The presidential election is around the corner, and crucial healthcare issues could be on the line.
But another, perhaps more niche healthcare policy may also get put on the chopping block: enhanced health insurance subsidies. These federal subsidies provide financial assistance to more than 21 million consumers who get their health plans through the Affordable Care Act (ACA) marketplace, a government-run site.
In July, Nashville-based HCA Healthcare and Franklin, Tennessee-based Community Health Systems (CHS) addressed the topic of subsidies during Q2 earnings calls, as analysts questioned how the health industry would be affected if they were discontinued.
Tim Hingtgen, CEO of CHS, said during the call that while it may depend on the political landscape, the health system is working “to make sure that everyone understands the importance of the affordability of the exchange business to make sure we continue with some of the gains we’ve experienced over the last several years.”
With the subsidies set to expire at the end of 2025, here’s what to know before the year ends.
What are enhanced health insurance subsidies?
In 2021, Congress passed the American Rescue Plan Act (ARPA), which provided two years of temporary subsidies in premium tax credits.
The idea was to offer $0 premium plans to more low- and middle-income people during the pandemic when both employment and healthcare were unstable. Under the expansions, households with incomes more than 4x the federal poverty line qualified, whereas previously, subsidies were limited to households with incomes between 100% and 400% of the federal poverty level, or up to about $125,000 for a family of four.
The following year, under the Inflation Reduction Act (IRA), the subsidies were extended until the end of 2025.
ACA marketplace enrollment currently stands around 21.4 million, according to health policy research firm KFF, compared to 11.4 million in 2019. In fact, KFF’s data shows that in 15 states, marketplace plan enrollment doubled from 2020 to 2024, with low-income enrollees making up most of the growth.
The rise in patient numbers ushered in a rise in participation from major health plan providers, according to Jenn Kerfoot, chief strategy and growth officer at Duos, a health tech company that works with aging patients.
“It’s created not only expansion and coverage for individuals getting care there that can’t afford employer coverage…but also for a lot of private companies that are serving those industries,” she said.
How have the subsidies affected healthcare? What would happen if they expire?
The Congressional Budget Office (CBO) estimated in July that if the subsidies were allowed to expire, enrollment would likely experience a bump up to 22.8 million people through 2025 and then drop to 18.9 million by 2026.
However, an extension would also come at a significant cost—the CBO projected in June a price tag of $335 billion to maintain the subsidies between 2025 and 2034.
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At the same time, the subsidies are saving people in the US a lot of money—about $700 or 44% a year on average, according to KFF. Rep. Steny Hoyer, a Democrat and chair of the regional leadership council, a House Democratic Caucus group that aims to strengthen the US economy and help implement legislation like the IRA, told Healthcare Brew that enrollees from Maryland’s 5th District, which he represents, will save $2,690 on average in premiums this year thanks to the subsidies.
Declining enrollment may also affect providers, Heather Meade, principal at regulatory group Washington Council Ernst & Young, told Healthcare Brew, since enhanced subsidies have been an “important source of coverage for hospitals, particularly in states that saw the largest sources of enrollment.”
“This will increase the population of uninsured individuals that they might be treating, which can be hard on hospital bottom lines,” she added.
It’s a balance, Kerfoot said, because while the subsidies are expensive, uninsured and underinsured patients cost the healthcare system, too. Between 2015 and 2017, hospitals reported an annual average of $42.4 billion in uncompensated care costs due to treating uninsured patients—fees that the government offsets through payments. Before the ACA was fully implemented, that number was around $62.8 billion, per KFF data.
Consumers postponing medical care today due to a lack of insurance may also cost the system much more in the future.
“You kick the can, and then when they age into Medicare, they’re going to be way more expensive to manage,” Kerfoot said. “The question is: Do we spend a little bit more money on subsidies now to save and protect the Medicare beneficiaries trust?”
Plus, the greatest enrollment gains, Meade said, were in Republican states that did not expand Medicaid. According to KFF, enrollment rose the most in Texas (212%), Mississippi (190%), Georgia (181%), Tennessee (177%), and South Carolina (167%) between 2020 and 2024.
What’s next?
As the subsidies are set to expire next year, Congress will have to decide if they should be extended, changed, or eliminated.
Vice President and Democratic nominee Kamala Harris has said that she would ask Congress to extend the tax credits, while Republican nominee and former President Donald Trump has not yet specifically outlined how he would address the issue.
No matter who’s elected this fall, Congress has the final say in whether the subsidies will be extended in the long term.
On September 25, congressional Democrats announced a plan to extend the subsidies, beginning what is expected to be a fight over healthcare spending.
“Congressional Republicans have indicated that they would, at a minimum, like to make some changes, if not eliminate the extended tax credits,” Meade said.