Congress has returned to Washington, D.C. from its Thanksgiving break, but has yet to resolve the debate on whether or how to extend enhanced premium tax credits (ePTCs) scheduled to expire on December 31. These enhanced subsidies make coverage more affordable for millions of Americans who buy plans in the Affordable Care Act (ACA) Marketplaces. The clock is ticking. Most people must enroll by December 15 for coverage that starts on January 1.
Consumers facing sticker shock are making hard choices. Anecdotal evidence suggests some are buying plans with high deductibles, but lower premiums, while others are foregoing coverage or waiting to enroll, hoping Congress acts to extend ePTCs.
It is unclear what, if any, solution Congress will embrace. There are some concrete proposals that would prevent Marketplace premiums from skyrocketing, and there are competing concepts, which are generally vague and undefined, that fail to head off the imminent spike in premiums. With few work days left on Congress’s calendar this year, this post reviews the evolving debate in Congress and how different approaches would or would not solve the impending affordability crisis for Marketplace consumers.
Proposals to extend ePTCs
Democrats and some moderate Republicans in Congress are calling for an extension of ePTCs. As part of the deal to end the government shutdown in November, Senate Majority Leader John Thune promised that the Senate would vote on a proposal from Democrats to extend ePTCs in mid-December. Senate Democrats have coalesced around a proposal to extend ePTCs by three years, which would need to receive 60 votes to pass in the Senate.
There is also some support in the House for extending ePTCs, though not among the GOP leadership. House Democrats have filed a “discharge petition” – a maneuver to try to force a House vote – that would extend ePTCs by three years, but six House Republicans would have to cross the aisle to support the petition before a vote could take place.
Several moderate House Republicans have called for an ePTC extension, in some cases, with some changes to how they are structured. Specific proposals with bipartisan backing include at least three bills, the Bipartisan Premium Tax Credit Extension Act, the Fit It Act, and the Bipartisan HOPE Act, which would extend ePTC by one or two years. In addition, a bipartisan group of House members has also endorsed the CommonGround 2025 framework that would extend ePTCs for one year and calls on Congress to consider other proposals to restructure enhanced subsidies the following year.
Just before Thanksgiving, President Trump was expected to roll out a framework that would extend ePTCs by two years, while making several other changes (see below), but scrapped the proposal before it was released amid Republican backlash.
Vague concepts related to funding tax-advantaged accounts
Republicans have called for repealing and replacing Obamacare since it passed 15 years ago, but have struggled to coalesce around a plan to do so. They have again floated several old ideas that do not solve the impending premium spike as part of the ePTC discussion, such as selling plans across state lines or boosting association health plans. The concept that has been mentioned the most, though, is replacing some or all of the financial help that lowers monthly premiums with a fixed contribution, generally to a tax-advantaged account for consumers.
Unlike the concrete ePTC extension proposals, the ideas around accounts are vague. They generally lack details, and have been floated via social media or statement. President Trump, for example, suggested on social media that funding for ACA subsidies should go “directly to the people so that they can purchase their own, much better heathcare.” (Note that ACA subsidies help pay the premium of the plan chosen by a consumer, and consumers elect whether to get the subsidy directly at tax time, or have it sent to their insurer instead to lower their premiums each month.)
Senator Bill Cassidy has outlined, in broad strokes, replacing ePTCs with a contribution to a health savings account (HSA) for Marketplace enrollees in high-deductible bronze plans. HSAs are tax-advantaged accounts that can be used to pay for medical expenses for people in high-deductible plans, but cannot be used to pay for premiums. Bronze plans have deductibles that average $7,500/year. The framework that President Trump scrapped reportedly contained a similar idea, among others. Senator Rick Scott has filed a bill that does not extend ePTCs and allows states to replace original ACA tax credits with a contribution to a new type of account that is similar to an HSA. Provisions in that bill could destabilize the ACA Marketplace and undermine coverage for people with pre-existing conditions.
Senate Republicans are reportedly trying to identify a counterproposal in time for the mid-December Senate vote, but Republicans have not yet landed on a plan. Whether the Senate will consider a Republican alternative l to the Democrats’ three-year extension of ePTCs before ePTCs expire, and what policies it would contain, remains up in the air.
Implications for consumers
ePTCs
If ePTCs are not extended, 20 million Marketplace enrollees will see their premiums more than double on average, but premium changes will vary widely, depending on an individual’s age, plan, and other factors. For example:
- A family of four earning $50,000 per year living in Nashua, New Hampshire will see their premiums jump from $9 to $186 per month, an almost 2000% increase; and
- Two retirees in their early 60s, living in Kaukauna, Wisconsin on an income of $85,000 per year will see their premiums jump from $602 to $2,144 per month, or 250%.
As premiums become less affordable, an estimated 4 million people would lose coverage. Others may buy plans with cheaper premiums that leave them exposed to much higher deductibles and other out-of-pocket costs.
HSAs or similar accounts
HSAs disproportionately benefit people who are wealthy and healthy. Well-off individuals both get additional benefits from HSA’s generous tax breaks and are more likely to have money to contribute to their HSA. HSAs must be paired with high deductible health plans, which are a better deal for healthy people who use less care, while they can expose people with serious or chronic conditions to substantial out-of-pocket costs. A recent report by the Government Accountability Office reiterated that wealthier and healthier people are more likely to have HSAs and cataloged hidden and/or recurring “junk fees” often charged by HSAs.
Expanding HSAs will not head off the spike in Marketplace premiums caused by the expiration of ePTCs. Because HSAs cannot be used to help pay for premiums, any proposal that swaps some or all of the existing premium assistance for an HSA contribution may make premiums even less affordable. In addition, under proposals that encourage people to enroll in skimpier coverage, an HSA contribution may prove insufficient to help people with high deductibles get needed care and avoid medical debt. Today, the lowest-income Marketplace enrollees qualify for silver-tier plans with deductibles that average $80. Under a proposal that ties an HSA contribution to a bronze-tier plan, that same low-income person would face a $7,500 deductible on average, with far more exposure to medical debt once they’ve exhausted their HSA contribution.
What’s next?
Proposals to extend or replace ePTCs—and support for such proposals—will likely continue to evolve as Congress scrambles to wrap up its work for 2025, and possibly even into next year. To date, no ePTC compromise has emerged that appears to have garnered enough support to pass both the House and Senate, though it is still not too late for Congress to act, particularly on proposals like a “clean” ePTC extension that could be implemented quickly. Meanwhile, consumers are left in the lurch, facing both soaring premiums and a rapidly approaching December 15 deadline to enroll in coverage for January.
