The Biden $1.9 trillion spending bill included $36 billion to shore up Obamacare by temporarily expanding premium tax credits to those who had not previously been eligible for them. Yet, many young, single people will still not qualify, leaving them to pay the full cost of health insurance premiums that have risen precipitously in recent years.
Under Obamacare, people who purchase health insurance on the marketplaces, known as exchanges, can, if they meet certain conditions, qualify for tax credits to help cover the cost of premiums. The tax credits, also known as subsidies, were originally targeted to those with incomes between 100% and 400% of the federal poverty level.
The Biden bill, the American Rescue Plan, was intended to expand for two years the subsidies to those above 400% of the federal poverty level, about $51,500 for an individual.
Yet, a Washington Examiner analysis found that a 30-year-old individual making just over 400% of the federal poverty level does not qualify for a subsidy in many metropolitan areas, including Chicago, Columbus, Denver, Houston, Los Angeles, Milwaukee, Phoenix, San Antonio, Seattle, and Washington, D.C.
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A 40-year-old earning just over 400% would not qualify for a subsidy if he or she lived in Chicago, Los Angeles, or Denver. If that 40-year-old lived in Columbus, Houston, Phoenix, San Antonio or Seattle, the monthly subsidy would be less than $35.
This will leave individuals exposed to some very high costs for health insurance. For people who don’t qualify for subsidies, premiums on the exchanges have increased substantially in recent years. According to an analysis from the U.S. Department of Health and Human Services, the average premium on the exchanges run by the federal government more than doubled from 2013-2017, from $232 to $476. Individuals age 30-40 making above 400% of the federal poverty level in certain cities could easily have to pay 7%-8% of their income for a the second-lowest cost silver plan on the exchanges, also known as the benchmark plan. Even if they choose the lowest-cost plan available on the exchange, they would still have to spend 5.5%-6.5% of their income for insurance.
The reason they are ineligible for assistance is related to the fact that Obamacare limits the amount a person pays toward insurance on the exchanges based on their income. A person qualifies for a subsidy if his income limit is less than the price of the benchmark plan on an exchange. So, if an individual is supposed to pay no more than $150 per month for a plan but the benchmark plan is $200 per month, he qualifies for a $50 subsidy.
The original Obamacare applied income limits only to those making between 100%-400% of the federal poverty level. The American Rescue Plan established an income limit for people above 400% of the federal poverty level. For the next two years, people making more than 400% will not have to pay more than 8.5% of their income for insurance on the exchanges. For someone making just over 400%, about $51,600 a year, the amount he pays for an exchange plan is limited to $4,386 annually or about $366 per month. But here’s the rub: that amount exceeds the premium for the benchmark plan on many exchanges. For a 30-year-old in Chicago the benchmark plan is $306 per month and for a 40-year-old it is $345. Thus, neither qualify for a subsidy.
Brian Blase, the head of Blase Policy Strategies and senior fellow at the conservative Galen Institute, said that it is a problem that younger, upper-middle class adults aren’t getting any relief from the American Rescue Plan.
“You want younger people to come into the health insurance market because they tend to use less healthcare. That lowers the overall cost of premiums,” Blase said.
Stan Dorn, director of the National Center for Coverage Innovation at Families USA, a national, nonpartisan organization that advocates for liberal healthcare policy, said that the expansion of subsidies for those between 100%-400% of the federal poverty level would bring more young people into the exchanges.
“Average younger adults just starting out are likely to be making a lower income than older adults and more likely to have jobs that do not offer health coverage,” Dorn said. “The subsidy expansion in the American Rescue Plan means that more of them will sign up [for the exchanges.]”
The American Rescue Plan boosted the subsidies for many in the 100%-400% federal poverty range by lowering the income limits. The 30-year-old living in Chicago making 200% of the federal poverty level will now only have to pay 2% of his income for coverage where he previously paid 6.52%. That will increase his monthly subsidy from $167 to $263. The Congressional Budget Office estimates that an additional 1.7 million people will enroll in the exchanges because of the subsidy expansion.
But Blase was not convinced that will lower premiums.
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“When you expand the subsidies, you are making people less sensitive to the cost of the premiums,” Blase said. “Insurers know that, and it reduces pressure on insurers to reduce premiums.”
Dorn disagreed.
“The greater level of assistance still preserve the incentives built into [Obamacare] to buy cheaper insurance,” Dorn said. “If people spend their subsidy on a plan that costs less than the benchmark plan, they save money.”
