Julie Morringello, a self-employed artist from rural Maine, recently received alarming news: her health insurance premiums are set to nearly double in the coming year.
Currently, she pays $460 monthly for her Affordable Care Act (ACA) plan. However, this affordable rate depends on crucial government subsidies that the Republican-controlled Congress might not renew.
“I don’t know what we’re going to do,” expressed Morringello, 58. Her insurance covers both herself and her 14-year-old daughter. Discontinuing coverage isn’t an option for her due to a personal history of cancer requiring ongoing medical attention.
This alarming situation could soon be faced by millions of other Americans as open enrollment for health coverage begins in November. Most individuals currently enrolled in ACA plans benefit from expanded federal tax credits, initially boosted by President Joseph R. Biden Jr. and Congress in 2021.
These vital subsidies are slated to end by year-end, leading to a tense political impasse between Democratic and Republican lawmakers. Democratic leaders in both chambers of Congress insist on extending these credits as a condition for supporting an upcoming government spending bill, which needs to pass by the month’s end to avert a government shutdown.
Republicans, however, point to the substantial price tag of the subsidies—estimated at approximately $350 billion over a decade—and express concerns about potential fraudulent enrollments. They have been reluctant to include the subsidy extension in the current short-term spending legislation.
Despite this, many individual Republican lawmakers are open to some form of funding extension, recognizing that letting the subsidies lapse could negatively impact their constituents ahead of the midterm elections.
Should no agreement be reached, over 20 million Americans face significantly higher insurance premiums next year. The Senate’s failure to pass a spending bill last week further escalates the threat of a government shutdown due to this issue.
Drew Altman, CEO of the nonpartisan health research group KFF, warned that “the consequences are potentially pretty dire for the 24 million people in the marketplaces whose costs are going to skyrocket.”
KFF’s projections indicate that average premium contributions for Americans could surge by over 75 percent. If this additional funding is not extended, an estimated two million people are projected to lose their health coverage next year, a figure expected to rise over the next decade, according to Congressional Budget Office estimates.
These expanded credits currently benefit a wider range of individuals, covering a larger portion of premium costs than before the pandemic. Low-income individuals, for instance, often pay no premiums for plans with low deductibles. Notably, these additional subsidies also extended financial relief to higher earners, such as a family of four making over $160,000 annually, for the first time.
A reduction in these subsidies could trigger a domino effect across the entire health insurance market. Combined with other policy changes introduced by this Congress and the previous Trump administration, the total number of individuals enrolled in ACA plans could eventually drop by approximately half. States like Florida and Texas are anticipated to experience the most substantial declines, as indicated by an analysis from Wakely Consulting prior to the Republican’s recent tax and domestic policy legislation.
Health actuaries anticipate that individuals with ongoing medical conditions, like Ms. Morringello, will likely maintain their enrollment despite increased costs. Conversely, younger, healthier enrollees might be more inclined to discontinue their coverage.
Health insurers are observing the situation with caution. Most have already raised their rates, anticipating a reduction in healthy customers. A KFF analysis of company filings reveals that insurers are, on average, increasing premiums by about 4 percentage points to compensate for a projected sicker pool of enrollees next year. Rising medical costs are also contributing to these price hikes.
Furthermore, recent policy changes from the previous Trump administration might also deter younger, healthier individuals from signing up. Health officials endorsed less comprehensive and cheaper insurance options. Additionally, new rules have been introduced that complicate both the initial enrollment and annual renewal processes for Obamacare plans. Many of these changes are currently being challenged in court.
While a complete collapse of the Obamacare market isn’t anticipated, experts caution that beyond next year, some insurers may reconsider offering plans in certain regions, potentially reducing consumer choices. For instance, Aetna, a CVS Health subsidiary, opted to withdraw entirely from the Obamacare marketplaces in May, affecting roughly one million enrollees nationwide.
Jeanne Lambrew, director of health reform for the Century Foundation and a former state commissioner of Health and Human Services, commented, “I don’t think it will go away, but I think it will be a lot worse.”
Linda Greenfeld, a senior executive at L.A. Care Health Plan, which serves low-income residents in Los Angeles County, highlighted the potential “devastating effect” on their customers if the expanded subsidies are lost. She noted that over half of their enrollees currently pay no premiums, making health coverage “a reality for most people.” Even a modest $50 monthly premium could force some to choose between healthcare and essential needs like food.
Critics of the subsidies argue that the expanded tax credits are unfairly benefiting wealthier Americans who do not require such aid. Furthermore, some contend that plans offering zero-dollar premiums have encouraged fraudulent and duplicate enrollments. Certain House Republicans have characterized the push for permanent expanded credits as “massive taxpayer-funded handouts to the wealthy and large health insurance companies.”
Brian Blase, president of the influential conservative health policy group Paragon Health Institute, advocates for eliminating zero-dollar premiums to combat fraud.
“I would say the underlying Obamacare subsidies are themselves very generous,” Blase stated, adding that even without the expanded subsidies, the lowest-income Americans would still pay approximately $30 monthly for insurance.
However, despite their party’s historical opposition to Obamacare, some Republicans are showing increasing willingness to retain at least a portion of these tax credits. Significant coverage losses are anticipated primarily in Republican-led states such as Florida and Texas. Consequently, vulnerable Republican lawmakers are concerned about potential political fallout from constituents facing sudden premium hikes before the midterm elections. Ten Republican House members have already co-sponsored legislation for a temporary subsidy extension, and Senator Lisa Murkowski, an Alaska Republican, introduced her own bill last week. Several other Republican senators have also indicated interest in or openness to an extension.
Nevertheless, Republican leadership has, to date, refused to incorporate the subsidy extension into the government spending bill, despite Democratic demands.
In Alaska, where Obamacare insurance is notoriously costly without subsidies, higher-income residents would face substantial premium increases.
Natalie Kenley, 43, of Palmer, Alaska, whose husband owns a dental practice where she also works, anticipates her family’s monthly premium will surge from $1,600 to over $2,000 without the additional aid. Living with multiple sclerosis, Ms. Kenley requires continuous health coverage. “I’m really concerned about health care costs because they feel very unpredictable,” she stated.
The Affordable Care Act has evolved into a vital insurance lifeline for individuals lacking employer-sponsored health coverage. According to a recent KFF analysis, approximately half of current enrollees are either small business owners, employees of small businesses without coverage options, or self-employed.
Ms. Morringello’s husband is retired and covered by Medicare. She has already selected one of the most economical plans available, featuring a $7,500 deductible. Finding an additional $5,000 annually for premiums will be challenging; she is considering cutting expenses like her local gym membership.
“If I can’t pay it, I’ll have to use my savings,” she concluded.