CLEVELAND, Ohio – While lump-sum payments and enhanced unemployment benefits have drawn the most attention from the new stimulus package, changes to Obamacare as part of the same stimulus law could prove more valuable for a lot of people – providing substantial savings for millions of Americans.
Premiums are going down. Out-of-pocket expenses are being cut for some. And higher income people will no longer be excluded from getting government subsidies for Obamacare (Affordable Care Act) plans.
Whether you’re already in an Obamacare plan, uninsured or paying expensive premiums through another plan, now is the time to get acquainted. These changes are scheduled to be put in place April 1 on the healthcare.gov Marketplace.
To help sort things out, I turned to Karen Pollitz, a former Lyndhurst and Cleveland Heights resident now living in the Washington, D.C., area, where she closely follows health insurance as a senior fellow at the Kaiser Family Foundation.
The Affordable Care Act, known as Obamacare, has long provided income-based subsidies.
Under the stimulus package, the subsidies will be more generous and available to more people. Gone is the income test that disqualified some people from subsidies because they made too much money. This adds eligibility for an estimated 3 million Americans.
Those already enrolled should sign into their account starting April 1 to make any necessary adjustments, advises the Centers for Medicare & Medicaid Services. Otherwise, you may have to wait until tax time next year to claim the savings retroactively.
“Your premiums, if you are in the market place, are going to go down, no matter your income,” Pollitz noted. Here’s why:
* At 150% of the 2020 poverty level used for 2021 plans ($19,140 for a single person; $39,300 for a family of four), enrollees under the old law were expected to pay up to 4.14% of their income to cover the premium for a mid-level plan (the second lowest silver plan in a county). That premium now will be covered 100% by subsidies – nothing due from the enrollee. There remains an option to pick a different plan that might cost more; the subsidy dollar amount set by the mid-level plan will carry over, with the individual paying the balance.
* At 200% of the poverty ($25,520 individuals; $52,400 family of four), the mid-level plan cost drops from a maximum of 6.52% of income to 2%.
* At 300% of the poverty level ($38,280 individuals; $78,600 family of four), the mid-level plan cost drops from a maximum of 9.83% of income to 6%.
* At 400% of the poverty level ($51,040 individuals; $104,800 family of four), the mid-level plan cost drops from a maximum of 9.83% to 8.5%.
* Above 400% of the poverty level, people previously paid the full premium cost. The premium is now capped at a maximum of 8.5% of income, with the government picking up the rest for these people.
Dollar savings will vary by plan, age and income. But the savings can be substantial.
For example, an individual at 200% of the poverty level – $25,520 – previously would have been expected to contribute close to $1,700 a year for that mid-level plan, with the government subsidy covering the rest. That individual’s share will drop to about $500.
Overall, premiums are expected to fall an average of $85 a month per policy, $50 for individual policy, the government estimates. And half the enrollees should be able to find a silver plan after these changes for less than $10 a month.
Importantly, however, these change are only for coverage in 2021 and 2022. Beyond then, the old subsidy structure is scheduled to return.
“There’s a lot of talk that Congress will come back and make these enhanced subsidies permanent,” Pollitz said. “It would cost a lot more money.”
Chance to change to better plans
Enrollment has reopened. President Joe Biden did this ahead of passage of the stimulus package, creating an open enrollment period through mid-May. The stimulus makes this special enrollment period more valuable.
Those already insured can now opt for a better plan, making use of the enhanced subsidies. Those who didn’t enroll previously can sign up for insurance now, or starting April 1 under the changes.
Pollitz encourages everyone to take a look at their options. She said these changes could be especially important to people who didn’t previously qualify for subsidies and found the Obamacare premiums to be too expensive.
“For older people in particular, this elimination of the subsidy cliff is going to make a dramatic difference,” Pollitz said. This is because the unsubsidized premiums are much higher for older individuals.
Special break for the unemployed
This next change only applies to 2021. Anyone receiving unemployment compensation during any week this year can take advantage of a special break, Pollitz noted, assuming they meet other healthcare.gov requirements such as not having other available affordable health insurance.
Regardless of income, the unemployed will be treated like someone with income no higher than 133% of the poverty level for the year, she said. In other words, you’ll qualify for the the second-lowest priced silver plan premium free.
Plus, there is another benefit in picking plans based on incomes that do not exceed 250% of poverty.
At this income level, people also qualify for lower co-pays and deductibles through “cost sharing” silver plans. A cost-sharing plan could mean, depending on the plan, $5 for a prescription instead of first having to meet a high deductible, plus much lower deductibles. These are only for silver plans, not those rated on the Marketplace as bronze, gold or platinum.
Break for income changes in 2020
If you made more than expected last year, here’s more good news. You won’t have to settle up with the IRS to return some of your subsidy.
To explain, let’s back up a bit. Those enrolling in Obamacare plans receive subsidies based on their expected income, using documents and good-faith estimates.
* If they end up making less than anticipated during the year, they receive money back at tax time the following year to account for what should have been a larger government subsidy. This doesn’t change.
* If they made more than estimated, they normally have to pay back some of their subsidy to the government at tax time. Not so this year. Under the stimulus bill – in recognition of how uncertain economic times were for so many people last year – there will be no required paybacks for 2020.
Pollitz calls this a “repayment holiday.” This is a one-year change, for 2020 premiums, most of which were based on estimates people made back in 2019.
Implementation will require some tax processing changes by the IRS, yet to be made. “One way or another, the IRS is going to figure this out and make you whole,” Pollitz said.
Government pickup for COBRA coverage
Anyone losing a job, or choosing to leave a job, probably has heard the term COBRA, so-named because it was part of a previous Consolidated Omnibus Budget Reconciliation Act. The law allows you to buy insurance through your former employer, often for up to 18 months, at cost. This often results in sticker shock. The employer is no longer obligated to pay its share, leaving the entire cost on the individual.
The U.S. House version of the stimulus called for the government to pick up the 85% of the cost. The U.S. Senate version upped that to 100%, from April through September for people whose coverage was terminated because their employer eliminated their job or reduced their hours.
This means people losing their coverage can keep their old insurance without having to pay a premium through September. This starts on April 1.
People who lost their coverage months ago for these reasons are also eligible rejoin coverage going forward, Pollitz said. And people who already elected coverage and are paying COBRA can also receive these subsidies if they lost their job or coverage through reduced hours.
The government will pay the employers directly to cover the cost from April through September.
“This could reduce your insurance premiums by $800 a month (or more). This could be enormous,” Pollitz said.
As noted above, these changes are short-term. The longest lasting change written into the law – for higher subsidies to make premiums cheaper – lasts through 2022.
But there is one other lingering question. The Supreme Court heard arguments in the fall to dismantle Obamacare. A ruling could come anytime from now until mid-Summer.
The Trump Administration and other Republicans including the Texas attorney general argued that since there no longer is a tax penalty for being uninsured, the entire law should be be tossed, One possibility is that the mandate will be formally removed, leaving the rest of the law intact.
Email questions and suggestions to rexne[email protected]. Include your hometown and first name for publication. And to help me sort through the clutter of my email box, try to remember including “That’s Rich!” in the subject of the email.
Previous That’s Rich! columns
How to claim your unemployment tax break under new stimulus; other coronavirus-related tax matters
Here’s what’s in the latest COVID-19 relief bill, including $5,600 in stimulus payments for a family of 4
Logic aside, pandemic unemployment checks are taxable, unlike stimulus payments – That’s Rich! Q&A
How to check to ensure you’re not overpaying for electric, natural gas; some ‘deals’ have short promotional periods
Here’s how to claim missing or bigger stimulus payments in filing 2020 taxes; young adults, new parents, others may now qualify
Here’s why some Ohioans are still out PUA unemployment benefits from December
IRS confirms stimulus payments will be issued for people who died in 2020
With bank CD rates so low, where can I park my savings to make at least a little interest?
President Biden extends student-loan breaks through September; here’s what to consider even if you can afford to keep paying
Compare Greater Cleveland, Akron property tax rates, and learn why they have changed this year
Here’s how to make a case to lower your property tax bill
Cuyahoga County home prices in 2020 up more sharply than at any time since the housing bust; see details for each town
$200,000-plus is now the norm for homes in Cleveland’s Detroit-Shoreway, Ohio City and Tremont neighborhoods
What you need to know about the new stimulus checks, and $300 extra weekly in unemployment benefits: Q&A
2021 personal finance calendar: key dates for tax documents, student grants and loans, Obamacare, Medicare and more
‘Tis the season for the stock market’s typical ‘Santa Claus Rally’
7 end-of-the year money-saving ideas: picking tax brackets, IRA withdrawals, loan refinancing, more
Extended warranties are free with credit cards; don’t waste the benefit
Is a gift card the right gift? Some ideas, cautions, and protections to know under the law
You can go to college tuition-free if you’re 60 or older by auditing classes in Ohio
How to be sure you’re getting a fair deal on auto insurance during COVID-19 with traffic, accidents down
Is your budget tight during coronavirus? See these tips to help you cope, now and in the long run
How to avoid scams; newest fraud tricks; can payment be stopped?
Organize your financial records in case you get sick – a reader Q&A
Explaining Ohio’s maze of city income tax rates and credits, and why you should log where you’ve been working
With mortgage rates at historic lows, should you join the rush to refinance? – That’s Rich!
Ohio has $3.2 billion in unclaimed funds; find out if some of that money is yours – That’s Rich!
Roth retirement plan or traditional IRA and 401(k) plans? Is this the time to adjust your thinking?
Taking college classes online? Here’s how students can save a lot of money
Does it make sense to pay off your mortgage early? Here’s what to consider
CARES Act makes this ideal time for a student-loan payment checkup
What you need to know to get an unemployment check in Ohio