ACA Health Insurance Premium Relief: Understanding the 8.5% Cap

The American Rescue Plan, signed into law in March 2021, included a provision designed to lower health insurance premiums for Americans purchasing coverage through the Health Insurance Marketplace. According to the Biden administration, under this plan, for the next two years, no American should be paying more than 8.5% of their gross income on premiums for silver plans purchased on the exchanges.

However, as evidenced by real-world examples like the post above, this premium relief is not universally applicable. There are important factors to consider that may affect the amount of premium reduction an individual is eligible for.

How the 8.5% Cap Works

The 8.5% cap applies to silver plans, which are the benchmark plans used to calculate premium subsidies. Silver plans cover approximately 70% of essential health benefits and have moderate deductibles and out-of-pocket costs.

The premium subsidy is calculated as the difference between the cost of the second-lowest-cost silver plan in your area and the amount you can afford to pay based on your income. If the subsidy reduces your premium to less than 8.5% of your gross income, you will pay no more than that percentage.

Factors Affecting Premium Relief Eligibility

While the American Rescue Plan intended to provide widespread premium relief, several factors can affect an individual’s eligibility or the amount of reduction they receive:

State Exchange Policies: Some states, like Illinois mentioned in the post, do not automatically apply the 8.5% cap to all plans offered on their exchanges. This may result in higher premiums.
Choice of Plan: The premium subsidy is calculated based on the cost of the second-lowest-cost silver plan in your area. If you choose a more expensive silver plan, your subsidy may not be sufficient to reduce your premium to 8.5% of your income.
Income Eligibility: The premium subsidy is based on your modified adjusted gross income (MAGI). If your income is too high, you may not qualify for the full subsidy.

Navigating Premium Relief Options

If you believe you are paying more than 8.5% of your gross income on health insurance premiums, it’s important to explore your options:

Review Your Plan: Ensure you are enrolled in a silver plan and verify that the premium charged is accurate.
Appeal Your Premium: If you believe your premium is incorrect, you can request an appeal from your health insurance marketplace or state exchange.
Seek Professional Help: Consider contacting a licensed health insurance agent who can assist you in understanding your coverage options and identifying ways to lower your premiums.

Conclusion

The 8.5% premium cap under the American Rescue Plan is a significant step towards making health insurance more affordable for Americans. However, it’s important to be aware of the potential limitations and factors that may affect your eligibility. By understanding these nuances and seeking professional guidance when needed, you can maximize your premium relief and access affordable health coverage.