March 11, 2021

Health insurance costs to drop for millions under Covid relief bill

Ika84 | E+ | Getty Images Private health insurance through the nation’s public exchanges is…

Ika84 | E+ | Getty Images

Private health insurance through the nation’s public exchanges is set to become more affordable — at least for a couple of years.

The $1.9 trillion Covid relief package, which received final congressional approval Wednesday and will soon head to President Joe Biden for his signature, includes provisions that will reduce the cost of health insurance amid the ongoing pandemic and elevated unemployment.

Those changes include increasing premium subsidies (technically tax credits) that are available through the federal marketplace and state exchanges for 2021 and 2022, expanding who qualifies for the financial help and forgiving amounts due by taxpayers who received too much in subsidies in 2020 (and minimizing that issue for 2021).

Premium tax credits

Older adults’ premiums are triple what younger adults would pay.

Karen Pollitz

Senior fellow with the Kaiser Family Foundation

The older an enrollee is, the greater the savings would be, due to premiums being based at least partly on your age. 

“Older adults’ premiums are triple what younger adults would pay” normally, Pollitz said, so the savings would have a bigger impact.

The CBO report estimates that the expanded eligibility would result in 1.7 million more people getting insurance through the marketplace, with 40% of them being individuals who are currently ineligible for premium tax credits under current law because their income is above the 400% cap.

The 2020 tax issue

One result of the federal government’s expanded unemployment benefits last year was that some unemployed workers had more income than they did when they were working.

That could have resulted in marketplace enrollees getting more in premium tax credits than they were eligible for. Under normal circumstances, that mismatch would mean they generally need to pay back the excess at tax time.

The stimulus bill essentially forgives any amount due on 2020 tax returns, Pollitz said.

The measure also would ensure that this year, if you qualify for tax credits and unemployment benefits push up your income, any amount above 133% of the poverty level would generally be disregarded in the calculation for subsidies through the exchanges.

COBRA subsidies