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The Impact of ARPA Exchange Subsidies on Consumers Ages 50–64

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Summary

Consumers ages 50–64 could see higher exchange premiums starting in 2023 without extension of ARPA subsidies.

Download the complete study, including state-specific tables, as a PDF.

On March 11, President Biden signed the American Rescue Plan Act (ARPA) of 2021. Among other provisions, ARPA temporarily increases exchange premium tax credits for individuals already eligible for assistance under the Affordable Care Act (ACA), and it extends subsidy eligibility to individuals with income over 400% of the federal poverty level (FPL) for 2021 and 2022. Under these provisions, approximately 18 million Americans now have access to lower-premium exchange plans, and approximately 8 million are newly eligible for lower premiums. Avalere estimates that 5.1 million individuals 50–64 will be enrolled in the exchanges at the end of 2021, with millions benefitting from substantial costs savings, as this population typically has the highest premiums due to age ratings.1

With the ARPA tax credit enhancements set to expire on December 31, 2022, populations 50–64 are at greatest risk for having substantially higher exchange premiums, which could make health insurance unaffordable for many. If Congress makes the tax credit enhancements permanent, millions of older Americans would pay lower premiums and have better access to coverage.

Overview

To assess the impact of the ARPA premium subsidies, Avalere estimated reductions in exchange premiums and national coverage shifts for the 50–64 population due to ARPA premium subsidies in 2021 and 2022. Avalere also assessed the impact of making the enhanced premium subsidies permanent by estimating coverage shifts in 2030. Specifically, Avalere analyzed potential impacts of the latest subsidy enhancements under the ARPA, including:

  • Fully Subsidized Exchange Premiums for Low-Income Individuals: For those not eligible for Medicaid, cap exchange premiums at $0 for individuals with incomes up to 150% of the FPL in 2021 and 2022.
  • Increased Existing APTCs: Increase Advance Premium Tax Credits (APTCs) for individuals with income between 150% and 400% of FPL in 2021 and 2022.
  • Expanded Exchange APTC Eligibility and Implementing New Premium Caps: Expand availability of exchange plan APTCs to individuals with incomes above 400% of the FPL, and cap maximum ACA premiums at 8.5% of FPL for individuals in 2021 and 2022.

National and State Impacts

Across all states, ARPA premium reductions make accessing insurance more affordable for consumers ages 50–64 and reduce the number of uninsured in this potentially higher-risk population. If the ARPA premium subsidy provisions listed above were made permanent, enrollment in the exchanges would continue to increase and the number of uninsured would continue to decrease in the population ages 50–64. Depending on individual income level, enhanced ARPA tax credits are estimated to save current exchange enrollees ages 50–64 between $500 and $4,701 per year on annual premiums after subsidies (Table 1).

Table 1. Estimated Annual Premiums Savings and Enrollment, Ages 50–64, by Income Level, 2021
Premium Savings and Enrollment 100%–150% of FPL 150%–200% of FPL 200%–250% of FPL 250%–300% of FPL 300%–400% of FPL 400%–500% FPL
Annual Premium Savings* $500 $976 $1,282 $1,445 $1,163 $4,701
End-of-Year Exchange Enrollment** 318,000 406,000 429,000 423,000 742,000 534,000

Source: Avalere analysis of 2021 open enrollment period public use enrollment file (PUF), SEP reports (April–August 2021), and American Community Survey 2019 1-Year Sample.

Notes: *AK and HI premiums are excluded. **Avalere estimates there are 2.2 million exchange enrollees 50-64 with incomes not elsewhere specified that were omitted from this table.

Avalere estimates that national enrollment in the exchanges for the population ages 50–64 will be approximately 1.1 million higher in 2022 and 2.1 million higher in 2030 if the ARPA premium subsidies are made permanent (Figure 1). Total end-of-year exchange enrollment for individuals 50–64 is estimated to be 5.1 million at the end of 2021 and 5.2 million at the end of 2022. Avalere’s estimates reflect historical enrollment trends, including mid-year enrollment attrition, enrollment during the 2021 special enrollment period (SEP), and the estimated impact ARPA premium subsidies are likely to have on consumer behavior.

Figure 1. End-of-Year Exchange Enrollment in Millions, 2021, 2022, and 2030, With and Without ARPA APTC Enhancements, Ages 50–64
Figure 1. End-of-Year Exchange Enrollment in Millions, 2021, 2022, and 2030, With and Without ARPA APTC Enhancements, Ages 50–64

Source: Avalere analysis of 2021 open enrollment period PUF, SEP reports (April–August 2021), and American Community Survey 2019 1-Year Sample.

Note: Individuals qualifying for 100% premium subsidies under ARPA based on receiving unemployment insurance are not included in the analysis.

By making exchange coverage more affordable, Avalere estimates the ARPA premium subsidies will reduce the number of uninsured individuals ages 50–64 by approximately 400,000 in 2022 and by as many as 900,000 in 2030, if the ARPA premium subsidies were made permanent (Figure 2). If the ARPA tax credit provisions expire, however, exchange enrollees will face higher premiums for the 2023 plan year, which may lead to higher rates of uninsured. Consumers would learn about the impact to their 2023 premiums upon receipt of renewal letters they will receive by early November 2022.

Figure 2. Uninsured in Millions, 2021, 2022, and 2030, With and Without ARPA APTC Enhancements, Ages 50–64
Figure 2. Uninsured in Millions, 2021, 2022, and 2030, With and Without ARPA APTC Enhancements, Ages 50–64

Source: Avalere analysis of 2021 open enrollment period PUF, SEP reports (April–August 2021), and American Community Survey 2019 1-Year Sample.

Note: Individuals qualifying for 100% premium subsidies under ARPA based on receiving unemployment insurance are not included in the analysis.

In addition to national-level coverage shifts, Avalere analyzed state-specific 2021 enrollment at the end of the open enrollment period and at the end of the SEP, and estimated enrollment at the end of the calendar year. Open enrollment includes individuals who renewed their coverage from the previous year and newly enrolled individuals. SEP enrollment is limited to additional individuals who enrolled in exchange coverage from February 15 to August 15. Accounting for enrollment attrition, Avalere estimates that a total of 5.1 million individuals ages 50–64 will be enrolled at the end of 2021. Historically, exchange enrollment peaks during open enrollment and declines throughout the year as more individuals leave the exchanges than enter through traditional SEPs, which require consumers to demonstrate a mid-year qualifying event. However, in 2021, the broad, 7-month-long SEP allowed individuals to enroll mid-year without requiring a qualifying event and to access the ARPA premium subsidies.

Beyond coverage shifts, Avalere estimated average exchange premiums costs, average reduction in annual premium costs, and total premium savings to demonstrate state-level consumer impact. Nationally, annual out-of-pocket premiums for individuals ages 50–64 are expected to be reduced by $954 (16%) on average in 2021 as a result of the ARPA subsidies. At the state level, savings vary from a low of $341 in Delaware to a high of $1,676 in West Virginia. Across all states, the total annual savings for consumers ages 50–64 is estimated to be $4.8 billion in in 2021. Total savings are forecast to be higher in 2022 since the ARPA premium subsidies will be available for a full 12 months, whereas they were not available until April 2021.

State-Level Demographics

Avalere estimated the distribution of exchange enrollment by income level within each state for individuals ages 50–64 to demonstrate who will benefit from the ARPA enhanced premium subsidies. In many states, more than half of older exchange enrollees are projected to have reduced premiums in 2021 and 2022 while facing potentially higher premiums in 2023 if the premium subsidies expire.

Avalere’s analysis also identified key exchange population demographics, including gender, race, ethnicity, and urban/rural status for individuals ages 50–64. By reducing exchange premiums, the ARPA subsidies increase access for low- to moderate-income individuals, many of whom represent minority communities.

Conclusion

For individuals ages 50–64, the ARPA premium subsidies can have a substantial impact on access to affordable coverage. Under current law, the ARPA premium subsidies are set to expire December 31, 2022, which would leave older individuals to face higher premiums ins 2023 and potentially lose coverage altogether. The impact of higher premiums varies by key demographics, potentially leaving more vulnerable populations at increased risk of loss of coverage, particularly those below 150% of FPL and those in marginalized populations. By 2030, nearly a million additional people between ages 50 and 64 could be uninsured if the ARPA premium subsidy enhancements are not extended.

Funding for this research was provided by AARP. Avalere Health retained full editorial control.

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Avalere Health is an Inovalon company, a leading provider of cloud-based platforms empowering data-driven healthcare. We believe in the power of data, informing actionable insights, delivering meaningful impact, and driving stronger patient outcomes and business economics.

Methodology

Avalere developed estimates of national and state-level coverage shifts and expected reductions in exchange plan premiums for the population ages 50–64 that could result from the ARPA premium subsidies in 2021 and 2022, as well as an extension of ARPA premium subsidies through 2030. To determine differences in premium totals for individuals ages 50–64 at the national and state level, Avalere calculated ARPA APTC amounts for select income bands (100%–150%, 150%–200%, 200%–250%, 250%–300%, 300%–400%, and 400%–500% of FPL) using the 2021 open enrollment period PUF, SEP reports (April–August 2021), and American Community Survey data on health insurance coverage and income.

To produce estimates of shifts in coverage, Avalere used publicly available enrollment data from the Congressional Budget Office, open enrollment period PUF, SEP reports (April–August 2021), American Community Survey data on health insurance coverage by target market (i.e., exchange market, employer-sponsored insurance, and the uninsured), and data from other relevant sources. Using differences in premiums with and without ARPA APTCs, as calculated under the premium analysis, Avalere applied Congressional Budget Office’s assumptions on elasticity of demand with respect to consumer behavior to determine shifts from uninsured individuals and those with employer-sponsored insurance into the exchanges.

Notes

  1. Exchange premiums may vary by a limited number of factors, including age. There is a 3:1 age rating limit.
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