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March 8, 2021

With the Saturday passage in the Senate (on a 50-49 party-line vote) of a $1.9 trillion American Rescue Plan Act, Congress is on track to complete the legislation this week – marking a massive win for President Biden and congressional Democrats. The bill extends far beyond stimulus payments and unemployment benefits that have received most of the attention: It would expand the child tax credit and the Earned Income Tax Credit and provide more generous support for child-care expenses.

Of note to Council member firms and your clients, however, is the inclusion of a 100% COBRA continuation benefits from the month after the provision becomes law through September 30. Additionally, there are tens of billions of dollars allocated for expansion of subsidies inside the ACA exchanges.

House Majority Leader Steny Hoyer has said that the House will take up and pass the Senate bill as early as tomorrow.


Expansion of ACA Exchange Subsidies

  • The ACA provisions would reconfigure and expand the ACA subsidies. Today, people who earn more than 400% of the federal poverty level cannot use ACA premium tax credits to pay for health coverage, even if premiums for the coverage available would eat up a large share of their income. Under the premium tax credit provision, the government would cap what high-income people have to pay for individual or family health coverage purchased through an ACA public exchange at a maximum of 8.5% of income. High-income exchange plan users could qualify for ACA premium tax credit subsidies if their premium payments exceed that threshold. Though the subsidies last only through the end of 2022, they will lower the cost of coverage and are expected to boost the number of people enrolled.
  • Another section would have ACA public exchange programs treat displaced workers who are collecting unemployment benefits in 2021 and who use ACA public exchange plan coverage as if they had income at 133% of the federal poverty level. The provision would help unemployed people qualify for rich health insurance subsidies even if, under the usual ACA exchange program rules, they would be classified as earning too much to get premium tax credit subsidies.


COBRA Benefits

The Senate bill expanded the 85% federal subsidies to reduce employer-sponsored healthcare premiums for workers who are eligible for COBRA (due to involuntary termination or reduction in hours) to 100% until the end of September.

We and our allies in the employer community have long expressed concern about the financial and administrative burdens imposed on plan sponsors by COBRA – notably, that the adverse selection of those electing COBRA means that true costs to employers typically far exceed the 102% of premiums that may be charged. During the consideration of the Affordable Care Act in 2010, it was hoped that the establishment of individual insurance marketplaces with subsidized coverage would obviate the need for COBRA, or at least limit its duration. The increase of the subsidy to 100% addresses at least one of our concerns that an insufficient subsidy would exacerbate adverse selection as primarily people with high health costs elected coverage.

Currently, churches are exempt from COBRA requirements, and will remain excepted from the new federal benefit due to a ruling of the Senate parliamentarian. Additionally, there was much discussion last week about the “Hyde Amendment” which bars federal funding for abortions. Had a Hyde-like provision been added to the bill, some estimated that more than 90% of existing health plans could not receive the COBRA subsidy. It was not included.

Other significant provisions for employers:

  • Allows for an extended election period to allow individuals who previously experienced a qualifying event to enroll in coverage.
  • Requires employers to provide clear and understandable written notices to workers and establishes an expedited review process for workers who are denied premium assistance.
  • Provides a payroll tax credit to allow employers and plans to be reimbursed for the full amount of COBRA premiums not paid by workers.

In February, the Department of Labor Employee Benefit Security Administration (EBSA) recently issued EBSA Disaster Relief Notice 2021-01, which requires plan sponsors to determine the duration of certain pandemic relief on a person-by-person basis, giving benefit plan participants to have substantial additional time to make certain decisions – including COBRA elections – imposing severe administrative burdens for employers.

How we are taking action: The Council is concerned that that federal subsidies for COBRA will compound these administrative burdens. In the absence of any further technical corrections to the legislation, we intend to work with EBSA and other regulators to ameliorate these issues. Here is a good summary of the many broad provisions of the act.


Political Commentary

From this morning’s Punchbowl by Anna Palmer:

“The biggest tripwire for progressives in the House is the new unemployment insurance provisions. The House will have to swallow a $300-per-week supplement instead of the $400 that they had passed. But Speaker Nancy Pelosi and the Democratic leadership seems to have their factions in line. The Congressional Progressive Caucus said it would support the Senate bill. Much of the left has taken the position that, while the bill may not be everything they want, it’s a significant win for the left and for Americans. 

“This is also a huge moment for Joe Biden, Pelosi and Senate Majority Leader Chuck Schumer (D-N.Y.). The whole process of getting this bill through Congress wasn’t always pretty. The Senate parliamentarian stripped out the $15 minimum wage, then eight Democrats voted against a motion to add in the wage hike. Senate Democrats changed the income threshold for direct payments. It got a little bit messy. Yet in the end, the Senate only made changes around the edges. Schumer’s slim 50-seat majority held together and put Biden on the path to his first signature legislative achievement in the face of overwhelming GOP opposition. 

“And let’s note that eight weeks after the deadly Jan. 6 attack on the Capitol, the two parties are as ideologically divided as ever. Not one Republican voted for the American Rescue Plan in the House or Senate. None. This is an enormous political gamble for one side or the other. Only time will tell who made the right call.”


And commentary from this morning’s Politico Playbook:

“Congress is about to pass and President JOE BIDEN is about to sign into law the greatest expansion of the welfare state since LBJ. The bill extends far beyond stimulus payments and unemployment benefits that have received most of the attention: It would expand the child tax credit and the Earned Income Tax Credit, provide more generous support for child-care expenses and bolster Obamacare to the tune of tens of billions of dollars.

“The government expansion is so broad that WaPo, reflecting the sensibility of most liberals, says it augurs ‘seismic shifts in U.S. politics‘ because the pandemic made Americans more pro-big government and more anti-austerity — perhaps permanently. Meanwhile, the WSJ editorial page, a little late to the fight, decries ‘the Covid Welfare State,‘ and warns that the “$1.9 trillion Democratic bill provides a guaranteed income unlinked to work.’

“As the bill moves through the House for a final vote this week, two big questions are on our minds: 1) How did Democrats win this fight over welfare while barely firing a shot? 2) Can they do it again? … On the first question, the conventional wisdom is sound: The twin crises of disease and recession boosted support for government intervention well beyond what has been tolerated for decades; Donald Trump and the GOP’s own support for the last two bills depolarized the fight over this one; Biden’s opposition was distracted by internal divisions (Jan. 6, impeachment, McCarthy vs. Cheney, Trump vs. McConnell); and the conservative media was distracted by juicier fare than tax policy.”


And, finally, some commentary from the New York Times about implications for the ACA changes:

“In coming years, Democrats will probably confront more decisions about how to expand coverage.  The new Affordable Care Act subsidies expire at the end of 2022, setting up a figurative cliff in which premiums would go back up if Congress did not act. Democrats could use the moment to make those changes permanent, further solidifying the role of private health insurance. If enrollees find themselves satisfied with their increasingly subsidized plans — if they perceive the coverage as more affordable because the government pays a bigger share of the tab — the urgency to expand public coverage may lessen. 

“’Sometimes the path of least resistance is self-reinforcing,’ said Jacob Hacker, a political scientist at Yale who helped develop the public option plan supported by Mr. Biden.

“While at the same time, ‘legislators could find themselves balking at the price tag. Making the subsidy permanent would most likely cost hundreds of billions. That could push the party to think about the cheaper but more politically challenging route of expanding public plans.’”