Want to Strengthen the ICHRA market? Make the Enhanced ACA Credits Permanent.

First, the impact on enhanced ACA credits on American families is undeniable. The American Rescue Plan Act (ARPA) and Inflation Reduction Act (IRA) enabled millions of consumers to receive health insurance for as little as $1 per month. It expanded who could receive Advanced Premium Tax Credits (APTCs) (also known as “Obamacare Subsidies”) and increased how much they could receive. 

The more significant impact, however, lies in how the IRA changed the ACA markets and set the stage for healthcare innovations that can curb rising costs and improve accessibility for all Americans. 

Understanding the IRP’s Impact on the ACA

Prior to 2021, no household earning more than 400% of the Federal Poverty Level (FPL) qualified for ACA credits. (Note: a single individual earning $54,360 per year earns 400% of the FPL.)

So what? Well, the problem with this cut-off is that it left individuals and families spending as much as 10-20% of their income on health insurance. As a result, some households -- especially those who saw themselves as “healthy -- took the risk of foregoing health insurance all together. 

ARPA and IRA removed this rigid eligibility cut-off. Instead, no household has to spend more than 8.5% of their income on health insurance premiums. It not only helped reduce uninsurance rates, but also brought healthier individuals to the ACA Marketplaces. 

These trends are significant because Insurance is fundamentally a numbers game. The more people in your risk pool, the more stable it is. If you have more healthy people in your risk pool, it’s even more robust. These dynamics contributed to the ACA premiums stabilizing and in some states, even decreasing! 

The ICHRA Connection

One of ICHRA’s most compelling value propositions is its cost savings to employers and employees. The reason why ICHRA is able to offer these cost savings is because the ACA Market has become more stable and cost-competitive.

Herein lies the significance of the enhanced ACA Credits introduced by the ARPA and IRP:

Bigger Risk Pools, Bigger Negotiating Power: The ARPA and IRA made it economically viable for more people to enroll in health insurance today. Today, the risk pools of the ACA are bigger in size than most businesses. As the ACA Markets grow, this becomes even more and more true. The bigger you are as a group, the more leverage you have in pricing and negotiating volume discounts. ICHRA allows the 98.9% of businesses have less than 500 employees to benefit from risk pool stability and volume discounting. 

Healthier Risk Pools, Better Pricing: The ACA Markets has been historically been stigmatized as the insurance option for the sick and poor. The IRA changed this dynamic. By expanding APTCs, it ensured the inclusion and retention of healthy self-employed individuals. This mix of healthy and high-risk individuals within the ACA is crucial for balanced risk distribution, which in turn, drives down costs universally. This offers hug value to businesses: ACA Market pricing is already less-expensive than traditional employer-sponsored group coverage in most state. ICHRAs allow employers to capitalize on these cost-savings.

‍Conclusion

The push to keep the enhanced ACA credits going is more than just helping families save. It's the start of a shift towards a healthcare system that's both affordable and inclusive for everyone. With steps like ARPA and IRPA, combined with the addition of ICHRA, many businesses can now tackle rising health insurance costs. They can offer their employees options that are not only more budget-friendly but also tailored to their needs. This change isn't a one-off—it's laying the groundwork for a future where good healthcare is within everyone's reach.