Policy Playbook: Deep Dive – American Rescue Plan Act of 2021

Author: Ariel Wu (EM Resident Physician, UCLA) // Reviewed by: Summer Chavez, DO, MPH, MPM (EM Attending Physician, UT Houston); Alex Koyfman, MD (@EMHighAK)

What’s the issue?

Last month’s Policy Playbook post unpacked ARPA, or the American Rescue Plan Act of 2021 (H.R. 1319), a $1.9 trillion economic stimulus act signed on March 11, 2021, from a bird’s-eye perspective. Previous posts on stimulus bills can be found here, here, and here. This month’s post explores how the stimulus act expands affordable health care coverage through the Affordable Care Act (ACA) and Medicaid, which protects population health and maternal health, increases provider compensation, and addresses socioeconomic and racial disparities in health outcomes.

Many provisions in ARPA target Medicaid:

• Incentivizes expanding Medicaid in non-expansion states^1,2
• Offers states the option to extend Medicaid and CHIP coverage of mothers to one year post-partum³
• Requires that Medicaid covers 100% of costs for COVID-19 vaccination and treatment with no cost-sharing³
• Offers states the option to increase funding for Home and Community-Based services³
• Eliminates the cap on the Medicaid Drug Rebate Program.
• Clarifies that drugs used in COVID-19 treatment are eligible for the Medicaid Drug Rebate Program³
• Temporarily supplies 100% Federal Medical Assistance Percentage (FMAP) to Native Hawaiian Health Providers and services provided by the Urban Indian Health Program³
• Offers states the option to create community-based mobile crisis intervention services for mental health and substance use crises (with 85% FMAP for 3 years)³
• Grants $250 million for states to create “strike teams” to respond to COVID-19 cases in nursing homes³

The American Rescue Plan also reduces insurance premiums for almost everyone with Marketplace Plans:

• Increases Premium Tax Credits for individuals making up to 400% of the federal poverty level purchasing plans on the Marketplace^2,3
• Caps the maximum insurance premium paid by all enrollees on the Marketplace to 8.5% of their annual income for the benchmark silver plan^2,3
• Extends Marketplace subsidies to individuals receiving unemployment compensation in 2021²
• Eliminates tax penalties for changes to Premium Tax Credit (PTC) eligibility in the year 2020³. Under the ACA, if changes to household size and income occur to reduce the amount of Premium Tax Credit that the individual qualifies for, they must pay back the excess PTC in their tax return, a process called “reconciliation”. The ARP recognizes that due to the pandemic, employment and income sources are difficult to predict through the year, and an unexpected tax bill would be a difficult burden for many facing these circumstances. CBO estimates this provision will save families $6.3 billion³.
• Grants $20 million for states to update their health insurance marketplaces to reflect policy changes and improve outreach and enrollment³

Finally, the American Rescue Plan has provisions for individuals who lost employer-based coverage:

• Subsidizes 100% of COBRA premiums until September 30, 2021³. Before the American Rescue Plan, individuals who lost employment-based insurance may continue their insurance coverage as long as they pay the entire premium, including the share that the employer previously paid for them. This kind of coverage, which can be extended up to 18 months after losing employment, is called COBRA coverage.
• Allows individuals who missed the 60-day enrollment period before these subsidies were available to re-enroll in COBRA.

Why does this matter?

ARPA qualifies at least half of uninsured Americans for free or heavily subsidized health insurance¹

The Affordable Care Act, passed in 2010, led to significant increases in coverage from 2010 to 2016, but since then coverage levels have remained stagnant or decreased across race and ethnic categories⁴, partially due to repeals of key components of the ACA by the Trump Administration from 2016 to 2020, including the repeal of the individual mandate (2017), waivers allowing states to institute “work requirements” for Medicaid (2018), changes to immigration policy, ending federal subsidies that kept premiums low (2017), cutting funds to health care navigator programs and support Marketplace websites (2017), and more⁵. What’s more, the COVID-19 pandemic has led to record rates of unemployment and loss of employer-based health insurance, particularly among women⁶.

In the setting of a global health crisis and millions of newly uninsured individuals, ARPA in broad strokes makes health coverage more affordable for millions of people. Before ARPA, individuals making up to 400% of the federal poverty line ($51,040/year) received a tax subsidy that reduced their average health care premium to 9.83% of their income a month for a silver plan. However, many who were eligible for this tax subsidy still remained uninsured; likely even with the subsidy, the premium and deductible of Marketplace plans were still not affordable.

Increasing the tax subsidy for people enrolled in the Marketplace, making unemployed people eligible, and capping marketplace plan contributions to 8.5% of annual income is estimated to reach 15 million currently uninsured people and make coverage more affordable for 14 million who are already insured through the individual market^2,3.

Analysis has shown that:

• 63% of uninsured people are now eligible for financial assistance through the Marketplaces, Medicaid, or Basic Health Plans⁸.
• 4 of 10 uninsured people can access a free or nearly free health plan through one of these programs⁸.
• Almost everyone eligible for a Marketplace plan will see a decrease in their premium payments through this relief law, with average savings of $70 per month⁸.
• The Congressional Budget Office (CBO) and Joint Committee on Taxation (JCT) estimate that ARPA will cause 1.7 million people to gain coverage through the Marketplace^2,3,8.

The largest demographics of uninsured people that remain ineligible for financial assistance are undocumented immigrants (3.9 million), uninsured people whose employer plans are deemed affordable by the ACA (3.5 million), and people in the Medicaid coverage gap (2.2 million).

ARPA more than covers the cost for states to expand Medicaid eligibility

For the 12 states that have not yet expanded Medicaid eligibility, ARPA offers funding that more than covers the cost of expanding Medicaid¹. On average, federal funding for the expansion is about double the cost of expansion for each of the non-expansion states¹. A state-by-state breakdown of the costs and funds can be found here. Under the ACA, states that have expanded Medicaid eligibility to 138% of poverty level are eligible for a 90% federal matching rate (FMAP); under ARPA, newly-expanded states would receive a 5 percentage point increase in the state’s regular match rate (FMAP), which includes groups who were covered prior to Medicaid expansion. When compounded with the 6.2 percentage point increase in match rate provided under the Families First Coronavirus Response Act (FFCRA), states could see even greater funding of their Medicaid programs until March 2022. The estimated cost of expansion for all 12 states is $6.8 billion; estimated federal matching funds to states is $16.4 billion over the next two years. The net benefit to the states for expanding Medicaid is $9.6 billion¹.

Funding states to expand Medicaid eligibility up to 138% of the federal poverty line would cover an estimated 4.3 million uninsured individuals¹. These gains in coverage overall will ensure a safer, healthier population, increase health care provider compensation, and make headway addressing social determinants of health.

ARPA addresses racial and socioeconomic health disparities

Finally, increasing Medicaid and CHIP coverage up to a year post-partum will help address the stark racial and socioeconomic determinants of maternal morbidity and mortality in the US³. The Congressional Budget Office estimates that about 45% of women covered by Medicaid for their pregnancy lose their coverage after the 60-day postpartum period, during which around one tenth of maternal deaths occur⁷.

ARPA reduces health care costs

ARPA guarantees full coverage of COVID-19 vaccination and treatment³. Second, for health care providers, ARPA also eliminates the cap for the Medicaid Drug Rebate Program, which is projected to return about $20 billion in federal and state prescription drug savings over the next 10 years³. Formerly drug manufacturers paid state Medicaid services up to 100% of the Average Manufacturer Price if the prices for brand- and generic-name drugs rose faster than inflation. Drug manufacturers have dodged that by raising drug prices exorbitantly, above the 100% cap, and pay less than the full rebate. Thirdly, ARPA lays out options for states to strengthen their infrastructure for community health and allocates funds to revitalize the state health insurance marketplaces, which should also increase enrollment rates^1,3.

What can I do about it?

• Familiarize yourself with the increased eligibility for affordable health coverage, from COBRA subsidies to Medicaid to the 8.5% of income cap on Marketplace premiums
• Familiarize yourself with updates in coverage of COVID-19 vaccination, treatment, and testing
• Determine if your state is a Medicaid non-expansion state.
• Determine if your institution qualifies for the Medicaid Drug Rebate Program
• Explore whether your institution is eligible to work with the state to develop Home and Community Based Services (HCBS), nursing home COVID-19 “strike teams”, or community-based mobile crisis intervention services

Helpful resources & links

A summary of changes to private health coverage

How the American Rescue Plan Act affects Marketplace premiums

Map of Medicaid expansion states

Understanding the Medicaid Drug Rebate Program

This post was a collaboration between emDocs and the EMRA Health Policy Committee.

References

1. Rudowitz, R., Corallo, B., & Garfield, R. New incentive for states to adopt the ACA Medicaid expansion: Implications for state spending. (2021, February 23). KFF. https://www.kff.org/coronavirus-covid-19/issue-brief/new-incentive-for-states-to-adopt-the-aca-medicaid-expansion-implications-for-state-spending/
2. McDermott, D., Cox, C., & Amin, K. Impact of key provisions of the American rescue plan Act of 2021 COVID-19 relief on marketplace premiums. (2021, March 23). KFF. https://www.kff.org/health-reform/issue-brief/impact-of-key-provisions-of-the-american-rescue-plan-act-of-2021-covid-19-relief-on-marketplace-premiums/
3. Park, E., & Corlette, S. (2021, March). American Rescue Plan Act: Health Coverage Provisions Explained. Center For Children and Families. https://ccf.georgetown.edu/wp-content/uploads/2021/03/American-Rescue-Plan-signed-fix-2.pdf
4. Artiga, S., Orgera, K., & Damico, A. Changes in health coverage by race and ethnicity since the ACA, 2010-2018. (2020, March 5). KFF. https://www.kff.org/racial-equity-and-health-policy/issue-brief/changes-in-health-coverage-by-race-and-ethnicity-since-the-aca-2010-2018/
5. Simmons-Duffin, S. (2019, October 14). Trump is trying hard to thwart ObamaCare. How’s that going?org. https://www.npr.org/sections/health-shots/2019/10/14/768731628/trump-is-trying-hard-to-thwart-obamacare-hows-that-going
6. Alon, T., Doepke, M., Olmstead-Rumsey, J., & Tertilt, M. (2020, April). The Impact of COVID-19 on Gender Equality. National Bureau of Economic Research | NBER. https://www.nber.org/system/files/working_papers/w26947/w26947.pdf
7. Peterson, E., Davis, N., Goodman, D., Cox, S., Mayes, N., Johnston, E., Syverson, S., Seed, K., Shapiro-Mendoza, C., Callaghan, W., & Barfield, W. (2019, May 8). Vital signs: Pregnancy-related deaths, United States ... Centers for Disease Control and Prevention. https://www.cdc.gov/mmwr/volumes/68/wr/mm6818e1.htm
8. https://www.kff.org/health-reform/issue-brief/how-the-american-rescue-plan-act-affects-subsidies-for-marketplace-shoppers-and-people-who-are-uninsured/