By KIM BELLARD
As you may have heard, the federal government is currently closed, although for many federal workers – those considered “essential” – that just means they continue to work but are not paid (and, in fact, Some may never get paid). The cause is the now habitual failure of Congress to approve a budget. As is often the case, the House passed a continuing resolution (CR) to keep the government open (for seven weeks), and Senate Republicans are willing to accept it, but Senate Democrats are resisting. Although they are normally the ones defending “clean” CRs, this time they resist including other legislative fixes: their key demand: continuing the expanded ACA premium tax credits.
I’m a little baffled why this is the hill on which they are willing to keep the government shut down.
Let’s go back. When the ACA passed in 2010, a crucial component was subsidies to help low-income people pay for ACA coverage (along with subsidies for cost-sharing features like deductibles). Subsidies were, and are, crucial for the ACA market to survive. These subsidies came in the form of premium tax credits.
If you remember the bleak individual health insurance market before the ACA, people couldn’t get coverage unless they passed a medical underwriting, and even then, pre-existing condition exclusions applied. As a result, few qualified and everyone complained. The ACA eliminated medical underwriting and exclusions for preexisting conditions, but the only way to ensure that enough healthy people joined the risk pool was to generously subsidize their coverage, much like employers do with employment-based health insurance. Hence the premium tax credits.
The offset operated for almost ten years. About ten million people obtained coverage through the exchanges. Then the pandemic arrived. People needed coverage more than ever, but many people’s incomes plummeted. So in 2021, Congress approved “enhanced” premium tax credits as part of the American Rescue Plan Act. They increased the amounts of the loans and made them available to some higher-income families. Those expanded credits were extended until the end of 2025 as part of the Inflation Reduction Law.
It’s those expanded premium tax credits that are expiring. The original credits would remain. Things would go back to the way they were before the pandemic (although, of course, premiums are now higher due to inflation). It would be more of a setback than a catastrophe.
The expanded tax credits had a dramatic impact. Registration went from about ten million to about 24 million – 22 million of which had extended credits. Therefore, whether they expire is certainly not a trivial matter. KFF estimates that average premiums would double in 2026.
However, the CBO estimates that the loss of the expanded credits would result in about 3.8 million people losing coverage, which is a far cry from the 14 million who gained coverage since they were implemented.
I’m not sure if the CBO is being overly optimistic or if the ACA has taught people to appreciate their coverage.
Everyone in Congress knew, or should have known, that these tax credits would expire this year.
Congress could have ensured they persisted longer when it extended them as part of the IRA. Congress could have extended it as part of HR1 (the so-called Big and Beautiful Bill). But none of that happened, so here we are.
Republicans in the House and Senate have expressed a willingness to extend them, although not as a condition of ending the shutdown, but they do not appear to be in a rush. Spokesman Mike Johnson only sees the December 31 end date for the expanded credits and says: “We effectively have 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 begins Nov. 1 and that insurers are already preparing their materials, so something like whether or not an expanded tax credit would be available would seem like an important factor for anyone making that decision.
This is not an issue that is primarily Democratic. Most people with ACA coverage live in Republican districts. About three quarters of Americans think tax credits should be expanded (including 59% of Republicans). Even 57% of self-identified MAGA supporters want them to spread. MAGA stalwart Margorie Taylor Greene has been vocal about the need to expand them. So one would have to think that, in one way or another, they are likely to spread.
So why allow the government to shut down because of them?
There are many other issues that Democrats could strike over, such as cuts to Medicaid. HR1’s cuts to Medicaid are estimated causing more than twice as many people to lose Medicaid coverage as ACA coverage, not to mention huge impacts on state Medicaid budgets due to lost provider taxes. But reversing those Medicaid cuts costs much more than the ACA’s premium tax credits, would require Republicans to retreat from favored policy positions like job requirementsand, for the most part, it won’t hit people as quickly as premium tax credits. Additionally, job requirements can explode on their own due to the administrative difficulties. Democrats have mentioned reversing the Medicaid cuts as part of the negotiation, but do not appear to have them as part of their red line.
Or Democrats could insist that Congress take back its constitutional duties of controlling federal spending or enacting tariffs, rather than abdicating them to the Administration, but finding enough Republican members of Congress who care more about the Constitution than risking Trump’s wrath is probably a fool’s errand. So are premium tax credits.
Look, I think subsidies should be expanded. Too many people now rely on them to take them off, especially on such short notice. Even more, I think they probably will be; There is too much risk of Republican districts being hit by a rollback for the GOP to simply ignore the problem. But I think it’s more likely that Republicans can wait for Democrats to drop out, betting on eliminating five more Democratic senators to pass the CR. They will then be able to deal with the tax credits at the end of the year, regardless of the damage to the enrollment process.
If anything, the furor over subsidies highlights a central flaw of the ACA: It focused on expanding coverage, not reforming our health care system. As a result, costs continue to rise unabated, making subsidies even more important. But that is not a sustainable approach. At some point, we will have to rationalize how much we pay for health care and how much we should pay. But unfortunately, we are nowhere near that point.
Kim is a former e-marketing executive at a major Blues scheme, publisher of the late and lamented Tincture.ioand now a regular THCB contributor
