Impact of Fixed American Rescue Plan Act Subsidies on Families

Nearly one million uninsured children and parents could gain healthcare coverage if the American Rescue Plan Act (ARPA) subsidies become permanent, according to an Urban Institute report.

The enhanced tax credits are set to expire on December 31, 2022. Making these subsidies permanent may benefit almost one million children and parents, the Urban Institute report found. The researchers used Urban Institute’s Health Insurance Policy Simulation Model to estimate the potential impacts.

The Biden administration introduced the ARPA in March 2021 as a part of its coronavirus relief plan. 

The passage of the Affordable Care Act (ACA) helped decrease the number of uninsured children and parents between 2013 and 2016, the report stated. But after 2016, uninsurance rates began to increase again and the onset of the pandemic in 2020 brought additional financial and health challenges.

The ARPA expanded subsidies to increase access to affordable healthcare coverage on the ACA Marketplace. 

Those with incomes below 150 percent of FPL received zero-dollar premiums and those earning between 150 and 400 percent FPL received reduced premiums. Individuals with incomes above 400 percent of FPL had their premiums capped at 8.5 percent of their income.

If the subsidies were made permanent, uninsurance rates among children and parents would fall, according to the findings. Private nongroup healthcare coverage would increase by 0.5 and 1.2 percent for children and parents respectively, leading uninsurance rates to drop from 4.6 to 4.2 percent for children and 10.8 to 9.8 percent for parents.

An estimated 303,000 children and 686,000 parents would gain coverage. Of those children, 67,000 would be five years old or younger and 267,000 of the parents would have children ages five or younger.

The majority of the families who would receive coverage if the subsidies were made permanent have incomes between 200 and 400 percent of FPL, according to the report. Nearly 200,000 children and 443,000 parents fall into this group.

A significant number of children and parents with incomes above 400 percent of FPL would also gain coverage, researchers predicted, with 75,000 children and 139,000 parents in this income group.

If policymakers make the ARPA subsidies permanent, 4.5 million children and parents who previously had nongroup coverage could see reductions in healthcare spending.

Overall, families’ healthcare spending could fall 18 percent, according to the report. For all income groups, families could see healthcare spending on premiums drop 28 percent per person and out-of-pocket spending decrease by four percent.

Families with incomes below 400 percent of FPL would see the biggest savings in healthcare spending.

However, despite the nearly one million children and parents who would potentially gain healthcare coverage if the ARPA subsidies were made permanent, 3.3 million children and 6.3 million parents may still be uninsured in 2022 if policymakers do not implement additional coverage changes, such as Medicaid expansion.

Among the uninsured, 57.2 percent of children and 21.8 percent of parents would be eligible for Medicaid or Children’s Health Insurance Program (CHIP) coverage. Less than 20 percent of the uninsured would be eligible for Marketplace tax credits.

Around 90 percent of children and parents would be ineligible for publicly subsidized coverage due to immigration status, an affordable health plan offering from an employer, or having an income below the required FPL in a state that has not expanded Medicaid.

The ARPA established that those who do not meet immigration requirements and those who have access to an affordable employer-sponsored health plan—which can result in the family glitch—are not eligible for the enhanced Marketplace subsidies, and making them permanent would not influence their insurance status.

Just over one in three parents and 15.2 percent of children would remain uninsured in 2022 due to immigration status. Around 20 percent of parents and 14 percent of children would be uninsured due to having access to an employer-sponsored health plan that the Affordable Care Act (ACA) deemed affordable.

More than 600,000 parents would be ineligible for public coverage because their state has not expanded Medicaid under the ACA. 

Extending the ARPA subsidies may help families maintain healthcare coverage and may also provide coverage for one million additional children and families.

The Urban Institute researchers urged policymakers to enact Medicaid expansion in the 12 states that have yet to do so, improve 2022 open enrollment period outreach, and eliminate the family glitch to ensure the remaining uninsured have access to coverage as well.