research

August 2022

> Read this report as a PDF.

The American Rescue Plan Act of 2021 (ARP) enhanced premium subsidies for ACA Marketplace health plans for 2021 and 2022 by increasing the number of households eligible for subsidies – and increasing the amount of the subsidies themselves. The result has been reduced health insurance premiums for individuals across the income spectrum and a greater number of people with health insurance. The ARP increased subsidies were scheduled to end this year, but the Inflation Reduction Act extends the enhanced subsidies through 2025.

This brief provides examples of individual health insurance premium cost savings, at certain ages, income levels, and geographic regions. The examples come from six states, selected to depict a variety of impacts and premium cost savings under ARP. The estimates, prepared by Wakely, are based on 2022 benchmark and silver premium information, using state averages published by Kaiser Family Foundation and 2022 poverty guidelines.^[1]

Premium cost savings vary by geographic region, age, and income level, but the key findings and themes hold true:

• Premium savings exist regardless of state, age, or income. They are often significant.
• Lower premiums enhance coverage. Prior research shows that small decreases in premium—even as low as $5 per month—may be significant in helping reduce the number of people that drop coverage.
• Premiums are eliminated for people with low incomes. The enhancements extended by the Inflation Reduction Act mean that workers and families with incomes below one and a half times the Federal Poverty Level—$20,285 for individuals, $27,750 for a family of four—will pay $0 net premium. When the COVID-19 public health emergency ends, Medicaid redeterminations will return. Zero-dollar premiums will be essential for many people to keep their health insurance rather than go uninsured.
• People with incomes of $54,360 to $67,950 saw dramatic reductions in premium costs owing to enhanced subsidies, especially as they approach age 65. The Affordable Care Act placed limits on how much insurers could raise premiums as people age, but premiums for older adults can be up to three times higher than those for young adults. As a result, older adults especially benefit from enhanced subsidies. For example, a 64-year-old in Texas who makes $67,950 a year in 2022 would save an average of $514 per month, or $6,168 per year. That equates to more than 9 percent of the individual’s annual income. As the following tables show, this level of savings varies significantly from state to state.

The tables in this brief are purely illustrative. The figures represent state averages and would vary by geographic location.

For more information about the six states illustrated here, visit communityplans.net/APTC for state-by-state fact sheets.

Maximum Percentage of Income Paid for Premiums, Before and With the American Rescue Plan / Inflation Reduction Act Subsidy Enhancements.

Income levels are for an individual; income thresholds for families are higher.

COLORADO: Enhanced Subsidy Savings Estimates by Income Level

FLORIDA: Enhanced Subsidy Savings Estimates by Income Level

NEW YORK: Enhanced Subsidy Savings Estimates by Income Level

Note: New York uses community rating and, unlike other states, does not vary premiums on the basis of age. As a result, savings are estimated based only on income.

PENNSYLVANIA: Enhanced Subsidy Savings Estimates by Income Level

TEXAS: Enhanced Subsidy Savings Estimates by Income Level

WYOMING: Enhanced Subsidy Savings Estimates by Income Level

[1] The premium cost paid by a member after subsidies are subtracted (i.e., net premium) reflects the assumption that an enrollee will purchase the lowest-cost silver metal level plan in the market rather than the benchmark premium.