- Subsidies that help 19 million people pay for health insurance in ACA marketplaces could expire.
- KFF found that the enhanced subsidies saved the average enrollee roughly $700 annually.
- The fate of the subsidies rests in the November election.
Vice President Kamala Harris and former President Donald Trump have offered conflicting visions for how they'd shape the economy if they won office, but one policy has received little attention: the Affordable Care Act.
According to a report published on July 26 by KFF, a nonprofit health policy group, a key component of the Affordable Care Act introduced during the pandemic is set to expire in 2025, and millions of Americans could see price hikes in their healthcare premium payments as a result.
When buying healthcare coverage through the ACA marketplace, people can qualify for premium tax credits, which aim to make health insurance payments more affordable. In 2021, the American Rescue Plan Act introduced subsidies that expanded eligibility for premium tax credits to enrollees with incomes 400% above the federal poverty line — which is $60,240 for one individual and $124,800 for a family of four. In 2022, the Inflation Reduction Act extended those subsidies through 2025.
According to KFF, these enhanced subsidies or premium tax credits caused a surge in enrollment in the ACA marketplace. Since 2021, enrollment in the ACA marketplace has increased roughly 79%, to 21.4 million from about 12 million.
Additionally, of the 21.4 million enrolled in the ACA marketplace since 2021, 92% qualify for the premium tax credits, according to KFF.
If those enhanced subsidies expire next year, roughly 19 million Americans will face double-digit or triple-digit increases in their premium payments, Cynthia Cox, a vice president at KFF, told Business Insider. KFF also found that the enhanced subsidies cut consumers' costs by about 44%, saving the average enrollee $700 annually if they remain intact.
For example, KFF found that a 45-year-old earning $25,000 annually could see their annual premium payment for a benchmark silver plan — which is a standard low-cost healthcare plan — increase from $160 with the enhanced premium tax credits to $1,077 without the subsidies.
On September 25, Sen. Jeanne Shaheen and Sen. Tammy Baldwin introduced the Healthcare Affordability Act — a bill that would make permanent the enhanced subsidies extended by the Inflation Reduction Act. Rep. Lauren Underwood introduced an identical bill in the House.
The bills would have to pass both the House and Senate and then be signed into law by the president to come into effect. However, it's unclear when a decision on the tax credits will be reached.
Federal subsidies drove enrollment in the ACA marketplace
Cox said that low-income individuals have driven the ACA enrollment surge. Since 2020, there has been a 115% increase in low-income individuals — with incomes up to 2.5 times the federal poverty line — enrolled in the ACA Marketplace.
"We've seen really substantial growth in the number of people signing up for ACA coverage since these subsidies became available," Cox said.
Additionally, enrollment has been driven by Black and Latino people, helping decrease disparities in health insurance, according to Claire Heyison, a senior policy analyst at the Center on Budget and Policy Priorities. According to CBPP, people of color made up the majority of ACA marketplace enrollees in 2023 for the first time.
Cox said that the enhanced subsidies make it so people earning just above the poverty level pay "next to nothing" for their monthly premium. Before the enhanced subsidies were enacted, an enrollee earning just above the poverty level would have to pay about 2% to 3% of their income for a benchmark silver plan, Cox said.
"That might not sound like a lot, but for someone who's making just above poverty, they really don't have a lot of discretionary income to spend," Cox said. "Then it becomes a question of what sacrifices would they make to be able to afford the coverage."
If the enhanced subsidies expire, many of those low-income enrollees will be priced out of coverage, Cox said. What's more, households with incomes just above 400% of the federal poverty line will become ineligible for the premium tax credits.
Additionally, 52% of enhanced subsidies from the Inflation Reduction Act have been directed toward enrollees in the South, according to KFF. Florida has received 22% of funding, while Texas has received 16%, and Georgia and North Carolina 7%, each, according to KFF.
The election could shape the future of enhanced premium tax credits
The November election could determine the future of the enhanced subsidies.
If Trump wins, Cox said it's all but sure the enhanced subsidies will expire.
If Harris wins and Democrats win the House and Senate, Cox said the enhanced subsidies will likely be extended.
Yet, Cox said it's important to recognize that Congress might end up with a split House and Senate, meaning it'd be difficult to pass a bill.
"There's a pretty significant chance that there's going to be a divided power in Washington, and then it's really anyone's guess what happens to these subsidies, but it would probably be an uphill battle to renew them," Cox said.
Republican lawmakers who want the subsidies to expire cite the extensive cost. The Congressional Budget Office estimates that the premium tax credits will cost taxpayers $335 billion over the next 10 years.
Additionally, the Congressional Budget Office estimates that 3.8 million people could become uninsured if the enhanced subsidies expire, according to Reuters.
"That would be followed by subsequent years of more people dropping coverage," Cox said.
Cox said many Americans aren't grasping what's at stake for healthcare in the 2024 election. She said that's largely due to how complicated healthcare policy can seem.
"People may not fully appreciate how integral these enhanced subsidies are now," Cox said. "If they went away, the original Affordable Care Act subsidies would still be in place, but these enhanced subsidies had such a tremendous impact on the ACA marketplaces that I think if they're allowed to expire, these would be the biggest increases in premium payments that this market has ever seen."
Are you enrolled in the Affordable Care Act marketplace? Do you qualify for enhanced premium tax credits Please reach out at [email protected].