The American Rescue Plan Act of 2021 (ARPA) was signed into law on March 11, 2021. According to a White House briefing, this legislative package is designed to “change the course of the pandemic, build a bridge towards economic recovery, and invest in racial justice.”  

ARPA provides relief in a number of ways including: 

• Expanded Affordable Care Act (ACA) subsidies 

• COBRA subsidies for employees who involuntarily separated during COVID-19 

• Temporarily increased contributions for Dependent Care Reimbursement accounts 

• Other credits offered to both employers and taxpayers.  

In this article, we’ll focus on the temporary changes to the premium tax credit (PTC) and the expansion of eligibility for health insurance subsidies under the ACA through the Federal Marketplace. 

The subsidies included in the ARPA are intended to expand coverage, affordability, and access to health insurance through the ACA. Many Americans still find premiums to be high and out-of-pocket costs burdensome. The goal is to extend healthcare coverage and potentially decrease the number of uninsured Americans during the COVID-19 pandemic.  

The refundable credit helps eligible individuals and families cover the cost of premiums through the marketplace, expands eligibility by removing the upper income limit, and makes the PTC more generous for those eligible. These temporary provisions are retroactive to January 1, 2021 and will continue through 2022. 

How does the ARPA affect the ACA? 

According to research from the Kaiser Family Foundation, 8 million Americans were either paying for unsubsidized plans or paying full price prior to the subsidy expansion. The provisions in ARPA will help those people as well as millions of uninsured people secure lower monthly premiums through larger tax credits. Additionally, the special enrollment period for the Federal Marketplace has been extended to August 15, 2021. Here are the main ways it will make an impact: 

• More people will qualify for a subsidized plan. Before the ARPA, an individual’s modified adjusted gross income (MAGI) had to be between 100% and 400% ($12,760-$51,040) of the federal poverty limit. If you earned more than $51,040, you would have to pay full-price for a plan. The ARPA caps how much income can be used to pay for a health insurance plan at 8.5%–if the premium is more than 8.5% of your MAGI, the difference will be covered by a federal subsidy. 

• Americans earning between 100% and 400% of the poverty level will pay less than before. Under ARPA, people earning between 100-150% of the poverty level will not have to pay a monthly premium and their health insurance plan will be completely subsidized. Others will see their monthly premiums decrease. 

The lower insurance costs were available in the Marketplace beginning April 1, 2021 – however, if someone was already enrolled, they can go back to claim the extra subsidy since it is retroactive to January 1, 2021. 

How will these changes to the ACA impact businesses? 

From a compliance perspective, employers need to revisit and review their ACA compliance and reporting. An article in the National Law Review points out that more full-time employees may be able to claim the PTCs which could lead to “greater scrutiny of employers’ ACA compliance by the IRS and a shift in employer group health plan enrollment.” The ARPA will increase the number of individuals who qualify for subsidized coverage which can trigger employer shared responsibilities penalties for Applicable Large Employers (ALEs) under the ACA. 

ALEs are generally employers with at least 50 or more full-time employees, including full-time equivalents, during the prior calendar year. If a full-time employee was not offered health insurance or not offered adequate and affordable coverage, that employee may choose to purchase health insurance in the Federal Marketplace. Under the new ARPA, there is a greater risk of ESR penalties since more employees now qualify for a PTC.   

For businesses with fewer than 50 employees, the higher ACA subsidies could work to provide considerable savings opportunities with regard to employer-sponsored group health plan offerings. Small businesses with fewer than 50 full-time or equivalent employees are not required to offer health insurance though many choose to do so anyway, at significant cost to both employer and employee. Under ARPA, many legal experts recommend that small employers review their health insurance strategy to see if they can cut costs by making employees eligible for marketplace coverage. 

Will the expanded ACA subsidy become permanent? 

Many in Congress support making the ACA subsidy expansion permanent. However, industry analysts believe any long-term subsidy approvals will depend on the outcome of the 2022 midterm elections. Either way, this does signal a trend that health insurance is becoming a priority for government policy so that people aren’t left behind. 

In the meantime, how should business owners be thinking about how to plan for health care as an expense or a benefit to attract and retain talent? Do you want to lead with benefits to stand above your competitors? Will your business be able to provide better services over the ACA marketplace? As we discussed the small business impacts of the ARPA and ACA updates in a recent webinar, it may make sense for your business to tailor your benefits offering to your talent recruitment goals. For example, if you are recruiting recent graduates, perhaps a Tuition Reimbursement Program may be the best investment to attract the talent you want. 

We’re here to help your business 

To keep up with all the changing legislation and take advantage of new assis
tance programs, it’s important to have employee benefits and payroll software and services that work as hard as you do. Solution providers like Asure help you automate all the complex moving parts associated with benefits administration and payroll, provide supporting documentation, and maintain the reports required to stay compliant. 

Watch our webinar for more information about ARPA and how it will impact small and mid-size businesses. We’ll explain what you need to know about Affordable Care Act updates, unemployment benefits changes, and minimum wage.