State-based ACA exchanges make backup plans in case Congress fails to act on enhanced ACA subsidies

The Biden administration and states across the country celebrated record-breaking enrollment gains for the Affordable Care Act (ACA) this year.

But state-run exchanges are eyeing backup plans for outreach and marketing in case Congress doesn’t extend beyond this year a major driver for those enrollment gains: enhanced income-based subsidies. Some officials have warned that people could drop off coverage—and consumers may shift to less-generous plans—if Congress doesn't act in time.

“If we are still in this stage of uncertainty, we will have to anticipate either outcome and ramp up planning efforts … with both scenarios in mind,” said Zachary Sherman, executive director of the exchange called Pennie, in an interview with Fierce Healthcare.

Sherman said Pennsylvania’s exchange signed up more than 110,000 new customers compared to the last open enrollment, and 35,000 of those customers are getting subsidies that they typically would not be eligible for. 

The American Rescue Plan's (ARP's) enhanced subsidies ensured that anyone making more than 400% above the federal poverty level wouldn’t pay more than 8.5% of their income on healthcare. Previously, that was the cutoff for eligibility for income-based subsidies. The enhancements also ensured that some consumers qualified for zero premiums or $10 a month premiums. 

According to a recent Assistant Secretary for Planning and Evaluation report, an estimated 3.4 million Americans currently insured in the individual market would lose coverage and become uninsured if the ARP’s premium tax credit provisions are not extended beyond 2022. Kaiser Family Foundation determined premiums would more than double for many

Pennie isn’t the only exchange that saw massive gains thanks to the subsidies. 

Washington’s exchange saw nearly 60,000 residents sign up for coverage for 2022, and 73% of all customers were eligible for subsidies, up from 61% in 2021, the exchange told Fierce Healthcare. 

It added that over 100,000 of the exchange customers (42% of total enrollment) pay $100 or less a month, compared to 29% before the ARP was signed into law.

Customers signing up on state-run exchanges saw average premium savings of 7% to 47% for 2022, according to a report from the National Association for State Health Policy. The report added that at least eight exchanges had 20% or more of their customers paying less than $25 a month for coverage. 

Overall, there were 14.5 million people who signed up for coverage for 2022 when considering both the state-run exchanges and the federally run, a record number.

Now, though, states are grappling with how many people could lose coverage if the extra subsidies go away.

Plans likely will start finalizing rates this summer and open enrollment will start in the fall, creating even greater pressure on Congress to act.

Minnesota’s exchange, MNSure, told Fierce Healthcare it expects 70,000 enrollees will lose some benefits and 10,000 would lose all of it. 

“Most of them will still get some subsidy. All of them will see a reduced subsidy,” said Libby Caulum, senior director of public affairs for MNSure.

Sherman said 90% of customers get financial assistance and will also see some adjustment, requiring key outreach if the subsidies don’t get extended. 

“We will have to do a considerable amount of planning and communication to those populations to help them understand what that means,” he said. 

This includes helping consumers understand the automatic renewal process and how to make plan adjustments. 

Sherman said that customers took the opportunity to buy more expensive plans than they otherwise would. A consumer that normally would buy a bronze or silver tier plan would instead buy a gold plan. 

“If the subsidies go away and the purchasing power of the subsidies is less going into 2023, we will want to make sure people understand that,” he said. 

Some of the people who were earning too much to qualify for subsidies before could drop out. 

“We will do a lot of education around the value and importance of staying covered about the options available to consumers,” Sherman said. “Maybe you are not in a gold plan but there are other options for you and the implications of buying a less expensive plan.”

Caulum added that predicting consumer behavior could be tricky, and it is difficult to pin down how many enrollees could drop off. 

“Once people get coverage it could be sticky for them. They realize the benefit and they don’t want to drop It,” she said.

It isn’t just consumers, however, that could be forced to rethink their available benefits. 

Massachusetts Health Connector Authority, for example, applied state funds otherwise allocated for premium assistance to help “reduce cost-sharing for critical services including primary care, mental health visits and prescription drugs,” said Executive Director Louis Gutierrez in a release from the National Association for State Health Policy.

Calling on Congress

The Biden administration, meanwhile, has been relatively mum on its plans on what happens if the enhanced subsidies aren’t extended. 

Administration officials said they believe Congress will extend the subsidies. However, Centers for Medicare & Medicaid Services Administrator Chiquita Brooks-LaSure recently told reporters the agency can move quickly to implement rules and change outreach efforts in case Congress doesn’t act. 

It remains unclear whether lawmakers will extend the subsidies. The $1.75 trillion Build Back Better Act, which extended the subsidies through 2025, was nixed in the Senate after objections from Sen. Joe Manchin, D-West Virginia. But Biden had said late last year the goal is to pass the social spending package in chunks

However, so far none of those chunks have made significant progress through Congress, despite widespread support from Democrats.