The MORE Affordable Care Act: The most important part of Joe Biden's COVID relief plan no one is talking about

After some hiccups and a marathon session, the Senate on Saturday approved President Biden's massive - and massively popular - $1.9 trillion coronavirus recovery and stimulus plan on a party line vote of 50-49. No Republican voted for the final measure, and Democrats - liberal, moderate, and conservative - ultimately put aside their differences and held the line. The legislation fulfills major progressive priorities, like direct payments to individuals, extended extra unemployment benefits, cutting childhood poverty in half, money for state, local and tribal governments, and money for vaccine distribution and for schools to reopen.

The Senate version is slightly different from the version approved earlier in the month in the House, also without a single Republican vote. Most noticeably, the Senate had to remove a $15 minimum wage provision from the bill in order for it to conform with the budget reconciliation rules.

But for all the high-profile coverage of the bill, there is one part of what is now almost certain to be the first major legislative feather in Joe Biden's presidential cap that has barely garnered any attention. And that provision is likely to prove just as crucial as any in the long run.

That provision is the stimulus plan's critical expansion of the Affordable Care Act. The stimulus vastly increases federal subsidies for individuals and families to purchase health insurance through Obamacare exchanges, and at the same time, it sets up an electoral trap for Republicans just in time for the 2022 midterms.

Understanding the changes the stimulus bill made to Obamacare subsidies requires first a rudimentary understanding of how the subsidies work under the Affordable Care Act. So below, I will first provide a refresher course on the ACA, and then an explanation of how the Biden stimulus improves on it.


If you are not aware of how the premium subsidies in the Affordable Care Act are calculated, here's a crash course: At incomes between 100% and 400% of the federal poverty level, individuals or families who purchase health insurance through an ACA exchange are expected to pay a certain portion of their income to pay for the premium. Within this bracket, the higher the income, the greater percentage of one's income one is expected to pay. For example, someone making 133% is expected to pay only 2% of their income in premiums, while those making 400% of of the FPL are expected to pay 9.8% of their income.

If you are wondering why there is no premium subsidies for people whose incomes are below the poverty level, it's because the ACA expanded Medicaid to cover everyone with an income of 138% of the FPL or less. The Supreme Court would later make that Medicaid expansion optional for states, and more than a decade after President Obama changed the landscape of healthcare in America, 12 states have yet to adopt the Medicaid expansion in an attempt, it would appear, solely to make poor people suffer, since the expansion is almost entirely paid for by the federal government.

The amount of maximum premium subsidy for a given individual or family is the difference between the actual cost of what's called a 'benchmark' plan (explained below) and whatever the buyer is expected to contribute themselves. The buyer does not have to purchase a benchmark plan with the subsidy, however. They can pick a plan that is less expensive than the benchmark plan and therefore have to pay less out of pocket (but if they pick a plan that is less expensive than the amount of the maximum subsidy, the IRS will not cut them a check for the difference, hence why it's the maximum subsidy), or, if they wish, they can pick a more expensive plan and pay the difference in premium themselves.

A benchmark plan is the second lowest priced 'Silver' plan offered in a state's marketplace. A Silver plan is basically a plan that covers, on average, 70% of medical expenses, except that no plan can charge copays or deductibles for preventive services, and no one has to pay in out-of-pocket expenses an amount that exceeds the out-of-pocket maximum for their income level.

With that out of the way, let's look at what the American Rescue Plan has in store for Obamacare premium subsidies.


The American Rescue Plan vastly improves the affordability of health insurance plans - at every income level - by two primary means:

First, for every income level, the ARP lowers the amount one is expected to contribute towards the premium of a plan in an ACA marketplace. It eliminates premiums altogether for those with incomes under 150% of the federal poverty level, resulting in a potential saving of nearly $1,700 a year for a family of four with a $40,000 income. It halves the maximum premium a family of four with an income of $66,000 has to pay, and so on. It also lowers the maximum anyone making above 300% of the FPL has to pay in premiums before they become eligible for subsidies from almost 10% of their income to 8.5%. As mentioned before, those making less than 300% of FPL has lower caps.

Second, the ARP eliminates the cap on income at which individuals and families could no longer qualify for premium subsidies at all - known as the 'subsidy cliff.' This means anyone purchasing health insurance in the Obamacare exchanges, regardless of income, is eligible for subsidies if the benchmark plan exceeds a certain portion of their income. This is especially crucial for expensive insurance markets where families and individuals can be cut off from any aid for making just a tad over 400% of the poverty level.

The chart below demonstrates the premiums a family of four purchasing insurance through their state exchange would pay under President Biden's stimulus plan, contrasted with what they are currently expected to cover under the ACA.

When the ARP is signed into law, the additional premium assistance will be retroactive to the beginning of 2021. It certainly makes insurance under the Affordable Care Act a whole lot more... affordable.

The timing of the legislation also coincides with President Biden re-opening the health care exchanges until May 15 so that people who lost their health insurance during the pandemic can purchase insurance.

The plan does come with one caveat: the extra subsidies are provided only for two years, and slated to sunset at the end of 2022. It was likely a necessary move to keep the price tag of the entire stimulus package within budget reconciliation instructions. It is also being added with the reasoning that the coronavirus emergency necessitates the extra help, and that is likely to have subsided by 2022.

But that caveat can also serve as an electoral blessing. It is difficult to remove a benefit from the American people once we get a taste of it. That's the reason that, despite how successful Republican misinformation was at making the Affordable Care Act an albatross around Democrats' electoral necks before it fully took effect, once it did, almost 100 legislative attempts to undo it not only failed, but backfired to result in a blue wave election for Democrats in the 2018 midterms.

This is also the reason Republicans, when they are in the majority, often feel comfortable passing tax cuts with sunset provisions, because they know that they can then make hay of it by accusing Democrats of wanting to raise taxes if they refuse to extend the tax cuts in future legislation.

Two can play at this game. The fact that the extra subsidies - in let's call it Bidencare - are sunsetting right around the time of the next midterm elections is no accident. Without a doubt, Democrats will try to extend the two-year timeline through future legislation (whether through regular order or reconciliation remains to be seen), perhaps even stand-alone legislation if for no other reason than to put Republicans on record voting to raise health care premiums (which is the effect of letting the extra assistance expire).

One of the groups that message is likely to resonate most with are upper-middle class suburbanites, many of whom will have a taste of premium subsidies for the first time ever under Bidencare and will be especially sensitive to losing that benefit. As we have seen in the recent elections past, the suburban vote is destiny.

Democrats have now won two national elections on health care, and a hattrick is certainly in the cards.

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