American Rescue Plan Improvements to Covered California Affordability: Who Gains?

Joint publication by the UC Berkeley Labor Center and UCLA Center for Health Policy Research

The American Rescue Plan (ARP), a $1.9 trillion relief and recovery package passed last month, includes the first major federal improvements to the Affordable Care Act since it was passed over 10 years ago. The ARP substantially increases premium subsidies for coverage purchased through health insurance exchanges like Covered California. We project that these subsidies will help over 1.6 million Californians, including 151,000 individual market enrollees who will qualify for subsidies for the first time and 135,000 uninsured people who will become insured.

With the implementation of the Affordable Care Act (ACA) in 2014, California was able to significantly reduce its uninsured rate, recording the largest decline of any state. Nevertheless, millions of Californians struggled to afford insurance on the individual market or remained uninsured. Since implementation of the ACA, California increased premium subsidies for some Covered California enrollees, expanded Medi-Cal coverage to undocumented low-income children and young adults up to age 26, and instituted a state tax penalty for being uninsured. These policies resulted in new or continued coverage for hundreds of thousands of Californians and were important steps toward addressing the state’s affordability challenges and coverage gaps.

The American Rescue Plan (ARP) has a number of important health coverage provisions, including 100% premium subsidies for COBRA coverage through September 2021. Those receiving Unemployment Insurance benefits in 2021 will pay only $1 per month for an Enhanced Silver 94 plan, the Covered California plan option requiring the least cost sharing from households. (Covered California hopes to implement the subsidies for Unemployment Insurance recipients by this summer, though the subsidies are for the entire calendar year of 2021.)

In addition, the ARP includes substantial additional premium subsidies for coverage purchased through Covered California for 2021 and 2022. Californians earning up to 150% of the Federal Poverty Line ($19,140 for a single person in 2021) qualify for an Enhanced Silver 94 Plan for $1 per month. Expected contributions vary by income but are significantly lower for families at every income level. The ARP also eliminates the federal subsidy cliff that existed for those with income above 400% FPL; no family is required to pay more than 8.5% of income for a benchmark plan.

Exhibit 1. 2021 Coverage Year, Percent of Household Income Paid for Covered California Benchmark Silver Premium

Income Range		Required Contribution as Share of Income
Income as Percent of Federal Poverty Level (FPL)	Income for Single Person Household	Affordable Care Act	California State Subsidy Program	American Rescue Plan
Under 138%*	$0 to $17,609	2.07%	0.00%	0.00%
138-150%**	$17,609 to $19,140	3.10% - 4.14%	N/A	0.00%
150%-200%	$19,140 to $25,520	4.14% - 6.52%	N/A	0.0% -2.0%
200%-250%	$25,520 to $31,900	6.52% - 8.33%	6.24% - 7.80%	2.0% - 4.0%
250%-300%	$31,900 to $38,280	8.33% - 9.83%	7.80% - 8.90%	4.0% - 6.0%
300%-400%	$38,280 to $51,040	9.83%	8.90% - 9.68%	6.0% - 8.5%
Over 400%	$51,040 and up	Not eligible for subsidies	9.68% - 18.0%***	8.5%

Notes:
* Individuals with income at or below 138% FPL are generally eligible for Medi-Cal. In certain limited circumstances, however, they are eligible for the federal premium tax credit and the California state subsidy program.
** Under the ARP, Covered California enrollees receiving Unemployment Insurance in 2021 are treated as though their income is no more than 138.1% FPL for the purposes of the federal premium tax credit meaning their required contribution for a benchmark plan will be 0%.
*** Eligibility for the California state subsidy program ends at 600% of the federal poverty level
Source: Covered California, March 2021 Board Meeting

 

The ARP will provide additional subsidies for the 1.35 million Californians already enrolled with subsidies through Covered California as of June 2020. Without the ARP, these Californians would have received subsidies worth an average of $411 per person per month in 2022 through a combination of ACA and California-specific subsidies; under the ARP, they will get an additional $91 per month.

Our modeling, using the California Simulation of Insurance Markets (CalSIM) model, suggests that in 2022 almost 300,000 Californians would newly get subsidies. This includes 151,000 Californians who would otherwise be enrolled in the individual market without subsidies who will now receive an average of $165 per person per month from the ARP in 2022. Almost all (80%) of these 151,000 people have incomes above 400% FPL, with about one-third above 600% FPL; the ARP ensures that none of them pay more than 8.5% of income toward premiums for a benchmark plan. A majority are ages 45-64, similar to the age distribution of those already enrolled in subsidized coverage. Approximately two-thirds are part of a household with at least one self-employed worker, reflecting that while most California workers have health insurance through their employer, the self-employed generally do not have that option and are disproportionately enrolled in individual market coverage.

We also project that 135,000 Californians who would otherwise be uninsured in 2022 will enroll in subsidized coverage in the individual market as a result of the more generous subsidies. A majority of these enrollees have incomes under 400% of the Federal Poverty Level ($51,040 for a single person in 2021), and a majority are ages 45-64. About half of these enrollees are part of a household with at least one self-employed worker. These enrollees would get a total of $464 on average per person per month, $55 more per month than they would have without the ARP subsidies.

Exhibit 2. California Beneficiaries of the ARP Subsidies, 2022

Number benefitting from adjusted federal subsidy curve	Average monthly subsidy amount with ACA & CA subsidies (no ARP)	Additional average monthly subsidy amount with ARP
1,350,000 subsidized enrollees	$411	$91
151,000 unsubsidized enrollees newly qualify for subsidies	$0	$165
135,000 new individual market enrollees	$409	$55

Source: Covered California and UC Berkeley / UCLA CalSIM version 3.0

Whether all of these additional beneficiaries actually enroll in coverage or switch from off-Exchange coverage to Covered California to receive these subsidies will depend on marketing, outreach, and enrollment efforts already underway in California. The Congressional Budget Office projects that the effects of the enhanced subsidies on enrollment will be “much more limited” in 2021 than 2022 due to the mid-year implementation.

We assume that with robust outreach during both the 2021 Special Enrollment Period and 2022 Open Enrollment, Covered California will convert all off-exchange enrollees eligible for subsidies to Covered California by 2022 and that all individuals who decide to enroll in coverage due to the ARP subsidies will enroll by 2022. We project Covered California will enroll 135,000 who would otherwise be uninsured, leaving 630,000 uninsured but eligible for subsidies in 2022.

The benefits will be reversed, however, if the subsidies disappear in 2023 and are not made permanent. Despite the ARP’s substantial improvements in the affordability of coverage through Covered California, we project that the state will still have 3.2 million uninsured Californians under age 65 in 2022, or approximately 9.5% of the population under age 65. Our next blog post will focus on the Californians we project will be uninsured in 2022.