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Subsidies that help 19 million people pay for their health insurance on the ACA marketplaces could expire.
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KFF found that the increased subsidies saved the average enrollee about $700 per year.
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The fate of the subsidies rests with the November elections.
Vice President Kamala Harris and former President Donald Trump have expressed conflicting views on how they would shape the economy if they come to power, but one policy has received little attention: the Affordable Care Act.
According to a report published July 26 by KFF, a nonprofit health care policy organization, a key part of the Affordable Care Act introduced during the pandemic is set to expire in 2025, and millions of Americans could see price increases in their health care premiums as a result.
When purchasing health care coverage through the ACA marketplace, people may 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 level – which is $60,240 for one individual and $124,800 for a family of four. In 2022, the Inflation Reduction Act extended these subsidies through 2025.
According to KFF, these increased subsidies or premium tax credits caused an increase in enrollment in the ACA market. Since 2021, enrollment in the ACA market has increased by approximately 79%, from approximately 12 million to 21.4 million.
Additionally, of the 21.4 million people enrolled in the ACA since 2021, 92% qualify for the premium tax credits, according to KFF.
When these increased subsidies expire next year, roughly 19 million Americans will see double- and triple-digit increases in their premium payments, Cynthia Cox, vice president at KFF, told Business Insider. KFF also found that the increased subsidies reduce 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 his annual premium payment for a benchmark silver plan — a standard, low-cost health care plan — increase from $160 with the enhanced premium tax benefits to $1,077 without the subsidies.
On September 25, Senator Jeanne Shaheen and Senator Tammy Baldwin introduced the Healthcare Affordability Act – a bill that would make permanent the increased subsidies provided by the Inflation Reduction Act. Rep. Lauren Underwood introduced an identical bill in the House of Representatives.
The bills would have to be passed by both the House of Representatives and the Senate and then signed by the president to go into effect. However, it is unclear when a decision on the tax credits will be made.
Federal subsidies drove enrollment in the ACA market
Cox said low-income individuals have driven the increase in ACA enrollment. Since 2020, the number of low-income people – with incomes up to 2.5 times the federal poverty level – has increased by 115% and enrolled in the ACA Marketplace.
“We have seen substantial growth in the number of people enrolled in ACA coverage since these subsidies became available,” Cox said.
Additionally, enrollment growth has been driven by Black and Latino people, which has reduced health insurance disparities, said Claire Heyison, senior policy analyst at the Center on Budget and Policy Priorities. According to CBPP, people of color made up the majority of enrollees in the ACA marketplace for the first time in 2023.
Cox said the increased subsidies will leave people earning just above the poverty line paying “almost nothing” for their monthly premiums. Before the increased subsidies went into effect, a participant earning just above the poverty line would have had to pay about 2% to 3% of their income for a benchmark silver plan, Cox said.
“That may not sound like much, but for someone making just above poverty, they don’t have a lot of discretionary income,” Cox says. “Then the question becomes what sacrifices they would make to pay for the coverage.”
When the increased subsidies expire, many of those low-income people will be priced out of coverage, Cox said. In addition, households with incomes just above 400% of the federal poverty level are no longer eligible for the premium tax credits.
Additionally, according to KFF, 52% of the increased subsidies from the Inflation Reduction Act are targeted at enrollees in the South. According to KFF, Florida has received 22% of the funding, while Texas has received 16% and Georgia and North Carolina each received 7%.
The election could shape the future of enhanced premium tax credits
The November election could determine the future of the increased subsidies.
If Trump wins, Cox said it is almost certain that the increased subsidies will expire.
If Harris wins and Democrats win the House and Senate, Cox said the increased subsidies will likely be extended.
Still, Cox said it’s important to recognize that Congress could end up with a divided House and Senate, meaning it would be difficult to pass a bill.
“There’s a pretty good chance that there will be a divided power in Washington, and then it remains to be seen what will happen with 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 high costs. The Congressional Budget Office estimates that premium tax credits will cost taxpayers $335 billion over the next decade.
Additionally, the Congressional Budget Office estimates that 3.8 million people could become uninsured if the increased subsidies expire, according to Reuters.
“That would be followed by subsequent years of more people dropping coverage,” Cox said.
Cox said many Americans don’t understand what’s at stake for health care in the 2024 election. She said that’s largely due to how complicated health care policy can seem.
“People may not fully realize how integral these enhanced subsidies now are,” Cox said. “If they were to disappear, the original Affordable Care Act subsidies would still be in effect, but these increased subsidies had such a huge impact on the ACA marketplaces that I think if they were to expire it would be the largest premium increase payments this market has ever seen.”
Are you enrolled in the Affordable Care Act marketplace? Are you eligible for increased premium tax credits? Please contact jtowfighi@businessinsider.com.
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