With a new year approaching, healthcare leaders are more alarmed than ever. The rollback of the premium tax credits under the Affordable Care Act (ACA) is no small potatoes and should be deeply alarming. The subsidies, initially extended by Congress in 2021, provided crucial financial assistance to millions of Americans, leading to a surge in enrollment in ACA health insurance plans. Not preserving these credits has created a fear of a coming “death spiral” in the healthcare market.
Over the last two years, new legislation supercharged the Affordable Care Act (ACA) by significantly increasing eligibility for health insurance subsidies. It further expanded subsidies for those already eligible to receive them. By doing so, enrollment skyrocketed. As the Centers for Medicare & Medicaid Services shared last week, 5.7 million people enrolled in ACA coverage through the HealthCare.gov and state-based marketplaces in this most recent open enrollment. Importantly, over 60 percent of these enrollees live in congressional districts represented by Republican members.
That hope is likely to be eclipsed in short order by gloomy forecasts. Gerard Anderson, a professor of health policy and management at Johns Hopkins University, recently warned that allowing subsidies to expire would be disastrous. If they do go away, only sicker people will be left in the program, putting its long-term viability at risk.
“The sicker people are the only ones that stay in the program until it becomes no longer sustainable and the insurance company stops even offering the plan,” – Gerard Anderson.
Emma Wager is a senior policy analyst for KFF’s ACA implementation program. She stresses that when premiums are through the roof, only the sickest will stay in their plans—healthy people will drop out. This would leave a more riskier insurance pool, making it more expensive for the people who stay behind.
“When you increase premiums dramatically, the healthy people drop out and therefore the pool is sicker,” – Emma Wager.
And then things went from bad to worse. Unfortunately, recent legislation —supported by an impressive bipartisan coalition —to extend and make these powerful credits permanent could not clear the Senate’s 60-vote hurdle. Given that these crucial subsidies expire this coming December 31st, the stakes are particularly high for individual enrollees. This would further exacerbate broader issues facing hospitals and healthcare providers.
To that end, health policy director at the Center for American Progress, Natasha Murphy, flagged an important caveat. The real effects of the subsidy expiration won’t be known until after open enrollment ends on January 15. She further suggested that this time will flush out who is really ready to pay more in premium.
“We will see actually who pays that first premium,” – Natasha Murphy.
Murphy underscored that this will be a make-or-break period for millions of families and individuals who depend on ACA coverage.
The ramifications extend beyond individual health outcomes. Wager pointed out that small and rural hospitals, which often operate on thin margins, will face significant challenges if subsidies disappear. These facilities will be forced to see an increasing burden of uninsured patients. Most of these people are unable to pay for care out of pocket.
“The expiration of subsidies would be particularly hard on small and rural hospitals that have very thin margins,” – Emma Wager.
As Politico explains, experts fear that insurance companies will be forced to raise prices dramatically should Congress fail to renew the current subsidies. Anderson pointed out that this increase would be widespread and hit all consumers, not just those losing coverage, very hard.
A new report from the Century Foundation uncovers a dark underbelly beneath that undeniable trend. If the subsidies are allowed to expire, rural residents may experience significantly higher premium increases than urban residents. This trend endangers the rising healthcare inequities just developing among various areas of the country.
“Farmers, ranchers … are heavily dependent on the ACA,” – Emma Wager.
As discussions continue around healthcare reforms, the looming expiration of ACA subsidies stands as a pivotal concern. Millions more would lose financial aids so essential to affording health insurance. Our stakeholders are urging Congress to act quickly with legislative solutions to protect these coverage options and help ensure a stable healthcare system.