Millions of Americans could lose health insurance subsidies

• Subsidies that help 19 million people pay for health insurance on ACA marketplaces could expire.
• KFF found that the improved subsidies saved the average participant about $700 annually.
• The fate of the subsidies depends on the November elections.

Vice President Kamala Harris and former President Donald Trump have expressed conflicting ideas about how they would shape the economy if they won office, but one policy has received little attention: the Affordable Care Act.

According to a report released July 26 by KFF, a nonprofit health policy group, a key component of the Affordable Care Act put in place during the pandemic is set to expire in 2025, and millions of Americans could see price increases in their health premium payments as a result.

When purchasing health insurance through the ACA Marketplace, people can qualify for premium tax credits aimed at making health insurance payments more affordable. In 2021, the American Rescue Plan Act introduced subsidies that expanded eligibility for premium tax credits to participants with incomes 400% above the federal poverty level—that's $60,240 for a single person and $124,800 for a four-member family Family. In 2022, the Inflation Reduction Act extended these subsidies through 2025.

According to KFF, these are increased subsidies or premium tax credits caused a surge in enrollment in the ACA marketplace. Since 2021, the number of enrollees in the ACA Marketplace has increased approximately 79%, from approximately 12 million to 21.4 million.

Additionally, of the 21.4 million enrolled in the ACA marketplace as of 2021, 92% are eligible for premium tax credits, according to KFF.

When these increased subsidies expire next year, About 19 million Americans will face double-digit or triple-digit increases in their premium payments, Cynthia Cox, vice president at KFF, told Business Insider. KFF also found that the expanded subsidies reduced costs for consumers by about 44% and saved the average participant $700 annually if left intact.

For example, KFF found that a 45-year-old making $25,000 a year saw his annual premium payment for a benchmark silver plan – a standard, low-cost health insurance plan – go from $160 with the expanded premium tax credits to $1,077 without The increased premium tax credits could increase subsidies.

On September 25, Senator Jeanne Shaheen and Senator Tammy Baldwin introduced the Healthcare Affordability Act – a bill that would make the increased subsidies extended by the Inflation Reduction Act permanent. Representative Lauren Underwood introduced an identical bill in the House of Representatives.

To become law, the bills would have to pass both the House and Senate and then be signed by the president. However, it is unclear when a decision on the tax credits will be made.

Federal grants boosted enrollment in the ACA marketplace

Cox said low-income people drove the increase in ACA enrollment. Since 2020, the number of low-income people enrolled in the ACA Marketplace – those with incomes up to 2.5 times the federal poverty level – has increased by 115%.

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“Since these subsidies became available, the number of people signing up for ACA insurance has really increased significantly,” Cox said.

Enrollment was also driven by blacks and Latinos, helping to narrow disparities in health insurance, according to Claire Heyison, a senior policy analyst at the Center on Budget and Policy Priorities. According to CBPP, in 2023, people of color made up the majority of ACA market participants for the first time.

Cox said the improved subsidies ensure that people earning just above the poverty line pay “virtually nothing” for their monthly premium. Before the expanded subsidies took effect, a participant earning just above the poverty line would have to pay about 2% to 3% of their income for a benchmark silver plan, Cox said.

“That might not sound like much, but for someone making just above the poverty line, they really don't have a lot of discretionary income to spend,” Cox said. “Then the question becomes what sacrifices they would make to be able to afford the coverage.”

When the expanded subsidies expire, many of these low-income enrollees will be excluded from coverage, Cox said. Additionally, households with incomes just above 400% of the federal poverty level are not eligible for premium tax credits.

Additionally, according to KFF, 52% of the increased subsidies from the Inflation Reduction Act were directed to students in the South. According to KFF, Florida received 22% of the funding, Texas received 16% and Georgia and North Carolina each received 7%.

The election could affect the future of the enhanced premium tax credits

The November election could decide the future of increased subsidies.

If Trump wins, Cox said, it is all but certain that the increased subsidies would expire.

If Harris wins and Democrats win the House and Senate, the increased subsidies will likely be extended, Cox said.

Still, Cox said it was 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's going to be a power-sharing situation 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 point to the high costs. Congressional Budget Office estimates that premium tax credits will cost taxpayers $335 billion over the next 10 years.

Additionally, according to Reuters, the Congressional Budget Office estimates that 3.8 million people could lose their insurance coverage if the increased subsidies expire.

“Then in the following years more and more people would give up their insurance coverage,” said Cox.

Cox said many Americans don't understand what's at stake for health care in the 2024 election. She said that's largely because of how complicated health policy can seem.

“People may not fully understand how important these increased subsidies are now,” Cox said. “If they were eliminated, the original Affordable Care Act subsidies would still be in effect, but these expanded subsidies have had such a huge impact on the ACA marketplaces that I think these would be the largest premium increases if they were allowed to expire.” Payments this market has ever seen.”

Are you enrolled in the Affordable Care Act Marketplace? Are you eligible for expanded premium tax credits? Please contact us at [email protected].