Mar, 16, 2021

Overview of the American Rescue Plan Act of 2021

Manatt Health

On March 11, 2021, President Biden signed an approximately $1.9 trillion COVID-19 relief bill—the American Rescue Plan Act of 2021 (“the American Rescue Plan”). The American Rescue Plan includes myriad health care provisions, focused primarily in two areas: first, it provides funding the Biden Administration requested to carry out its COVID-19 response plans; second, it enacts significant but largely temporary coverage policies.

Although House and Senate Democrats collaborated to draft the legislative package that passed the House late last month, the Senate ultimately made several key changes to the bill, which required the House to vote again. The Senate’s targeted changes include the following:

  • Ensuring that anyone who receives unemployment insurance in 2021 is eligible for maximum cost-sharing subsidies to purchase coverage on the Marketplace;
  • Increasing Consolidated Omnibus Budget Reconciliation Act (COBRA) subsidies from 85 percent to 100 percent of premiums;
  • Delaying the effective date of the Medicaid drug rebate cap rescission by one year;
  • Reestablishing an imputed rural floor for the Medicare hospital area wage index for hospitals in all-urban states;
  • Adding $8.5 billion in Provider Relief Fund funding for rural providers; and
  • Modifying the state and local relief funds to create more specific parameters regarding recipients’ use of the funding, modifying the ways in which the federal government may distribute the funding including by introducing phased-in distributions, and establishing a new state infrastructure fund.

The legislation also includes major economic stimulus and anti-poverty measures, including enhanced federal unemployment insurance, child tax credits, and stimulus checks for Americans who make under $80,000 per year. The final bill does not include the House-passed increase in the minimum wage to per hour because the Senate Parliamentarian ruled that the provision could not be passed via reconciliation.

Although all health care coverage provisions of the bill are temporary, many will have a lasting impact. Some of the American Rescue Plan policies, such as temporarily making Marketplace subsidies more generous and available to more Americans, will lay the groundwork for future policy discussions. Other policies, such as incentivizing the remaining states to expand Medicaid, could permanently alter the coverage landscape. Below is a high-level summary of the key provisions of the bill:

  • Marketplace. Temporary enhancements to the advance premium tax credits (APTC) available for individual insurance coverage purchased on the Marketplace for plan years 2021 and 2022, including enhanced benefits for individuals who receive unemployment insurance for 2021, as well as funding for State-Based Marketplaces (SBMs).


   Table 1. Proposed Premium Percentages by Household Income

Household Income (% of the FPL) Original 2021 Premium Percentage Proposed Temporary Premium Percentage,
Up to 150% 2.07%-4.14% 0%
150%-200% 4.14%-6.52% 0%-2%
200%-250% 6.52%-8.33% 2%-4%
250%-300% 8.33%-9.83% 4%-6%
300%-400% 9.83% 6%-8.5%
Over 400% No subsidies 8.5%
  • COBRA. Temporary, enhanced premium assistance to make COBRA coverage more affordable for people who lose employer-sponsored coverage. The subsidy begins April 1, 2021 and extends through September 30, 2021.
  • Medicaid. Provisions to increase coverage and access, including enhanced federal matching funds for states that newly expand Medicaid, a state option to extend the period of time to 12 months for which postpartum individuals are eligible for Medicaid/the Children’s Health Insurance Program (CHIP), and expanded coverage of vaccines and COVID-19 treatment. The bill also imposes new rebate obligations under the Medicaid Drug Rebate Program (MDRP) and abolishes the cap on Medicaid rebates.
  • Medicare. Requires the Centers for Medicare & Medicaid Services (CMS) to re-establish a rural floor for the Medicare hospital area wage index for hospitals in all-urban states.
  • COVID-19 Vaccine, Testing, and Tracing Funds. Funds for the Biden Administration to carry out its National Strategy for the COVID-19 Response and Pandemic Preparedness.
  • Provider Relief Funds. Adds $8.5 billion to the Provider Relief Fund, specifically for rural Medicare- and/or Medicaid- enrolled providers.
  • Nursing Facilities. Adds $700 million in fiscal relief funds—$500 million for state nursing strike teams and $200 million for infection control support.
  • State and Locality Relief Funding. $350 billion in fiscal relief funds—$230 billion for states, Tribal governments and territories, and $130 billion for counties, cities, and local governments.
  • Other Funds for Health Care Initiatives. Funding to support mental health and substance use disorder (SUD) programs, nursing facilities, and other public health initiatives such as community health centers, the Title X family planning program, and workforce initiatives.

Notably, Congressional Democrats are already in the early stages of developing a second reconciliation package that could include a wide range of additional health care priorities.

See below for additional information: