The Affordable Care Act (ACA), also known as Obamacare, was passed in 2010. This legislation significantly impacted the health care landscape by increasing affordability and accessibility in the United States. Just recently, President Joe Biden announced that ~15.9 million Americans have signed up for an ACA marketplace plan since the start of the 2023 open enrollment period in November.
In recent news, there have been important changes and considerations that individuals need to be aware of. This post will discuss what the ACA is and the ramifications of the recent changes.
The ACA’s Background
The goal of the ACA was to expand access to health insurance in a cost-effective manner while improving the quality of care. This goal was accomplished by offering subsidies, also known as “premium tax credits,” for households with incomes between 100% and 400% of the federal poverty level.
The issue is if your income went one dollar over the upper bound, you were on your own to cover the entire health insurance premium. This equates to thousands of lost dollars for countless American households every year!
The criteria for determining the subsidy is based on a household’s income, not its assets. But things get tricky as the ACA’s definition of income includes things most would not assume, such as capital gains, unemployment compensation, and investment income, in addition to any wages and self-employment income.
The ACA Extension
Recently, the Senate reached a deal to extend enhanced ACA subsidies for an additional three years through 2025. This extension will provide further financial assistance to those enrolled in ACA plans, helping lower health care coverage costs.
In addition, thanks to a provision in the American Rescue Plan, the subsidy income “cliff” was eliminated in 2021. This provision was extended through 2025 as part of the Inflation Reduction Act.
The Senate’s deal also focuses on making health care more affordable and accessible to millions of Americans by addressing the cost of prescription drugs. This is sorely needed since medical bills are consistently one of the most common reasons for bankruptcy in America, with ~17% of adults with health care debt filing for bankruptcy in 2022.
This subsidy calculator can help give you an estimate based on your household size, age, zip code, and expected income.
How the ACA Extension Affects Individuals
One of the extension’s main provisions was the special enrollment period for uninsured individuals. This provision allows those without health care coverage to enroll in an ACA plan outside the regular open enrollment period, generally between November and January, depending upon the state. This is extremely beneficial for uninsured Americans who seek to secure coverage and protect themselves from the financial risks of unexpected medical expenses.
The ACA extension also expanded premium tax credits for those already enrolled in an ACA plan. This means that those already receiving financial assistance may be eligible for additional support in paying their monthly premium.
The extension has several provisions that affect individuals seeking health care coverage. Below are a few key points to consider:
Special enrollment period: As mentioned, the extension provides a special enrollment period for uninsured individuals and allows those without coverage to enroll in an ACA plan outside the regular open enrollment period.
Expansion of premium tax credits: If you are enrolled in an ACA plan and are currently receiving premium tax credits, it’s worth checking to see if you are eligible for additional assistance.
Coverage for pre-existing conditions: One of the key provisions is the protection provided for those with pre-existing health conditions. Insurance companies cannot deny coverage or charge higher premiums based on pre-existing conditions. This rule is vital for those with chronic health conditions who may have struggled to find affordable coverage.
How the ACA Extension Impacts States
The extension also has an impact on the state level. Currently, 40 states (including DC) have extended their ACA enrollment period, allowing more individuals to enroll in an ACA plan. This is likely to have significant implications for the health care landscape in these states by potentially increasing the number of insured individuals and reducing the burden on the health care system.
According to the Kaiser Family Foundation, the number of uninsured individuals has steadily decreased from ~46.5 million in 2010 to ~27.5 million today.
Conclusion
The ACA extension has important implications for both individuals and states. It provides a special enrollment period for uninsured individuals and helps expand the premium tax credits for those already enrolled. This helps increase the number of insured individuals while lowering the cost of health care coverage.
It is vital to research your ACA plan options and consider your health care needs to find the right plan for you and your family while taking advantage of eligible tax credits.
Our Bethesda, MD financial planning firm helps clients through this process and to understand how it incorporates into their financial plan. To discuss further, please schedule an introductory call.
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