American Rescue Plan Act Provisions to Increase Access to Affordable Health Insurance

Blog | March 11, 2021


By Brieanne Lyda-McDonald 


Congress passed the American Rescue Plan Act on March 10, 2021 and President Biden is expected to sign it into law by the end of the week. The legislation totals $1.9 billion in spending to support families, stimulate the economy, and fund a variety of efforts to combat the COVID-19 pandemic and its impacts.


Provisions that are getting the most attention are:

The American Rescue Plan Act also includes two provisions related to the Affordable Care Act and one related to COBRA coverage that seek to decrease the number of uninsured individuals and make health coverage more affordable.


Increased subsidies for individual insurance plan premiums

The American Rescue Plan expands subsidies for two years for people who sign up for coverage through the health insurance Marketplace created by the Affordable Care Act. Up to now, Federal subsidies to pay for premiums were limited to individuals with incomes between 100% and 400% of the Federal Poverty Level (FPL). The new policy helps to temporarily eliminate the subsidy cliff for those in higher income brackets by setting a limit on the percent of income to be paid for Marketplace plans at 8.5%.


People whose incomes are between 100% and 150% of the FPL will have their insurance premiums fully subsidized for a silver-level plan and cost-sharing reduced so that those plans would have an average deductible of $177. These subsidy provisions will be in effect for two years. Table 1 shows average premium payments for North Carolinians before and after the American Rescue Plan. The change in premiums as percent of income for a 60-year-old across income levels can be seen here.


Additionally, anyone receiving unemployment income this year, as well as their dependents, is eligible to have their premium fully covered for a silver-level plan.


A special enrollment period re-opened the Marketplace for people to purchase plans from February 15 through May 15, 2021. During this time, people who enrolled during the regular enrollment period last year can switch plans if they would like to take advantage of a better option based on the new subsidies. Anyone with Marketplace plans covering them for 2021 will be eligible for the new subsidies.


Table 1. Average Premium Payments After Subsidies for People Purchasing Plans in North Carolina Currently and Under the American Rescue Plan Act, by Age and Income

$20k $40k $60k $80k
Age Current ARP Act Current ARP Act Current ARP Act Current ARP Act
30 $74 $5 $328 $211 $458 $403 $458 $455
40 $74 $5 $328 $211 $516 $425 $516 $493
50 $74 $5 $328 $211 $721 $425 $721 $567
60 $74 $5 $328 $211 $1,095 $425 $1,095 $567

Source. McDermott D, Cox C, Amin K. Impact of Key Provisions of the House COVID-19 Relief Proposal on Marketplace Premiums. Kaiser Family Foundation. February 18, 2021.



Subsidized COBRA health insurance premiums

People who have lost their jobs and chosen to continue health coverage through COBRA will have their insurance premium fully covered through September 2021.


Incentives to states that have not expanded Medicaid eligibility

North Carolina is one of twelve states that have not expanded Medicaid eligibility to 138% of FPL for all residents. If North Carolina were to expand Medicaid eligibility, an estimated additional 373,000 residents would become eligible for Medicaid coverage.  In addition to continuing the ACA provision that guarantees a 90% Federal Medical Assistance Percentage (FMAP; the percent of Medicaid expenses that the federal government will pay) for expansion populations [1] the  American Rescue Plan attempts to incentivize states to expand Medicaid eligibility by increasing the state’s FMAP for traditional Medicaid populations by five percentage points for two years. North Carolina’s FMAP for Federal Fiscal Year 2022 is 73.85%, which includes an increase of 6.2 percentage points from the regular base rate provided by the Families First Coronavirus Response Act of 2020.


The increased FMAP for traditional Medicaid populations could lead to an additional $1.7 billion in federal funds for North Carolina across the two years of the increase. Estimated new state costs for expanding Medicaid eligibility across the same two years is $490 million. Therefore, the overall effect on state spending would be an additional $1.21 billion in federal funds.


Several NCIOM task forces have called on the North Carolina General Assembly to expand Medicaid eligibility to increase access to care, improve the opportunity for health, and improve economic stability for North Carolina residents., including 2020  task force recommendations on Serious Illness Care and Developing a Perinatal System of Care. Whether the state capitalizes on the incentives to expand Medicaid eligibility in the American Rescue Plan Act will depend on decision-makers in the General Assembly.


[1] States that have already expanded Medicaid eligibility currently receive a 90% FMAP for the population included in the expansion.