Downstream Impacts of Making American Rescue Plan Act Permanent

Making the American Rescue Plan Act permanent could lower costs on the Affordable Care Act marketplaces and eradicate the Medicaid coverage gap, but it would also cost the federal government up to $333 billion in the policy's first decade, according to a Commonwealth Fund report.

The researchers used the Urban Institute’s Health Insurance Policy Simulation Model in order to assess the impacts of this policy on cost, coverage, and federal spending.

Making the American Rescue Plan Act permanent could significantly impact uninsurance rates. If Congress permanently established the American Rescue Plan Act premium subsidies and eliminated the Medicaid coverage gap in 2022, seven million people might avoid becoming uninsured.

Moreover, the Medicaid coverage gap would close as Americans’ access to coverage grew due to the subsidized plans available on the Affordable Care Act marketplace. 

The funds for these policies would largely come through federal spending. Researchers estimated that permanent marketplace subsidies in 2022 would cost the federal government around $27.7 billion, after factoring in uncompensated care offsets.

This spending would accrue over time, costing the federal government $442 billion from 2022 through 2031. Some savings such as uncompensated care would offset these costs, meaning that the actual cost to the federal government for implementing these policies for the next decade would equal up to $333 billion.

“The costs would likely be somewhat lower than presented here because consumers and insurers may take more time than we assumed to fully respond to the new options,” the researchers qualified.

Affordable Care Act enrollment, which has experienced a boost in recent months due to the special enrollment period, would nearly double. Enrollment would increase by 8 million to hit approximately 17.3 million enrollees.

The researchers anticipated a drop in employer-sponsored health plan coverage, which aligned with previous research regarding the impact of the pandemic on employer-sponsored health plans. The study estimated that approximately 670,000 individuals would leave their employer-sponsored health insurance plans.

Meanwhile, the Children’s Health Insurance Program (CHIP) may see an uptick in enrollment of approximately 346,000 individuals under the proposed policy.

As a result of high enrollment, individuals on the Affordable Care Act marketplace might see lower premiums. The researchers indicated that premiums could drop by 18 percent in 2022 if this policy became permanent.

Additionally, the new policy would attract more low-income enrollees to the Affordable Care Act marketplace due to permanent subsidies that covered the Medicaid coverage gap. More than half a million low-income, uninsured individuals would join the marketplace.

The proposed policy could also improve the Affordable Care Act marketplace’s coverage equity for some underserved populations.

Policymakers designed the Affordable Care Act to reduce racial care disparities, however, progress had stalled on that front. But by making permanent certain coverage-related facets of the American Rescue Plan Act, Black non-Latino/Hispanic individuals could see their uninsurance rates drop by a third.

However, the Hispanic population, which has the highest uninsurance rate of any ethnic or racial group of Americans, would see a little over 15 percent change in their uninsurance rates.

“We estimate that making the enhanced ARPA subsidies permanent and filling the Medicaid coverage gap by expanding marketplace eligibility to those earning below 100 percent of FPL would have significant changes on coverage,” the researchers concluded. 

“Together, these two policies would broadly expand eligibility for marketplace subsidies, reduce the number of uninsured people especially at lower income levels, and lessen household financial burdens for health care.”

Payer organizations have urged Congress to consider making permanent the changes that the American Rescue Plan Act introduced. AHIP pointed out that failing to solidify marketplace subsidies could lead to higher premiums in 2023.

The Alliance of Community Health Plans also advocated for making the law’s changes permanent, arguing that doing so would improve the successes of the individual health insurance marketplace.