Policies To Improve Health Insurance Coverage as America Recovers From COVID-19

One year ago this month, the first wave of COVID-19 cases in the United States led to widespread job loss throughout the country.¹ Early in the pandemic, there was serious concern that the impact of these job losses would lead millions of workers to lose job-based health insurance coverage, causing a dramatic spike in uninsurance.

Evidence to date suggests that the number of uninsured people has not risen as greatly as initially feared. Although the number of jobs in the United States remains about 9.5 million below pre-pandemic levels,² workers in the industries that were most affected by the pandemic’s economic damage tended not to have job-based coverage to begin with. Some of the estimated 3 million people who lost job-based coverage in 2020³ gained other forms of coverage through public programs, including Medicaid and the Children’s Health Insurance Program (CHIP), and through the health insurance marketplaces established by the Affordable Care Act (ACA).

While total coverage losses were not as great as projected last spring, federal action is needed to fill coverage gaps for the tens of millions of uninsured Americans and improve protection against medical costs for families facing the financial strain of the pandemic. This issue brief describes the extent of coverage loss during the COVID-19 pandemic, outlines the evidence for why the uninsured population did not increase as dramatically as expected, and explains how the American Rescue Plan—the stimulus bill that President Joe Biden is expected to sign this week—will alleviate uninsurance and underinsurance as the United States climbs out of the coronavirus crisis.

How coverage changed during the pandemic

After the passage of the ACA in 2010, 20 million Americans gained insurance coverage.⁴ The largest increase in coverage was in 2014, when the provisions of the law expanding Medicaid and opening the health insurance marketplaces went into full effect.⁵ During the Trump administration, this trend reversed, with the uninsured rate among the nonelderly increasing from an estimated 10.0 percent in 2016 to 10.9 percent in 2019.⁶ The COVID-19 pandemic and resulting recession had the potential to exacerbate these coverage losses.

During the Great Recession, the uninsured rate among the nonelderly swelled to 18.2 percent, its highest level in decades.⁷ In 2010, 60 million people reported they had been uninsured at some point during the past year.⁸ Early in the pandemic, many experts feared that the high levels of job loss could result in a similar spike in uninsurance. The Economic Policy Institute, for example, estimated in May 2020 that more than 16 million workers had lost employer-sponsored insurance (ESI) due to job loss, and the Urban Institute projected that as many as 5 million to 9.5 million workers could become uninsured in its May 2020 analysis.⁹

More recent analyses, however, have found a smaller—though still substantial—loss of employer-sponsored coverage and a smaller net increase in uninsurance. Data from the U.S. Census Bureau’s Household Pulse Survey suggest that by mid-2020, about 3.3 million people had lost employer-sponsored coverage, and according to an Urban Institute study, the number of uninsured increased by 1.9 million.¹⁰ The same study found that Hispanic and non-Hispanic Asian adults experienced the greatest reductions in ESI coverage, and it detected an increase of nearly 4 percentage points in the uninsured rate among Hispanic adults. Separately, a Kaiser Family Foundation analysis of insurers’ administrative data estimated that around 2 million to 3 million fewer people had ESI as of September 2020.¹¹

While the lower-than-anticipated number of workers losing health coverage during the coronavirus crisis sounds like good news, there are mixed reasons that the United States did not see a greater increase in the number of uninsured. A couple of those reasons include: 1) Many of the workers who were laid off did not have coverage through their job; and 2) Americans who lost health insurance during the pandemic have been able to gain coverage through Medicaid or buy coverage on their own through the ACA marketplaces. The ACA’s Medicaid expansion, establishment of the marketplaces, and protections for preexisting conditions mean that Americans have far more options today than were available during the Great Recession.¹²

In addition, the net change in the uninsured population does not capture other aspects of health insurance, such as shifts in the type of coverage or how the financial impacts of the pandemic affect households’ ability to afford out-of-pocket costs.

Many lost jobs were in industries that did not offer coverage

The job loss caused by the pandemic and resulting recession has hit some workers harder than others. Workers with essential jobs, such as at grocery stores or in hospitals, continued to report in-person; many of those employed by businesses forced to close to comply with social distancing guidelines were laid off; and some office-based employees were able to switch to working from home. Employees who were able to work from home during the pandemic were likely to have higher incomes and be more highly educated.¹³

Many of those who lost work over the past year were less likely to be covered through employer-sponsored insurance in the first place. The Congressional Budget Office estimates that an average of 14.3 million people had permanently or temporarily lost their job at any given point in 2020, but only half of those people had the option of employer-sponsored coverage when they were employed. Out of the 7.2 million people who temporarily or permanently lost their job in 2020 and had access to employer coverage, most retained some form of coverage and 1.3 million became uninsured.¹⁴ In addition to public insurance programs, some workers who lost job-based insurance may have been able to enroll in ESI through a parent or spouse.

Among industries, the largest job loss by far has been in the leisure and hospitality sector, which as of February 2021 was 3.5 million jobs below what it was a year ago.¹⁵ The industry includes arts and entertainment as well as hotels and food service, all of which have been hit hard by closures of dining and indoor venues and reductions in travel activity.¹⁶ Only 36 percent of private sector workers in leisure and hospitality had access to employer-sponsored coverage in March 2019, in contrast to 82 percent of private sector workers engaged in management, business, and financial occupations and 56 percent of all workers in private industry.¹⁷

The ACA helped stem coverage losses during the pandemic

Medicaid, CHIP, and the health insurance marketplaces provide coverage options for those who have lost job-based coverage or experienced income changes over the past year. Medicaid and CHIP enrollment rose by 9.4 percent from February to September 2020, an increase of more than 6.6 million people.¹⁸ Under the ACA, Medicaid eligibility is based on monthly income—rather than annual income or assets—which enables people experiencing sudden loss of income to access free and low-cost coverage.¹⁹

Initial data for the ACA marketplaces suggest that enrollment in those programs is also above pre-pandemic levels. At the end of the most recent open enrollment period, a total of 8.25 million people had enrolled through the federal HealthCare.gov platform, essentially the same as the total from a year prior (8.29 million) even though two states switched to state-based enrollment platforms and others had recently expanded Medicaid, two factors that would be expected to drive total federal enrollment lower for 2021.²⁰

Enrollment may have increased even more in states that operate their own marketplace portals, which also generally provided more opportunities for enrollment and better outreach to the uninsured than the federal government did in 2020. Many of the state-based marketplaces offered special enrollment periods (SEPs) during the pandemic to encourage sign-ups among those who were newly jobless or previously uninsured.²¹ California, for example, enrolled nearly 290,000 people from March 20 to August 31, 2020, during its COVID-19 SEP.²² The state reported that 59 percent of these new enrollees had ESI in February 2020, much higher than the 39 percent of new enrollees transitioning from ESI in 2019.

Marketplace enrollment could grow further this year. The Biden administration opened a federal SEP for the pandemic, which the Trump administration did not do; it is aimed at expanding coverage and runs for three months, from February 15 through May 15, 2021.²³ Nearly 9 million uninsured Americans are eligible for subsidized coverage through the marketplaces,²⁴ and even more could qualify under the American Rescue Plan. The Centers for Medicare and Medicaid Services reported that during the last two weeks of February, 206,000 people enrolled in marketplace coverage, roughly three times as many as in past years.²⁵

The increases in Medicaid, CHIP, and marketplace coverage are a major reason why insurance loss during the pandemic was not as great as during the Great Recession. They also offer mechanisms to effectively restore coverage lost during the COVID-19 pandemic and expand health coverage and affordability.

Affordability remains a barrier to coverage and care

Although the ACA extended insurance coverage to 20 million Americans,²⁶ affordability remains a barrier to obtaining and maintaining coverage. According to a 2020 poll by the Commonwealth Fund, one-third (34 percent) of uninsured adults who previously had nongroup coverage said they could not afford the cost of their health plan.²⁷

Affordability problems also prevent some Americans from seeking care and ultimately have negative consequences on health. Prior to the pandemic, nearly 1 in 10 (8.3 percent) of adults reported not getting care due to cost during the past year. Throughout the pandemic, other factors such as canceled medical appointments, social distancing requirements, scarce appointment availability, and fear of health care settings contributed to about 30 percent to 40 percent of adults reporting that they delayed or forwent care sometime in the past four weeks.²⁸ For example, a Centers for Disease Control and Prevention report documented a sharp drop in routine pediatric vaccinations.²⁹ Concerningly, research by the Urban Institute found that people with chronic disease, Black Americans, and low-income children were among the populations more likely to have delayed or forgone care during the pandemic.³⁰ Without policy interventions to address gaps in coverage, affordability, and care, these trends could widen existing disparities in care and health.

Extending help for the uninsured and underinsured

Better health coverage is essential to the U.S. recovery from the pandemic. Uninsurance and underinsurance leave Americans vulnerable to high medical costs, at a time when millions still lack jobs and are experiencing reductions in income. Efforts to address recent coverage changes should also consider the needs of the 30 million people who lacked coverage before the pandemic or who otherwise struggled with the cost of care.³¹ President Biden’s American Rescue Plan, the $1.9 trillion stimulus package the president is expected to sign into law this week, contains crucial provisions for rapidly extending coverage and improving affordability by building upon the Affordable Care Act to close gaps in Medicaid eligibility and boost subsidies for private coverage through the marketplace.³²

Close the Medicaid coverage gap

One of the most important steps Congress can take to expand coverage is to further incentivize state Medicaid expansion. Currently, 12 states have yet to expand Medicaid under the ACA, leaving millions of people—whose incomes are below the federal poverty level—without access to either Medicaid coverage or financial assistance toward marketplace coverage.³³ Most of the remaining 12 nonexpansion states are in the South, and under Medicaid expansion, more than 3 million people in those states would gain health coverage.³⁴ It would also allow low-income residents already covered through private plans to reduce their health care costs by switching to Medicaid. With state revenues projected to decline by as much as 4.4 percent in fiscal year 2021,³⁵ federal funding could strongly incentivize these remaining states to expand Medicaid.

The American Rescue Plan provides nonexpansion states with the opportunity to secure federal Medicaid funding in addition to the 90 percent federal match guaranteed by the ACA.³⁶ The provision is built around the amount of federal money that states receive to fund their Medicaid programs, the Federal Medical Assistance Percentage (FMAP). Prior to the pandemic, the federal government paid one-half to three-quarters of the cost of Medicaid beneficiaries eligible prior to the ACA, based on a state’s average income.³⁷ For beneficiaries eligible through Medicaid expansion, the FMAP is 90 percent, meaning the federal government covers nearly the entire cost of expansion. Congress has already boosted states’ base FMAPs during the pandemic: The Families First Coronavirus Response Act (FFCRA) and the Coronavirus Aid, Relief, and Economic Security (CARES) Act increased states’ FMAPs by a total of 6.2 percentage points for the duration of the public health emergency.³⁸

Some states that have yet to expand their Medicaid programs continue to cite costs associated with enrolling the newly eligible population, which would be large in states such as Texas and Florida.³⁹ Evidence from states that have already expanded, however, shows that their net cost of Medicaid expansion can be less than the 10 percent state match for expansion enrollees because Medicaid expansion reduces uncompensated care and increases state revenues by boosting economic activity.⁴⁰

The American Rescue Plan further incentivizes Medicaid expansion by having the federal government pay for an additional 5 percentage points of Medicaid costs in the traditional Medicaid program for two years after states expand.⁴¹ This boost is in addition to the 6.2 percentage point increase for the traditional Medicare program in place via the FFCRA for the duration of the public health emergency. Boosting the traditional Medicaid FMAP by 5 percentage points would represent a massive flow of federal funds to states because even in states that have expanded their Medicaid programs, spending in the traditional Medicaid program accounts for almost 80 percent of overall program spending.⁴²

Because expansion costs constitute around only 2 percent of a state’s total Medicaid spending on average,⁴³ the 5 percentage point increase in the traditional Medicaid FMAP offers remaining states the opportunity to expand Medicaid, cover their entire expansion costs, and receive a net increase in federal Medicaid funding. The Kaiser Family Foundation estimates that if every expansion-eligible enrollee signed up for Medicaid in these states, these states would still net $9.6 billion in new federal funds under this proposal.⁴⁴

Improve health insurance affordability

In addition, the American Rescue Plan adds support for people purchasing coverage through the ACA marketplaces, closes gaps in financial assistance for low- and middle-income families, and subsidizes COBRA coverage for laid-off workers.⁴⁵ The legislation makes marketplace subsidies newly available to higher-income, middle-class people for 2021 and 2022 and increase the generosity of subsidies for those already eligible based on income for 2021 and 2022. The plan also allows people who receive unemployment at any point during 2021 to receive the maximum subsidies available, making them eligible for a “silver”-tier plan without owing any premium, as well as cost-sharing reductions and subsidies meant to cover copayments and deductibles. In its analysis of an earlier, House-passed version of the American Rescue Plan, the Congressional Budget Office projected that the enhanced ACA subsidies would reduce the number of uninsured people by 1.3 million in 2022, increasing marketplace enrollment by a total of 1.7 million.⁴⁶

Under the American Rescue Plan, marketplace financial assistance will become newly available to people with incomes above and below the original ACA subsidy eligibility thresholds during 2021 and 2022. The ACA created income-based assistance toward premiums and cost-sharing for marketplace coverage, with premium tax credits available for people with family incomes from 100 percent to 400 percent of the federal poverty level (FPL).⁴⁷ Originally, the ACA did not provide financial assistance to those with incomes below 100 percent of the FPL or middle-class families above the upper limit, making marketplace costs particularly burdensome for those in the Medicaid coverage gap, unsubsidized families in high-premium regions, and near-elderly enrollees with incomes just above 400 percent of the FPL. Now, the American Rescue Plan guarantees that people below 100 of the FPL can obtain a silver-tier plan with no net premium and those above 400 percent of the FPL owe no more than 8.5 percent of their income toward a silver plan. A 64-year-old who earns $58,000 per year, making them previously ineligible for subsidies, will see their annual premium drop by $3,000 under the plan.⁴⁸

Crucially, the bill also improves health care affordability over the next two years for those already in the subsidy-eligible income range, including the roughly 10 million marketplace enrollees already receiving financial assistance. While marketplace data are not yet available for all states for this year, in 2020, 9.6 million of the total 11.4 million enrollees received premium tax credits.⁴⁹ The American Rescue Plan reduces enrollees’ premium costs by lowering the percentage of income a subsidy-eligible enrollee owes toward the benchmark silver plan and enables those with incomes up to 150 percent of the FPL to enroll in that plan at no cost.⁵⁰ The potential savings for many enrollees is dramatic. For example, a single person making $19,300 (150 percent of the FPL) will see their annual premium drop by $800.⁵¹ Although the plan does not change the ACA’s financial assistance for deductibles and other cost-sharing for most enrollees, the enhanced premium subsidies could help them afford more generous plans, allowing them to lower their out-of-pocket costs and alleviating underinsurance.

Furthermore, the American Rescue Plan contains two coverage provisions tailored for people who lose employment. First, the bill extends the maximum available premium subsidy to those who are jobless in 2021. Anyone who receives unemployment benefits this year will be treated as making 133 percent of the FPL for the purposes of marketplace financial assistance, meaning they are eligible for at least one $0 premium plan option as well as cost-sharing reductions—the subsidies which lower copayments, deductibles, and coinsurance for low-income consumers.⁵² Second, the bill provides a 100 percent subsidy to people who lose their job and receive continuation coverage through their employer-sponsored plan, known as COBRA, through the end of September.⁵³

Conclusion

While the coronavirus crisis has led to significant job loss in the United States, there has not been as severe of an increase in uninsurance as predicted earlier in the pandemic. This is in part because the programs established by the Affordable Care Act are robust, helping those who lost their jobs in the past year secure new sources of coverage. Millions of people lacked insurance coverage and struggled with the cost of care prior to the COVID-19 pandemic, however, and continued efforts to address coverage loss amid the pandemic should address their needs as well.

The American Rescue Plan’s coverage provisions build upon the ACA and are crucial to the nation’s recovery from the pandemic, given the staggering levels of unemployment the country is still facing and the fact that care delays and coronavirus infections could have adverse effects on Americans’ health for years to come. The health coverage changes in the American Rescue Plan not only strive to restore pre-pandemic levels of health insurance coverage but are also a major step toward extending coverage to all uninsured Americans.

Emily Gee is the senior economist for Health Policy at the Center for American Progress. Thomas Waldrop is a policy analyst for Health Policy at the Center.

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Endnotes

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