A change in subsidy eligibility changes your options

The ACA provides two types of subsidies for eligible individuals who enroll in health insurance plans through the exchanges:

• Premium subsidies are available to people who aren’t eligible for Medicaid, and whose household income is at least 100% of the federal poverty level (FPL), or above 138% of the poverty level if they’re in a state that has expanded Medicaid. There used to be an income cap for subsidy eligibility at 400% of the poverty level, but that has been eliminated through 2025 by the American Rescue Plan and Inflation Reduction Act. Through 2025, premium subsidies are available if the benchmark plan would otherwise cost more than 8.5% of the household’s income.

• Cost-sharing subsidies, otherwise known as cost-sharing reductions (CSR), are available to people who aren’t eligible for Medicaid, who purchase a Silver plan, and whose income is at least 100% of the poverty level but no more than 250% of the poverty level (the same caveat applies regarding the lower income limit for subsidy eligibility in states that have expanded Medicaid).

For Americans who are already enrolled in minimum essential coverage, an income change or a change in family size counts as a qualifying event if it results in a change in eligibility for premium subsidies or CSR.

The specific rules for special enrollment periods, including those related to changes in subsidy eligibility, can be found at 45 CFR § 155.420. In general, an enrollee who becomes newly eligible or newly ineligible for subsidies has a 60-day window (starting with the date of the income change) during which they can switch to a different plan.

Thanks to the American Rescue Plan, individual-market health insurance premium subsidies are larger and available to more people through 2025.

Change in CSR eligibility: Switch to a Silver plan if newly eligible for CSR, or to non-Silver plan if newly ineligible for CSR

People who are enrolled in a Silver plan with CSR benefits qualify for a special enrollment period to switch to a plan at a different metal level if they become newly ineligible for CSR. This provision was finalized by HHS in 2020.

Prior to 2022, the rules already clarified that an exchange enrollee who isn’t enrolled in a Silver plan must be allowed to switch to a Silver plan if they experience an income change that makes them eligible for CSR, assuming they wish to take advantage of CSR benefits. But there was not a similar provision for people who were already enrolled in a CSR version of a Silver plan, who then lost their CSR eligibility.

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An existing provision (see § 155.420(d)(6)(ii)) already granted a special enrollment period to an enrollee who experienced “a change in eligibility for cost-sharing reductions,” but in proposing the new rule change, HHS clarified that this provision limits people to a new plan at the same metal level they already have — hence the need for a new rule allowing people to switch from Silver to a different metal level if they lose their eligibility for CSR benefits (it’s not as beneficial to be limited only to picking a different Silver plan if you lose your CSR eligibility).

The new rule was added in as subsections of § 155.420(a)(4)(ii), addressing people who are newly ineligible for CSR as well as those who are newly eligible for CSR.

Change in premium subsidy eligibility: With loss of subsidies, can switch to a plan at any metal level as of 2024. If newly eligible for subsidies, can switch to a different plan at current metal level

Starting no later than January 2024, the exchanges must allow people who lose their eligibility for advance premium tax credits to switch to a different plan at any metal level (or a catastrophic plan, if they’re eligible for one) if they choose to do so. This is clarified at § 155.420(a)(4)(ii)(C). If an exchange, including HealthCare.gov, hasn’t deployed this new rule prior to 2024, enrollees who lose their subsidy eligibility are still limited to picking a different plan at the same metal level as the plan they currently have. The new rule was finalized in May 2021, but again, exchanges have until 2024 to implement it.

Loss of advance premium tax credits (ie, becoming ineligible for premium tax credits mid-year) can happen due to an increase in income, or due to a change in household size (for example, a household of four becomes a household of three when an older child ceases to be a tax dependent).

If a person becomes newly eligible for premium subsidies due to a decrease in income, there’s a special enrollment period during which they can pick a different plan. But it has to be another plan at the same metal level as their current plan (unless there are no other plans available at that metal level, in which case they’d be allowed to go up or down one level — but that’s a rare scenario).

HHS addressed this issue in the proposed rule changes for 2022, and noted that they decided against a rule change to add additional flexibility to switch to a plan at a different metal level in a situation where a person becomes newly eligible for premium tax credits (see page 177).

(Note that there are other SEPs for people who get out of the coverage gap in states that haven’t expanded Medicaid, or gain a dependent. Both of these are scenarios in which a person is or might be newly eligible for subsidies. But these scenarios have their own applicable rules.)

Switching from off-exchange to on-exchange when you become eligible for subsidies

Federal regulations allow people who lose eligibility for premium subsidies to switch from an on-exchange plan to an off-exchange plan. Giving people the flexibility to switch from on-exchange to off-exchange when they lose eligibility to premium subsidies is particularly helpful now that insurers in most states are adding the cost of CSR to Silver plan premiums in the exchange, but offering off-exchange Silver plans without the cost of CSR added to their premiums (this makes the off-exchange version cheaper for a person who doesn’t get subsidies, but the on-exchange version would likely become cheaper if and when the person starts to qualify for subsidies).

The SEP for people who have off-exchange coverage and experience an income change that makes them subsidy-eligible was confirmed in the 2020 Notice of Benefit and Payment Parameters that HHS finalized in April 2019. Here are the details:

• HHS added a new section at § 155.420(d)(6)(v) describing the new SEP.
• The SEP is available in all states that use HealthCare.gov (including state-run exchanges that use the federal enrollment platform).
• The SEP is optional for states that run their own exchange platforms.
• Consumers have 60 days from the date of their income change to enroll in a plan through the exchange.
• If other members of the person’s household are already enrolled in a plan through the exchange, the person will be allowed to join them on that plan. Alternatively, the person will be allowed to enroll in a separate plan of their own choosing during the SEP.
• Consumers have to provide proof of their income change, as well as proof that they had minimum essential coverage (or pregnancy Medicaid, CHIP unborn child, and Medically Needy Medicaid) prior to the income change (for at least 1 of the 60 days prior, as is the standard with other SEPs that require proof of prior coverage).
• Off-exchange minimum essential coverage obviously includes ACA-compliant plans that are sold outside the exchange, but it also includes grandmothered and grandfathered plans. So a person who has retained one of these plans — because they weren’t eligible for subsidies — can switch to an on-exchange ACA-compliant plan with premium subsidies in the future if they have an income change mid-year that makes them subsidy-eligible.
• However, plans that are not minimum essential coverage, including short-term health plans, will NOT satisfy the prior coverage requirement for this SEP. So a person who enrolled in a short-term health plan (maybe because they weren’t eligible for a premium subsidy in the exchange and considered all of the available ACA-compliant plans to be too expensive) would not be eligible for a SEP to switch to an on-exchange plan mid-year if they experience a change in income.
• As is always the case when people switch from one plan to another mid-year, out-of-pocket amounts will start over at $0 on the new plan (unless the enrollee is switching to the exact same plan on-exchange that they already have off-exchange, and the insurer agrees to credit their out-of-pocket spending towards the new plan; there is nothing that requires insurers to do this, but it can never hurt to try).

From 2014 through 2019, the SEP triggered by an income change only applied if the person was already enrolled in a plan through the exchange. If you were enrolled in an off-exchange plan, you were not eligible for a SEP if your income changed mid-year.

This made it challenging for some people to take advantage of the “Silver switch” option that many states have offered as a solution to the cost of CSR. People who aren’t eligible for premium subsidies — but who want a Silver plan — may find that the full-price cost of the plan is lower if they shop outside the exchange. But then if they experienced a change in income mid-year that made them eligible for a subsidy, they were still stuck with their full-price off-exchange plan until the following year.

Income changes and job changes can sometimes be difficult to predict, but from 2014 through 2019, neither of those counted as a qualifying event if you weren’t already enrolled through the exchange.

In finalizing the SEP that allows off-exchange enrollees to switch to the exchange, HHS noted that people enrolled in employer-sponsored coverage or exchange coverage who become newly eligible for premium subsidies in the exchange have an opportunity to take advantage of those subsidies, as do uninsured people in the Medicaid coverage gap who experience a change in income that makes them subsidy-eligible.

But prior to 2020, there wasn’t an opportunity for people enrolled in off-exchange coverage to take advantage of a premium subsidy for which they are newly eligible. The new rules changed that, starting in 2020

A third-party enrollment site like healthinsurance.org will let you compare both on- and off-exchange plans. Subsidies are only available in the exchange, but if you’re not subsidy-eligible, it’s worth looking at both on-exchange and off-exchange options.

(If you’re uncertain about your eligibility for a special enrollment period, call (619) 367-6947 to discuss your situation with a licensed insurance professional.)

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.