Have you lined up your healthcare through the marketplace? If not, you’re lucky because it can be a huge headache. Thankfully, it may have gotten a bit easier for a lot of households.
The federal government has extended the special enrollment period for Obamacare. The original cutoff was May 15, but you now have until Aug. 15 to sign up.
Why the extension? The American Rescue Plan. Under the plan, which passed earlier this year, subsidies are now available to more people. That means if you haven’t qualified before, it’s well worth checking into.
Here’s what you need to know about the 2021 Obamacare subsidies.
A quick refresher on subsidies
Before getting into the details of this year’s changes, it’s important to do a quick review of how exactly subsidies work.
Health insurance can be expensive. The Affordable Care Act set up a marketplace to make it easy to find coverage.
But not everyone who goes through the marketplace makes the same salary. That’s where subsidies come in. With subsidies, the government offers benefits like tax credits that help reduce the premiums and out-of-pocket costs.
The government puts income caps on the subsidies it pays off. It’s not solely about the income you bring in each year. It’s based on the percentage of your income that your health insurance can consume.
You apply for the subsidies when you enroll in a healthcare plan each year through your state’s health insurance marketplace. Unless you have a qualifying event, you have to apply during the open enrollment period, which is only a limited time period each year.
The new income caps
The first thing to know about the new subsidies is that there are no income caps.
Temporarily, Congress has approved everyone to receive Obamacare subsidies, but your subsidies will be based on the percentage of income your healthcare makes up. The subsidies are designed to ensure nobody puts more than 8.5% of their income toward health insurance. Before the American Rescue Plan, you could put as much as 9.83% of your income toward insurance without qualifying for subsidies.
It’s important to note that the 8.5% cap only applies to those with incomes that are at least 400% above the poverty level. Everyone else will pay lower premiums.
How do you know how much your premiums will be? The marketplace will tell you. You can answer a few questions at Healthcare.gov to determine whether tax credits apply that will reduce what you’ll pay each month.
This income percentage is based on the ACA’s benchmark plan. The benchmark plan is the second-lowest-cost Silver plan available on the marketplace.
Who will benefit?
The expansion means a larger number of people will qualify from subsidies that make their insurance more affordable. Those who are uninsured and/or unemployed will probably benefit most from the expanded subsidies.
Many households will find their premiums decreasing by $50 per person each month, or $85 per policy.
Perhaps most notable, though, is that four out of five enrollees will be able to find a plan that costs them $10 or less each month. One out of four enrollees can upgrade to a plan that offers better coverage for less, thanks to the expanded subsidies.
Who doesn’t qualify?
As always, if your employer provides health insurance coverage, you won’t qualify for a plan under the Affordable Care Act. However, there is always an exception to that.
If your employer-sponsored plan is expensive or lower in quality, you may qualify for the marketplace. Your plan’s affordability is based on the percentage of your income you’re paying toward insurance. Typically, this percentage is 9.83% of your household income, but for 2021 and 2022, your employer-provided insurance’s affordability gauge will drop to 8.5%.
You also won’t qualify if your household’s income is 400 times the poverty level or more and your insurance premium would be less than 8.5% of your household income.
Obamacare and unemployment
What if your income comes primarily from unemployment compensation?
Plenty of households find themselves in that situation due to COVID-19. The American Rescue Plan considered the needs of those residents, as well.
Under the plan, those who receive unemployment will get $0 premiums for the benchmark Silver plan. But that’s not all. You’ll also get cost reductions that will bring your out-of-pocket costs down.
Who qualifies? Anyone who received at least one week of unemployment compensation in 2021. Your income will also need to be less than 134% above the poverty level.
Unemployment has been an inevitable part of life for many over the past year. Those who have been let go are eligible for COBRA, which continues their employer-provided coverage temporarily.
As valuable as COBRA can be, it’s an exorbitant expense for many families. Former employees must pay 102% of the cost of premiums to stay on those employer-provided plans. For someone who’s suddenly out of work, the cost can pack quite a punch.
The American Rescue Plan brings help with that, as well. From April 1, 2021, to Sept. 30, 2021, you won’t have to pay premiums or administrative fees for your COBRA continuation coverage. The federal government will subsidize those expenses.
How long will it last?
The increased eligibility for subsidies is only temporary. Along with the other benefits in the American Rescue Plan, the changes are geared toward strengthening the economy and helping struggling households.
You’ll enjoy these benefits for 2021 and 2022. The unemployment provision currently applies only to those who receive unemployment compensation for some or all of 2021.
How to apply
If you’re already getting insurance through an exchange, you can easily switch to another plan to take advantage of the subsidies. This will lower your monthly payments. You can also keep your existing plans and apply the subsidies to what you already have.
If you’re applying for Obamacare for the first time, go to Healthcare.gov before Aug. 15. There, you can preview this year’s plans and prices or find healthcare brokers who can handle the process for you. Unemployment compensation recipients will need to wait until early July to sign up.
Those who prefer the local approach can find local brokers who will set up things for you. This could be a great option if you don’t want to go through the process. However, make sure you’ll be able to get all the subsidies you’re eligible for if you go this route.
Local marketplaces
Only 36 states will enroll through the federal site. Other states have their own marketplaces, each with its own deadlines and application processes.
To find out how you’ll need to apply for health insurance, find your state on this list. Many of these other states have open enrollment throughout the year, with coverage starting the next month.
But the subsidy expansion also applies to those enrolled in state marketplaces. An estimated 57,100 Californians will now be eligible for subsidies, for example.
Summary
Healthcare remains a huge expense for many families. But with Obamacare subsidies, you may be able to get a little relief on premiums for the short term. You have until mid-August to sign up, but it’s important to start thinking about it if you’re in the market for new medical coverage.