At the heart of the fight over the US government shutdown is the fate of health insurance for millions of Americans who might soon face an impossible choice: accept a significant increase in their premiums or take a gamble and forgo coverage.
About 4.2 million people are expected to lose coverage if the US Congress fails to extend premium subsidies for Affordable Care Act (ACA) plans, the US Congressional Budget Office (CBO) said.
A separate analysis by KFF found that without the subsidies, which are set to expire at the end of the year, average annual premiums would more than double — from US$888 this year to US$1,904 next year.
Illustration: Kevin Sheu
Democrats want the subsidies extended permanently, while Republicans are ready to let them lapse. Democrats also want to restore the Medicaid funding cut from the One Big Beautiful Bill Act.
It is a political battle that has real consequences for millions of Americans, many of whom own or work for small businesses, or have scrimped and saved to retire early.
“These are your friends, neighbors and colleagues who are going to lose insurance and their health is going to suffer as a result,” University of Pennsylvania Leonard Davis Institute of Health Economics executive director Rachel Werner said.
In the complex US healthcare system, the public has long struggled to understand how policy changes might affect them. The topic of ACA subsidies is particularly complicated.
One issue is that the expiration of the additional tax credits, which more than 90 percent of current enrollees qualify for, would not affect everyone equally. Some would see steep rate hikes as they lose subsidies altogether, while others would continue to receive some help, albeit less of it. (T be clear, even a modest cost increase could have a significant impact on many households.) Meanwhile, insurance companies are responding to the uncertainty by implementing their own price hikes, adding to consumers’ overall costs.
The impact of this seemingly technical policy change would be huge. After the administration of former US president Joe Biden sweetened the tax credits to make insurance more affordable for a broader swath of the population, the number of people buying plans through the marketplace more than doubled. At the same time, the number of uninsured Americans dropped to an all-time low.
Who is most at risk of losing coverage? Self-employed Americans, small business owners or those working for small businesses with fewer than 25 employees account for 48 percent of adults insured by an ACA plan, a KFF analysis found. That could disproportionately affect people living in rural areas, where small businesses account for a large proportion of jobs.
The other major group that would take a hit is people who retire early. Those 50 to 64-year-olds once found themselves in an expensive healthcare limbo between their previous employer-sponsored coverage and Medicare eligibility. However, enhanced subsidies made marketplace plans much more affordable by capping their contribution at 8.5 percent of their income. Now, that group represents just more than half of ACA enrollees who make more than four times the federal poverty level.
Without the extra credits, those people would not receive any assistance paying for their insurance. After years of careful planning, their healthcare costs would skyrocket.
A 60-year-old couple living on US$85,000 (just higher than the threshold that would qualify them for subsidy eligibility) could see their monthly premium jump from about US$600 to more than US$2,100 — or nearly a third of their household income, the KFF said.
Healthcare providers would feel the squeeze, too. Last week, the Robert Wood Johnson Foundation and the Urban Institute estimated that the expiration of the enhanced tax credits would result in US$32.1 billion in lost revenue for hospitals, doctors and other healthcare providers.
The most significant drop in healthcare spending would occur in the south, where a cluster of states still have not adopted Medicaid expansion, which allows anyone with a household income below 138 percent of the federal poverty level to qualify for public insurance. The subsidies allowed people living just above the poverty line in those 10 non-expansion states to obtain a silver ACA plan at no cost. That significantly reduced the number of uninsured people in those states, where more than 6.2 million people in that income range signed up for marketplace plans this year.
The end of subsidies would hit people living in those red states hard — and lead to the biggest declines in healthcare spending, an analysis by the Robert Wood Johnson Foundation and the Urban Institute showed. Spending would fall nearly 5 percent in Florida, Georgia and Texas.
Meanwhile, people who maintain their coverage could find that they have fewer options available come next month. Some insurers are opting out of the marketplace next year, saying that the lack of extra subsidies would cause healthier people to drop coverage altogether, which would leave them with a sicker — and more expensive — pool of patients.
Of course, the subsidies are not free.
The CBO estimates that maintaining the credits would cost about US$350 billion over the next decade. And because the enhanced subsidies are relatively new, it is too early to quantify their benefits — for example, how access to preventive care might alleviate the burden of chronic conditions or reduce longer-term healthcare costs.
Still, health policy experts point to robust data on the health, financial and economic impact of other significant efforts to improve insurance coverage — such as Medicaid expansion — as an encouraging sign.
Werner and her colleagues in June offered a more compelling reason to extend the subsidies: Ending them would not only lead to an estimated 5 million people losing insurance, but also result in an additional 8,811 deaths.
It was an important reminder of the high stakes in scrapping a policy that has been working so well for so many Americans.
Lisa Jarvis is a Bloomberg Opinion columnist covering biotech, healthcare and the pharmaceutical industry. Previously, she was executive editor of Chemical & Engineering News.
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