By KIM BELLARD
As you may have heard, the federal government is currently shut down, although for many federal workers – those deemed “essential” – that just means they keep on working but don’t get paid (and, in fact, some might never get paid). The cause is the now-standard failure of Congress to pass a budget. As it often does in these instances, the House did pass a continuing resolution (CR) to keep the government open (for seven weeks), and Senate Republicans are willing to go along, but Senate Democrats are balking. Even though they’re usually the ones who advocate “clean’ CRs, this time they’re holding out to include some other legislative fixes. Their key demand: continuing the expanded ACA premium tax credits.
I am a little puzzled why this is the hill upon which they’re willing to keep the government shut down.
Let’s back up. When ACA was passed in 2010, a crucial component was subsidies to help low- income people afford ACA coverage (along with subsidies for cost-sharing features like deductibles). Subsidies were, and are, crucial for the ACA marketplace to survive. These subsidies came in the form of premium tax credits.
If you recall the dismal individual health insurance marketplace pre-ACA, individuals couldn’t get coverage unless they passed medical underwriting, and, even then, preexisting conditions exclusions applied. As a result, few qualified and everyone complained. ACA did away with medical underwriting and pre-existing conditions exclusions, but the only way to ensure that enough healthy people would join the risk pool was to generously subsidize their coverage, much as employers do with employment-based health insurance. Thus the premium tax credits.
The trade-off worked for almost ten years. About ten million people got coverage through the exchanges. Then the pandemic hit. People needed coverage more than ever, yet many people’s incomes crashed. So in 2021 Congress passed “enhanced” premium tax credits as part of the American Rescue plan Act. They increased the amounts of the credits and made them available to some higher income families. Those expanded credits were extended to the end of 2025 as part of the Inflation Reduction Act.
It is those expanded premium tax credits that are expiring. The original credits would remain. Things would go back to the way they were pre-pandemic (although, of course, premiums are now higher due to inflation). It’d be more of a setback than a catastrophe.
The expanded tax credits did have a dramatic impact. Enrollment went from about ten million to over 24 million – 22 million of whom had the expanded credits. So it certainly is a non-trivial matter if they expire. KFF estimates that average premiums would double in 2026.
Still, though, CBO estimates loss of the expanded credits would result in about 3.8 million people losing coverage, which is a far cry from the 14 million whom gained coverage since they were implemented.
I’m not sure if the CBO is being overly optimistic, or if ACA has taught people to appreciate their coverage.
Everyone in Congress knew, or should have known, that these tax credits were expiring this year.
Congress could have ensured that they persisted longer when they extended them as part of IRA. Congress could have extended then as part of H.R.1 (the so-called Big, Beautiful Bill). But neither of those happened, so here we are.
House and Senate Republicans have indicated an openness to extending them, although not as a condition of ending the shutdown, but appear to be in no hurry. Speaker Mike Johnson sees only the December 31 ending date of the expanded credits and says: “We have effectively three months to negotiate. In the White House and in the halls of Congress, that’s like an eternity.”
That ignores, of course, that open enrollment starts November 1, and insurers are already preparing their materials, so something like whether an expanded tax credit would be available or not would seem like an important factor for anyone making such a decision.
This is not an issue that is primarily a Democratic one. Most people with ACA coverage live in Republican districts. Over three-quarters of Americans think the tax credits should be extended – including 59% of Republicans. Even 57% of self-identified MAGA supporters want them extended. MAGA stalwart Margorie Taylor Greene has been vocal about the need to extend them. So you’d have to think that, one way or another, they’re likely to get extended.
So why allow the government to be shut down over them?
There are plenty of other issues the Democrats could be striking over, such as Medicaid cuts. The cuts to Medicaid that HR1 made are estimated to cause more than twice as many people to lose Medicaid coverage as ACA coverage, not to mention the huge impacts on state Medicaid budgets due to loss of provider taxes. But reversing those Medicaid cuts cost way more than the ACA premium tax credits, would require Republicans to retreat from favorite policy positions like work requirements, and won’t, for the most part, impact people as soon as the premium tax credits. Plus, the work requirements may blow up on their own due to the administrative difficulties. The Democrats have mentioned reversing the Medicaid cuts as part of the negotiation, but don’t appear to have them as part of their red line.
Or the Democrats could insist that Congress regain its Constitutional duties about controlling federal spending or enacting tariffs, rather than abdicating those to the Administration, but finding enough Congressional Republicans who care more about the Constitution than risking Trump’s ire is probably a fool’s errand. So premium tax credits it is.
Look, I think the subsidies should be extended. Too many people now rely on them to take them away, especially with so little notice. Even more, I think they probably will be; there’s too much risk of blowback to swing Republican districts for the GOP to simply ignore the problem. But I think it’s more likely to Republicans can wait the Democrats out, betting on pealing off five more Democrat Senators to pass the CR. They can then deal with the tax credits late in the year, damage to the enrollment process be damned.
If anything, the furor over the subsidies highlights a central flaw with ACA: it focused on expanding coverage, not on reforming our health care system. As a result, costs continue to rise unabated, making subsidies all-the-more important. But that’s not a sustainable approach. At some point, we’re going to have to rationalize how much we pay for health care and what we should be paying for. But, alas, we’re nowhere near that point.
Kim is a former emarketing exec at a major Blues plan, editor of the late & lamented Tincture.io, and now regular THCB contributor
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