More Affordable Health Coverage Now Available for Pre-Medicare Adults

Two recent federal actions are making health insurance more affordable and accessible for millions of Americans, including those ages 50 to 64. The first is a new law increasing financial assistance available for Affordable Care Act (ACA) health coverage, and the second is a Special Enrollment Period, open now through August 15, that will allow people to take advantage of the new financial assistance and enroll in coverage. These actions are important for adults ages 50 to 64 because, as we show in new AARP Public Policy Institute analyses, affordability of health insurance has been a major issue for this age group. Another impact of the actions is that they create an opportunity to improve access to coverage for communities of color and reduce health coverage gaps.

New Law Helps Older Adults Facing Major Coverage Affordability Challenges

The newly enacted American Rescue Plan Act (ARPA) significantly expands already-available federal premium tax credits, which lower premium costs, for ACA Marketplace coverage for 2021 and 2022. This means that Marketplace health plan coverage will become more affordable, with many people now eligible for premium-free plans. The law also expands premium assistance for the first time to people with incomes above 400 percent of the Federal Poverty Level. 

Before ARPA’s implementation, many older adults faced high and unaffordable nongroup (individual) health coverage costs. This is in part because, unlike with group coverage (e.g., offered through an employer), older adults pay considerably higher premiums for nongroup coverage than younger adults due to the insurer practice of “age rating.” Older adults with incomes slightly above the prior 400 percent of the Federal Poverty Level threshold for subsidies had it especially hard, facing unaffordable premiums equal to nearly 30 percent of their income. Older adults are also more likely to face high out-of-pocket costs due to preexisting conditions. And among older adults who do not have access to job based or public health coverage, over half remain uninsured.

Under the new law, nobody will be required to pay more than 8.5 percent of their household income on premiums for Marketplace coverage. This change makes a big difference in how much people have to pay for health coverage. Before the law, a 64-year-old earning $52,000 in 2021 would not have been eligible for subsidies and would have faced an average $12,700 annual premium for Marketplace coverage. With the law’s expanded tax credits, that same person is now eligible for subsides and would pay only $4,400 – a savings of over $8,300 over the course of the year.  Adults with lower incomes who already received subsidies would see even bigger savings than under prior law. For example, an individual with an annual income just below $20,000 (150 percent of FPL) would now pay no premium for coverage in 2021.

Opportunities to Enroll in Affordable Coverage Can Help Reduce Disparities

The new Special Enrollment Period, meanwhile, works effectively in tandem with the expanded premium assistance by providing an important opportunity for people to enroll in ACA Marketplace health coverage. This new opportunity to access more affordable health coverage can help increase enrollment and, with effective outreach to targeted communities, begin to help reduce racial and ethnic coverage disparities. While the ACA significantly narrowed racial and ethnic coverage gaps among 50- to 64-year-olds, large disparities remain (see figure). Hispanic/Latino and American Indian/Alaskan Native older adults are nearly three times more likely than White older adults to be uninsured (20 percent compared to 7 percent). Meanwhile, about 13 percent of older Hawaiian/Pacific Islander adults, 11 percent of older Black adults, and 8 percent of older Asian adults remained uninsured.

Important Improvements but Progress Must Continue

The American Rescue Plan Act in combination with the new Special Enrollment Period have the potential to start to narrow health coverage disparities. And by lowering premiums for many Americans, including older adults who haven’t reached the age for Medicare eligibility, these federal actions begin to address problems of health care affordability. While these efforts are crucial, policymakers should continue to explore long-term solutions to address unaffordability of coverage in the nongroup market.