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On March 11, 2021, President Biden signed into law the American Rescue Plan Act (ARP) of 2021, allocating $1.9 trillion towards economic relief. The ARP aims to expand Americans’ access to health insurance coverage by lowering marketplace premiums. Residents of most states will be able to access lower-cost marketplace coverage starting April 1.

Changes include:

  • Increasing who qualifies for financial assistance.
  • Eliminating previous income cut-offs.
  • Extending coverage for those without work.

The ARP significantly increases the number of people who qualify for Advance Premium Tax Credits (APTC) and raises the value of credits for current recipients. This means millions of enrollees currently receiving financial assistance will pay less for their marketplace plan – and millions more are now eligible for assistance who would not have qualified previously. The law mandates that no one will pay more than 8.5% of their income when enrolling in a “benchmark” marketplace plan.

Coupled with the extension of the 2021 Special Enrollment Period (SEP) until August 15, the ARP draws large numbers of enrolling and renewing members to the federally-facilitated marketplace (FFM) and state-based marketplaces (SBMs).

The FFM implemented most of the subsidy changes on April 1, meaning that customers can now activate their new or expanded subsidies. On the other hand, SBMs have varied in their responses to these changes – which in many cases are still pending.

1. New Requirements Calling for Rapid Implementation

SBMs are expected to implement the eligibility changes called for in the ARP and release timely communication regarding how members will access lower premiums. These changes include:

  • Adjusting the marketplace subsidy eligibility systems.
  • Changing member notices and communications.
  • Revising tax forms.

How Individual State-Based Marketplaces are Handling These Changes

Despite the coverage parameters SBMs were given, how they went about implementing the changes was largely individualistic. Some SBMs (Massachusetts Health Connector, D.C. Health Link, Covered California, Washington Healthplanfinder, and MNsure) are going to automatically recalculate eligibility and rates for members currently enrolled through the marketplace. Other SBMs will require current users to update their application to receive increased assistance. Enrollees in FFM states must submit an updated application to have new APTCs applied to their health plan.

The APTC changes called for in the ARP apply under the law effective January 1, 2021, but technology challenges mean it could take some time before consumers see lower premiums. Increased tax credits will apply toward premiums going forward, but enrollees will receive subsidies from earlier in the year when they file their tax return.

Other requirements for SBMs include sending out member communication with instructions on how to capitalize on the expanded subsidies and updating tax forms.

SBMs not prepared for large volumes of premium readjustments, member communication, and new enrollees may struggle as these changes continue being implemented.

2. Expiring Coverage Leaves Room for Future Changes on the State Level

The ARP mandates that employers cover COBRA premium subsidies for eligible former employees for up to six months during 2021. Former employers will be reimbursed for this cost.

This temporary coverage is set to end on September 30, 2021. Many will be unable to afford unsubsidized COBRA but are not eligible for a Special Enrollment Period (SEP) under federal law due to the loss of COBRA coverage. But at least two SBMs (Pennie and Nevada Health Link) has said they will open a SEP for these COBRA enrollees.

State-Based Marketplaces Differ in Implementing the Special Enrollment Period

The FFM extended enrollment through August 15, 2021, and SBMs must decide on how to adjust their own extension accordingly. Some SBMs have chosen to match the FFM in their extensions. Pennie, HealthSource RI, Washington Healthplanfinder, Maryland Health Connection, and Connect for Heath Colorado announced the extension of their SEPs through August 15, and some have already announced plans to extend for even longer depending on demand.

SBMs differ in their restrictions on SEP eligibility. Some states are only allowing those not currently enrolled in the Marketplace to sign up during these set time periods. DC Health Link extended its SEP through the end of the COVID-19 pandemic, but only uninsured residents may register. Other SBMs established SEP timelines specific to eligibility; Covered California allows for anyone to enroll in their Marketplace through May 15 and extended the SEP for uninsured individuals until the end of 2021.

Deciding when and how to effectively initiate new SEP qualifying events to account for this large population of potential enrollees presents a unique challenge to SBMs. The continuation of an unprecedented public health emergency will continue to have shocking impacts on insurance needs; states-based marketplaces must position themselves where they are able to adapt to rapidly changing regulations and public demand.

3. Incentives Drive State-Based Marketplaces to Prioritize Technology Investments

In order to streamline the changes required by the ARP, state-based marketplaces were appropriated $20 million in funding for “marketplace modernization.” States are encouraged to invest in their technology platforms to easily adapt to current and future regulation changes while catering to the user-experience. Funding is available through September 2022.

Consider Scalability When Selecting a Technology Vendor

Health insurance constantly evolves and brings challenges to the table. Prepare for the unexpected by partnering with an adaptable technology vendor.

Composable, modular solutions are built to rapidly respond to meet the ever-changing needs of the insurance marketplace. A one-size-fits-all solution no longer meets requirements as the insurance industry shifts towards using a co-operative collection of business capabilities designed to work together and address specific business needs.

Modular solutions focused on automation can be utilized to reduce administrative overhead and improve the overall user experience.

Member retention continues to surpass statistics from past years during the 2021 Open Enrollment Period. As marketplace plans continue to become more affordable and accessible, SBMs need to not only retain members but identify and capitalize on growth scenarios through technological advancements.

Visit Softheon to learn more about our composable, modular solutions designed to scale.

Meet the Author


Josh Schultz is a Senior Policy Analyst at Softheon, where he advises the company on health policy issues affecting businesses and government health agencies. Prior to Softheon, Josh worked for a non-profit agency assisting Medicare beneficiaries, a technology company, and consulting firms.