The substantial drop in Health Insurance Premiums, explained.

When the American Rescue bill passed in March 2021, you might have gotten a stimulus check for $1,400.  You probably thought that was the best and last thing you were going to get from this massive bill. You would be wrong if you get Health Insurance through the Marketplace right now, or for 2022. This bill has major implications for anyone under 65 looking for Health Insurance Coverage. I’ve been helping many clients, both Old and New, find Health Insurance in St. Louis since this bill passed, and the change in their Insurance Premiums is substantial.

Since I don’t expect you to love Health Insurance (That’s my job) I’ll give a quick rundown of how this bill will affect anyone looking for individual coverage.

Huge Reductions in Premiums

The amount of Premium you pay each month for coverage is going to be way less than previous years. The Government is paying a larger percentage of the costs, so you pay less for the same coverage. I have seen a great deal of people end up paying nothing for full coverage health insurance. This subsidy lowers costs in a big way for people from the top to the bottom of the income scale. It is hard to make a one size fits all estimate for how cheap Health Insurance through the ACA will be now, but I would say for most people it’s roughly 50% of what they would pay before, or free. According to the Government, four out of five enrollees will be able find a plan (not necessarily the plan I would recommend, but a plan) for $10 or less a month after premium tax credits.

Ending the Subsidy Cliff

This affects less people but means a lot to the few it affects. Before this bill passed, some people faced the subsidy cliff. What that meant is as their income crept up, the premium they would have to pay shot up quicker than their income does. Now there is a more gradual increase of Premiums, as your Household Income goes up. This keeps the percentage of your Household Income that goes to Premiums generally pretty steady.  This graph explains it better than I can. (The Blue is the percentage of total income spent on Health Insurance Premiums before, Orange is after the bill passed)

Subsidy Cliff for Individual Health Insurance

Conclusion

Personally, I am not thrilled about the huge price tag (1.9 trillion!) of this recent bill. However, the parts of this bill that touch Health Insurance through the ACA, dramatically lowers the price people pay to get insured. If that encourages more people to sign up for Marketplace Insurance, that is a good thing in my book, because no one should be without Health Insurance.

If you need Health Insurance in Missouri or Illinois, I will of course recommend you contacting MB Health.

Written by Dan Jung, a St. Louis based Health Insurance Broker.

If you want to know how Subsidies, Premiums and taxes work together, click here.

If you want to learn about why you should have a Health Insurance Advisor, click here

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