Posts Tagged "American Rescue Plan"

Good News on Health Insurance in Pandemic

To paraphrase a U.S. senator in 1977, the moral test of government is how it treats the sick, the poor, and its children. That rings especially true during an historic public health emergency like COVID.

Congress came through with financial relief to blunt the pandemic’s impact, and the money that flowed through the economy provided more Americans with health insurance, while also reducing poverty.

Several newly released U.S. Census reports “show how much vigorous policies can do to prevent poverty and preserve access to health care,” the Center on Budget and Policy Priorities concluded.

The Uninsured. During the pandemic, the share of all adults lacking health insurance declined from 9.2% in 2019 to 8.6% in 2021, reversing the trend of a rising uninsured rate in prior years. The rate dropped as Congress improved access and affordability during COVID by passing large premium reductions for policies purchased on the federal and state exchanges and by requiring states that receive Medicaid funds to expand their coverage of poor and low-income workers during the pandemic.

Congress has extended the premium reductions through 2025, but the federal enhancements to Medicaid are set to expire, leaving states to determine the extent to which they will cover their low-income workers in the future.

The Poor. The COVID aid passed by Congress lifted nearly 14 million Americans out of poverty over the past two years, according to Census. This statistic aligns with earlier research showing the financial assistance was particularly effective in helping low-income workers and people who were struggling financially prior to the pandemic. …Learn More

ACA Policyholders May Dodge a Bullet

It looks like some 13 million people who buy their health insurance on the state and federal exchanges may not see large hikes in their premiums next year after all.

The more generous premium subsidies for Affordable Care Act (ACA) policyholders approved in 2021 under the American Rescue Plan for COVID relief are set to expire at the end of this year. There have been months of uncertainty over whether Congress could pass a bill to continue the subsidies.

But The Washington Post reports that the House and Senate are on a path to agreeing to extend them for three more years, along with allowing Medicare to negotiate the prices of some prescription drugs.

Last year, the American Rescue Plan enhanced the ACA’s original subsidies by capping insurance premiums at 8.5 percent of a worker’s income for 2021 and 2022. If the caps are renewed, ACA policyholders would also avoid the “double whammy” of insurance companies’ 2023 premium hikes, which they have started submitting to their state insurance regulators.

The prospect of an agreement comes months after state insurance commissioners warned lawmakers that the uncertainty around whether the subsidies would continue meant that some insurers would raise 2023 premiums by more than they might have. ACA subsidies make health insurance more affordable to more people, which takes some pressure off of premiums by expanding the pool of customers and reducing insurers’ risk.

Two groups that historically have paid more for health insurance are benefitting the most from a premium cap set at 8.5 percent of income: middle-income workers, who tend to pay a larger percentage of their income for an ACA policy, and older workers, who pay higher premiums because insurers view them as risky.

Before the caps were put in place, workers earning four or more times the federal poverty level did not get any subsidies and paid full price for ACA coverage. Without the assistance, for example, a 40-year-old earning about $51,500 would be paying 20 percent more – or $438 per month instead of the $365 she currently pays, according to the Kaiser Foundation.

Premiums would’ve been 62 percent higher in New York and more than double in Wyoming. …Learn More

Low-income Spend Tax Credit on Food, Rent

The fate of the recent expansion of the federal child tax credit is uncertain in the ongoing budget negotiations in Congress. What is clear is that poor and low-income families are putting the increased assistance to good use.

Low-income families figureNine out of 10 families earning less than $35,000 are spending the money on one or more essential living expenses, which include food, utilities, housing, clothing or education needs like books and after-school programs, according to an analysis of U.S. Census data by the Center on Budget and Policy Priorities.

The American Rescue Plan passed in March temporarily increased the credit from $2,000 to $3,600 per year per child for kids under age 6 and to $3,000 for older kids and teenagers. In another temporary provision in the legislation, the IRS sends the credit to families every month in the form of a monthly payment.

The child tax credit is also now fully refundable, which means that low-income people are eligible for the full credit even if they pay little or no income taxes. If the budget negotiations make this a permanent feature of the credit, the IRS would extend the federal assistance to 27 million more children in low-income families.

Unfortunately, the center estimates, there are some 4 million children in families with very low incomes that aren’t receiving the monthly payments, either because they didn’t file taxes in 2019 and 2020 or didn’t receive an economic relief check from the federal government. The IRS has created an online tool for parents to sign up and start receiving the credit.

The Center on Budget and Policy Priorities asked the people it surveyed about their specific uses for the monthly cash payments. Six out of 10 families earning under $35,000 said they are spending the money on food. About half are paying their utilities or housing expenses. Even the non-essential expenses seem like good uses for the extra funds, including car payments, childcare, and paying down debt.

Higher-income families also buy necessities with the extra cash. But low-income families struggle more to pay for their basic living expenses, and the center said they are using more of the money from the tax credit to pay for them. …Learn More

The Problem with Low-Income Tax Credits

The federal tax code offers a nifty tax credit to low-income workers who save for retirement. If only it reached more people.

The Saver’s Credit offers what appears on its face to be a strong incentive: the IRS will return up to 50 percent of the amount low-income workers and married couples put into a retirement plan.

But Barbara Wollan, an 18-year volunteer in Iowa with the Volunteer Income Tax Assistance program, or VITA, which provides free tax preparation to low-income workers, said her clients often don’t qualify. The reason: the tax credit is not what the IRS calls “fully refundable.”

For example, a single person earning $19,750 or less is eligible for a tax credit equal to 50 percent of the amount saved – the maximum retirement plan contribution eligible for the credit is $2,000. The credits are either 10 percent or 20 percent for single workers earning between $19,751 and $33,000. (The income limits are higher for households.)

The catch is that the credit is subtracted from the taxes owed, and low-income people usually pay little or no taxes to the IRS after they take the standard deduction given to all taxpayers. If they don’t owe taxes, they don’t get the credit.

“To dream big about helping low-income people save for retirement, we would make it a refundable credit,” said Wollan, an educator with Iowa State University Extension and Outreach, which distributes research information in her state on topics like finance and agriculture.

Congress is considering providing a refundable credit of up to $500 to single and married savers even if they don’t owe anything at tax time. But lawmakers often get into a political disagreement about whether people who don’t pay taxes should get money back from the IRS.

Wollan feels her low-income clients should be rewarded for making what is, for them, a Herculean effort to save. “When I see that they have contributed to a 401(k) or other retirement account, I just want to jump up and down and cheer and pat them on the back,” she said. But “because their income is so low, they don’t get to take advantage of these credits, and that is so sad.” …Learn More

ACA Proves Itself but Race Disparity Persists

The U.S. Supreme Court’s decision in June to reject another challenge to the Affordable Care Act was widely seen as the final word: the law is here to stay.

But it was COVID-19 that underscored how important it is.

Racial disparities in uninsured populations

The federal government said nearly 10 million people signed up for Medicaid health coverage during the pandemic year that ended in January 2021. A decade after passage of the Affordable Care Act (ACA), which expanded Medicaid to include more low-income Americans by increasing the income limit for eligibility, the new sign-ups pushed total Medicaid enrollment to a record high of 80 million.

The recent increase was largely due to the spike in sign-ups among the unemployed or workers who saw their hours reduced and lost some of their wages. The relief packages passed by Congress in March 2020 and this year encouraged Medicaid enrollment by giving states additional funding to pay medical costs and sign up more people.

Beyond Medicaid, sales of regular health insurance policies sold on the state insurance exchanges also rose last year, as COVID-19 raced through the population. A 5 percent increase in enrollment in the policies, which are often subsidized, pushed total enrollment to 12 million.

Earlier this year, the American Rescue Plan continued to shore up health coverage by reducing insurance premiums for people who buy the policies. Unfortunately, these and earlier federal supports were temporary measures put in place for the pandemic, and some progress will be reversed when the supports expire at the end of this year or next year.

Despite the recent coverage gains, it has been a bumpy ride. Prior to COVID-19, sales of ACA policies had been slowing after years of marked progress in reducing the U.S. uninsured rate. And in the states that have not expanded Medicaid to reach more residents, the uninsured rates are nearly double the rates in the expansion states – 15.5 percent vs 8.3 percent. …Learn More