Biden’s Early Focus: Durable and Attainable Private Insurance

By Zack Buck

Though health policy debates during the 2020 presidential primaries centered around expanding access to public health insurance programs (e.g., “Medicare-for-All”), the focus of the nascent Biden administration has been on making private health insurance more durable, not deconstructing it.

While these changes are likely to make private insurance plans more affordable and attainable, choosing to reinforce private insurance plans puts global systemic reform, the goal of many advocates, further out of reach.

Far from a massive single payer reorganization, or even the comparatively-smaller public option, President Biden’s health policy priorities seek to improve and bolster the structures and policies pursued by President Obama. Indeed, the president’s focus on shoring up the inner workings of the Affordable Care Act (ACA) is demonstrated by intense focus on the structure of the ACA’s premium tax credits (PTCs) and its cost sharing reduction (CSR) payments.

First, billed as an emergency COVID-19 stimulus package, President Biden’s most important legislative accomplishment to date, the American Rescue Plan Act (ARP), made structural changes to the ACA’s PTC structure. Although the changes are temporary and due to sunset after two years, they expand ACA subsidies in dramatic ways.

These changes extend PTCs beyond their original bounds, which limited them to those with household incomes between 100 and 400 percent of the federal poverty level (FPL). With the change in the ARP, most all individuals are now eligible for PTCs that limit their health insurance premiums to no more than 8.5 percent of their household income.

This is likely to positively impact individuals making just over the original income limit, as the Congressional Budget Office (CBO) estimates that “people with incomes just over 400 percent of the FPL … would experience the greatest reduction in net premiums.” Originally unable to access subsidies, and not old enough for Medicare coverage, these individuals — many early retirees or self-employed individuals — experienced difficulty in finding an affordable plan on the individual exchange. This will now change.

Further, the PTCs are expanded to completely relieve the burden of any premium for individuals making between 100 and 150 percent of the FPL (reducing the premiums from the limit of 2.07-4.14 percent currently). In fact, the legislation broadens subsidies for every income group, reducing the maximum income contribution for the individual marketplace for all income brackets.

Nonetheless, not all of those purchasing a qualified health insurance plan on the exchange will be eligible for expanded subsidies. Those living in households with incomes lower than 100 percent of the FPL and in states that have not expanded Medicaid (there are currently 12) will remain in a coverage gap that leaves them ineligible for PTCs. But some may be helped by new rules that make those receiving unemployment income (UI) benefits more likely to receive subsidies. The ARP also seeks to encourage holdout states to expand their Medicaid programs by sweetening the percentage of expansion that is federally financed.

In addition to PTCs, the Biden administration could recalibrate CSR payments.

After the Trump administration announced in October 2017 that it would end CSR payments the following year, insurance plans engaged in “silver-loading,” meaning that they “priced in” the missing CSR payments to the insurance plans’ premiums themselves. This had the impact of making silver plans (with 70 percent actuarial value) more expensive than gold plans (with 80 percent actuarial value) in some jurisdictions.

Of course, the increase in premiums led to corresponding increases in the amount of PTCs that beneficiaries received. And because the PTC amount is keyed to the silver benchmark plan, premiums for non-silver accounts (after PTCs were awarded) dropped substantially.

In light of these changes, scholars have suggested that the Biden administration could implement further reforms to facilitate “access to a gold plan for less than the cost of the benchmark silver plan.” But, to date, changes to the CSR structure remain to be seen.

These realized and proposed changes shed light on the health reform priorities of the Biden era. On the positive side, they are likely to make the exchange private insurance plans more affordable and attainable. Health care financing mechanisms — the technocratic and technical internal gears of health policy — impact real people’s lives. And with the rising cost of health insurance, these solutions address a fundamental problem that clearly impacts access, and, eventually, health outcomes.

But changing tax subsidy formulae and income cliffs is highly specific, individualized, and detail-oriented. While the changes are welcome, they may fail to address the deep, structural causes of America’s health care cost crisis, like hospital and prescription drug prices, saturated marketplaces, and inefficient and fragmented payment structures. Those challenges remain.

Zack Buck is an associate professor of law at the University of Tennessee College of Law.

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