Extra subsidies that made Affordable Care Act plans more affordable for millions of Americans for the past five years are all but guaranteed to vanish on New Year’s Day.
In January, most people who buy plans on HealthCare.gov or a state-run marketplace will see a rise in their monthly premium, ranging from a modest bump to hundreds or even thousands of dollars.
Congress has been locked in a fierce fight over extending the expiring subsidies, resulting in the longest government shutdown in history, which ended without a deal. The door for Congress to extend the assistance had been open by just a smidgen. But House Speaker Mike Johnson (R-Louisiana) slammed it shut Tuesday, announcing he would not hold a vote on health care legislation before lawmakers leave town for the holiday break. A group of moderate Republicans joined Democrats to force a vote on a three-year extension, but it’s unlikely to happen before January and the Senate already rejected that proposal.
The extra subsidies, provided during the coronavirus pandemic, were never supposed to be permanent. The original, more modest subsidies provided under the ACA remain available on the marketplaces, where 24 million Americans, most of them without workplace coverage, bought plans this year.
ACA enrollees are being squeezed from two directions. In addition to losing some subsidies, their average monthly premiums are rising steeply by an estimated 26 percent, according to KFF, a nonpartisan health policy organization.
The resulting surge in costs, echoing similar hikes in employer-sponsored plans, has prompted widespread agitation among health insurers and consumer advocates who worry that people, especially healthy ones, will drop coverage because of sticker shock. Insurers say that prospect, along with higher drug and hospital costs, is contributing to the steep premium hikes.
“There is no mechanism to cushion the impact on those people who are in this market and, through no fault of their own, are going to see very significant disruptions to their coverage and soaring premiums,” Mike Tuffin, the chief executive of AHIP, a trade group representing health insurers, said at a recent affordability forum.
The Congressional Budget Office estimated 4.2 million more people will be uninsured by 2034 without the extra subsidies. More than half of respondents to a KFF poll of marketplace enrollees said they would be somewhat or very likely to go without health insurance if their monthly premium payments doubled.
Here’s how the expiration of the extra subsidies could affect you.
If you earn between $16,000 and $23,000 …
… you could go from your premiums being fully covered to paying a modest sum each month.
This group — representing 44 percent of marketplace customers in 2024 — earns roughly 100 to 150 percent of the federal poverty level for an individual. Their plans were already heavily subsidized under the ACA’s original structure. The enhanced subsidies allowed most to get plans without paying for premiums.
Starting next year, people in this income tier will again have to share in the cost of their premiums. Katherine Hempstead, a senior policy adviser at the nonpartisan Robert Wood Johnson Foundation, said this group is seeing a smaller change in nominal costs than other earners.
For example, a 40-year-old nonsmoker earning $17,000 will have to pay $30 a month for a midrange “silver” plan next year, according to KFF’s subsidy calculator. That same person earning $22,000 will have to pay $66 per month. The numbers may seem small, but they can be significant to people living paycheck to paycheck.
If you earn between $23,000 and $63,000 …
… your premium payment may go up by tens or hundreds of dollars.
This group earns between 150 percent and 400 percent of the federal poverty level and also represents 44 percent of marketplace customers. They were already contributing to their monthly premiums, but now their contributions will be heftier.
Say that 40-year-old nonsmoker earns $30,000. They’ll go from a $42 premium payment for a silver plan in 2025 to a $155 payment in 2026, according to the KFF calculator.
If they earned $60,000, their monthly contribution will increase from $404 to $498.
If you earn more than $63,000 …
… you are no longer eligible for any premium subsidies.
People earning more than 400 percent of the federal poverty level will have to cover the full cost of their premium without the enhanced subsidies. This has long been known as the “subsidy cliff,” where assistance is suddenly cut off.
This group represents only about seven percent of marketplace enrollees. But they have the most to lose from the subsidies expiring. About 60 percent of the enhanced subsidies would go to taxpayers earning more than $60,000, according to an analysis by the Joint Committee on Taxation and the CBO, which are nonpartisan financial analysts.
They will be fully exposed to steep premium hikes next year. If that 40-year-old earns $64,000, they will have to pay the full $625 premium for a silver plan, up from $453 this year. The hikes are even steeper for older people, who can be charged more by insurers under the law. A 60-year-old with that same profile will pay $1,326 a month for a silver plan, up from $453.
If you own or work for a small business …
… you are more likely to be affected by all this.
About 10 million adults covered under the ACA marketplaces are small-business owners, their employees or the self-employed, according to KFF. They are unable to afford the same health coverage that big companies offer, and they often depend on the marketplaces for insurance.
In surveys by the National Federation of Independent Business, small-business owners have ranked the cost of health insurance as their biggest problem. Millions of them rely on various health insurance subsidies from the government.
“Small businesses have smaller margins, less cash and less access to capital. They have struggled to provide health coverage,” said John Arensmeyer, the founder and chief executive of Small Business Majority, a group that advocates for small businesses. “For them, the ACA has been a tremendous benefit.”
If you live in a politically red state …
… more people around you could be affected.
More than half of marketplace enrollees live in Republican-held congressional districts, according to a KFF report. The highest concentrations are in red states: Florida, Georgia, Mississippi, South Carolina, Texas and Utah.
Politically red states are also less likely to have expanded Medicaid for adults with low incomes, meaning more of their residents rely on the marketplaces for coverage. Medicaid expansion covers people up to 138 percent of the federal poverty level, but in the 10 states that didn’t expand it, people in that income bracket can shop on the marketplaces instead.
That reality didn’t compel Republicans in Congress to help Democrats extend the extra subsidies. They complain the subsidies are too expensive for the federal government and don’t solve the underlying problem of spiking premiums. Meanwhile, Democrats are gearing up to attack Republicans over the issue in next year’s midterm elections.
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