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Shop and Compare is Working – ARP Provides Bigger Subsidies

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New ARP (American Rescue Plan) premium calculations are available on the Covered California website www.coveredca.com. Those who have health insurance coverage that is not employer sponsored will be well served to look at the Shop & Compare Feature: https://apply.coveredca.com/lw-shopandcompare/.

The ARP reduced the limit on Health Care Premium costs to 8.5% of overall household income, assuming enrollment in a Silver or Bronze Plan. Gold or Platinum Plans will require a higher premium cost for enrollees.

In the past there hasn’t been much of a subsidy for younger people with higher earnings, but a recent visit to the site shows that a 31 year old living in Shasta County with $58,000 of income could pay $259 monthly for a Bronze plan after a premium subsidy of $149. Prior to this she was paying about $410 monthly for the Bronze plan in Santa Rosa. Another option would be a Silver plan for the same $410 that she was paying for the Bronze plan.

A young healthy woman is probably best to choose to continue the high deductible plan, but take the $150 monthly difference and contribute to a Health Savings Account (HSA). The website also shows that if the individual had received unemployment benefits in 2021, the Silver Premium could be a low as $1.

The HSA is a tax favored savings account that allows one to set aside funds to pay qualified medical expenses. There is no “use it or lose it” provision, so it can be a kind of health IRA. Although the state of California does not allow the deduction, the Federal tax structure is such that the funds can actually be never taxed if used properly!

Looking at older ages, two 60 year olds with combined income of $150,000 could purchase a high deductible health plan for $356 after $1560 in advance premium tax credits. Had they collected unemployment benefits in 2021, the premium cost could be much lower.

A 50 year old couple with the same income would pay $598 for the high deductible plan after $663 in credits if they had not received unemployment benefits.

Covered CA replied to my inquiry regarding recipients of Unemployment insurance as follows: ”If a member has received Unemployment their eligibility will be locked in at 138.1% that is not within Medi-cal guidelines. “  This will put them in the Enhanced Silver category, thereby providing enhanced benefits as well as subsidies. From what I can see there is no limit on the 2020 overall income.

As you review the results from this estimator, you might be a little confused. You aren’t alone. The calculations are complex and based on Silver premiums for the baseline calculation. Further, remember this is an estimate. There are enhanced benefits for those that received unemployment benefits in 2021 as well.

The website emphasizes that all of these are estimates. Since much of this is new tax law, I would suggest that individuals coordinate between their tax professional and Covered CA to try to avoid any surprises when filing tax returns. I am not a tax professional and neither are most agents or certified enrollers.

If you underestimated your income for 2020, you are in for a pleasant surprise. The IRS website states that the “IRS suspends requirement to repay excess advance payments of the 2020 Premium Tax Credit”. This could be a big relief to folks who underestimated income and were expecting to have to repay the credit. This link will take you to the IRS explanation:

https://www.irs.gov/newsroom/irs-suspends-requirement-to-repay-excess-advance-payments-of-the-2020-premium-tax-credit-those-claiming-net-premium-tax-credit-must-file-form-8962.

Further, if the return has already been filed, the IRS will be adjusting that repayment to zero and returning the overpayment to the individual! What intrigues me is that there appears to be no reconciliation provision that penalizes someone who willfully under-reported income. Perhaps that will follow.

It is important to note that the “family glitch” has not changed. This is the provision that provides that if either spouse has “affordable coverage” at work, the rest of the family is not eligible for a subsidy, regardless of the cost of dependent coverage from the employer.

Clearly there were multiple features of the ARP designed to help those middle and lower income individuals through the pandemic. The challenge is that the law was passed and provisions are retroactive. This makes the administration and compliance more than a little challenging.

Margaret R. Beck

Margaret Beck CLU, ChFC, CEBS started her insurance practice in Redding in 1978. She is the founder of Affiliated Benefit Services where businesses and individuals are assisted in choosing proper products, compliance with complex benefit laws and claims issues once coverage is placed.

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