risk, download the ACA 101 Toolkit.

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