Does the Affordable Care Act make it easier to get individual health insurance?

Thanks to the American Rescue Plan, premium subsidies are larger and available to more people in 2021 and 2022. | Image: leszekglasner / stock.adobe.com

But consumers in the individual market need to be aware that there’s now an open enrollment period each year, and coverage is normally only available outside that time frame if you have a qualifying event. (Note that in 2022, enrollment is available any time in most states if you’re eligible for subsidies and your income doesn’t exceed 150% of the poverty level; a specific qualifying life event is not necessary to use this enrollment opportunity.)

And for people who don’t qualify for premium subsidies (premium tax credits), coverage in the individual market can be unaffordable, depending on the person’s age, location, and income. But this has also changed for many people in 2021 and 2022, thanks to the American Rescue Plan. This law, enacted in March 2021, makes marketplace coverage more affordable for millions of people, including some who did not previously qualify for premium subsidies. It’s scheduled to sunset at the end of 2022, but could be extended by Congress.

Enhanced shopping platforms

Health insurance marketplaces (exchanges) make it easier to shop for coverage. Exchanges have been frequently likened to Travelocity or other travel websites: Online marketplaces where individuals can easily find and compare health insurance options. Each state has an exchange, although 33 states rely on the federally-run HealthCare.gov platform for enrollment in 2022 plans.

Exchanges allow people shopping for individual health insurance to get the information they need in one location and give them confidence that they are comparing “apples to apples.” All health plans offered on the exchange must cover the ACA’s essential health benefits, but individual and small group plans offered outside the exchanges must also include coverage for the same essential health benefits.

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Premium subsidies (premium tax credits) are making health insurance affordable for millions of Americans, many of whom were unable to afford coverage at all prior to 2014. In a typical year, many – but not all – people who earn up to 400% of the federal poverty level receive subsidies to offset a portion of their premiums if they don’t have access to affordable employer-provided insurance. But the American Rescue Plan has eliminated this income cap for 2021 and 2022. Instead, people who earn more than 400% of the poverty level (that amounts to $51,520 in 2022 for an individual and $106,000 for a family of four) are subsidy-eligible in 2021 and 2022 if they would otherwise have to pay more than 8.5% of their household income for the benchmark Silver plan.

As of early 2022, nearly 13 million people were receiving premium subsidies through the exchanges. Total enrollment and the number of people receiving subsidies both grew to record highs for 2022, due in large part to the American Rescue Plan.

For people with incomes up to 250% of the poverty level, cost-sharing reductions are also available, as long as they select a Silver plan through the exchange. These cost-sharing subsidies make it easier for people to actually use their insurance, since their out-of-pocket costs are lower than they would be without the cost-sharing subsidies. As of early 2022, more than 53% of the people enrolled in plans through HealthCare.gov were receiving cost-sharing subsidies on silver plans purchased through the exchanges.

Premium subsidies became much larger starting in 2018, due to the way states and insurers handled the fact that the federal government stopped paying for cost-sharing reductions. The larger premium subsidies continue to be available, resulting in many enrollees being able to get free bronze plans, and in some cases, free gold plans (and this was before the ARP added to the premium subsidies; they’re even more significant now for 2021 and 2022, resulting in more people qualifying for premium-free bronze, silver, or even gold plans).

Medicaid expansion

The ACA also called for Medicaid expansion, providing coverage to people with household income up to 138% of the poverty level. Prior to 2014, in most states, childless adults couldn’t qualify for Medicaid regardless of how low their income was. And even adults with dependent children were often ineligible for Medicaid, despite having incomes well below the poverty level.

However, as of 2022, there are still 12 states that have not expanded Medicaid. (The ACA called for expansion nationwide, but in 2012, the Supreme Court ruled that states could opt out). The American Rescue Plan includes two years of additional federal Medicaid funding for any of those states that newly expand Medicaid, although only Missouri and Oklahoma had taken advantage of that as of 2022. Both of those states expanded Medicaid in 2021, but they were already on track to do so prior to the American Rescue Plan, after voters approved Medicaid expansion ballot measures in 2020.

No more medical underwriting

Prior to 2014, health insurance companies in the individual market could refuse to sell you a policy, charge you more based on medical history, or refuse to cover a pre-existing condition. According to the Department of Health and Human Services, as many as 129 million Americans under age 65 have some type of pre-existing health condition, and up to 30% of healthy Americans are likely to develop a pre-existing condition over the next eight years. Starting in 2010, the ACA banned coverage limitations for children with pre-existing conditions, and that ban went into effect for adults starting in 2014. Today, everyone has access to health insurance, regardless of medical history.

(As noted above, enrollment is only available during open enrollment, which runs from November 1 to January 15 in most states, or during a special enrollment period triggered by a qualifying life event; this is how employer-sponsored health insurance has long worked.)

Insurance companies are also no longer allowed to charge women more than men for equivalent coverage. Prior to 2014, women almost always paid more than men – despite the fact that most didn’t cover maternity care. All new individual plans now include maternity coverage, and pricing is the same regardless of gender.

Pricing can still vary based on age, but only by a ratio of 3 to 1. So a person who is 64 can only be charged three times as much as a person who is 21. Prior to 2014, there were no official limits, and it was common for the ratio to be closer to 5 to 1. So the ACA has made coverage more affordable for older Americans (although younger people now pay more than they would have without the new rules).

Higher premiums for people not eligible for subsidies

Although the ACA has certainly improved access to individual health insurance — or Medicaid – for much of the population that’s not eligible for employer-sponsored health insurance, that isn’t universally true. For people who were able to obtain medically underwritten health insurance prior to 2014 and who earn too much to qualify for subsidies now, coverage is generally far more expensive than it was prior to ACA implementation.

(More people are subsidy-eligible in 2021 and 2022 as a result of the ARP, but some still do not qualify, either due to the family glitch or because the benchmark plan is already considered affordable as a percentage of their income; note that the family glitch is expected to be fixed as of 2023, but some families might still find coverage unaffordable, due to the specifics of how the fix will be implemented.)

Although there is no longer a “subsidy cliff” at 400% of the poverty level, this is a temporary fix that’s currently only scheduled to last for 2021 and 2022. Unless it’s extended by additional legislation, the subsidy cliff will return in 2023. At that point, if your income is a little above 400% of the poverty level, you may want to speak with a financial advisor to see if contributions to a pre-tax retirement account and/or a health savings account might bring your ACA-specific modified adjusted gross income into the subsidy-eligible range (note that you must have an HSA-qualified high deductible health plan in order to make contributions to an HSA).

Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about the Affordable Care Act for healthinsurance.org.