Updates to Government Premium Subsidies and Price Transparency Rule

The nearly $2 trillion American Rescue Plan passed in March includes an important change to the Affordable Care Act’s insurance exchange subsidy program. The Biden administration hopes the change will lower the nation’s uninsured rate. Under the original ACA rule, those who purchased insurance through an exchange only received subsidies if their income fell below 400% of the poverty level. The new law provides additional funding to help those with incomes above this threshold, ending the problematic “cliff” that limited options for middle-class workers who did not have access to employer insurance.

The new law caps total spending on insurance premiums at 8.5% for these people, while also lowering the cap for those with incomes closer to the poverty level. In theory, the change will make it easier for some of the nation’s millions of uninsured people to obtain coverage on the exchanges. Those already utilizing the exchanges will likely see a larger subsidy to further lower their premiums.

In other news, recent analyses of health systems response to CMS’ rule on price transparency revealed lackluster compliance so far. The rule, originally passed by the Trump administration and effective January 1st, 2021, states that hospitals and large health systems must publish prices and their insurance negotiated allowable rates for a large assortment of “shoppable” services including many non-emergency tests and procedures.

Multiple studies showed that over half of hospitals and large health systems have to date not complied. The rule includes a $300/day penalty for non-compliance, but CMS has not revealed any information on how or if it plans to enforce it. Industry analysts suggest that CMS is hesitant to enforce the penalty while the COVID-19 pandemic continues, as most hospital and health systems have already faced significant financial, technical, and logistical issues over the past year.

If the rule eventually works as intended, the price transparency will force many hospitals and health systems to begin price competing, lowering their prices.