There’s a major “cliff” ahead in health care policy that isn’t getting much attention, but it could drop a major financial hit on middle-class people who buy insurance through the Affordable Care Act.
According to health care data analyst Charles Gaba, tens of thousands of Arkansans would see massive premium increases if Congress fails to extend the enhanced subsidies that make the ACA’s health care plans more affordable. Those subsidies are set to expire at the end of 2025. Depending on who’s in the White House and in control of Congress next year, that could be trouble; Republicans seem happy to let them die.
The graph above shows five hypothetical family situations in Arkansas and how much premiums would skyrocket for them without the enhanced subsidies. It’s grim stuff.
So what are these enhanced subsidies, and how did we arrive at this cliff?
First, the history: In addition to Medicaid expansion, which covers Arkansans who make less than 138% of the federal poverty level (that’s a little less than $21,000 for an individual or around $31,000 for a family of four), the ACA also established regulated insurance marketplaces known as exchanges. These exchanges offered subsidies to help lower the costs of the policies on the exchange for people who make too much to be eligible for Medicaid but less than 400% of the federal poverty level (that’s around $60,000 for an individual or nearly $125,000 for a family of four). The exchanges are only for people who did not already get sufficient coverage through their employer — freelance or contract workers, for example.
Got that? Now a bit of wonkery: The subsidies were based on the percentage of your income you could be required to pay in order to buy a Silver plan, known as the benchmark (the plans are rated Bronze, Silver, Gold and Platinum based on how extensive the coverage is). For example, if you were at 150% of the federal poverty level, you would only be required to pay 4.1% of your income to reach that benchmark level, with the federal government covering the rest of the cost. Consumers could then use that amount as a subsidy to shop on the exchange for a plan. They could purchase the benchmark Silver plan, or they could buy a different plan. A Bronze plan might wind up being altogether free once they applied the subsidy amount.
The original ACA setup created an awkward situation: If you made a single dollar beyond the 400% line, you’d get nothing. This was not very good policy, and more generally, middle-class freelancers were winding up with expensive premiums in a way that somewhat randomly singled them out as losers in the health care reform push.
When President Joe Biden came into office and Congress passed the American Rescue Plan stimulus package, the subsidies to help pay those premiums got bumped up in order to alleviate this issue with the ACA. From Gaba, here’s the breakdown on how they changed (the lower the percentage of the income shown in that last column, the higher the corresponding subsidy):
Without these higher subsidies, the out-of-pocket costs for purchasing health insurance plans will skyrocket — if the government is paying less to offset the cost, the consumer has to pay more.
How much more? Lots of caveats to Gaba’s analysis (see his post for a full explanation), but here’s the basic picture:
That’s really bad! Premiums five times as high for a lower-income single adult, or fifty times as high for a low-income single parent. The numbers are particularly gruesome for older Arkansans who don’t yet qualify for Medicare and so are relying on the ACA exchanges. And while this isn’t listed above, those making 138% to 150% of the federal poverty line — around 41,000 Arkansans — may go from not having to pay premiums at all to suddenly facing monthly bills if they want to keep their Silver plan or better.
Currently, more than 156,000 Arkansans are covered by plans on the exchange. You can see the breakdown by income here.
If we lived in a healthy democracy, Arkansans would freak out about this and demand action from their congressmen. But in this era of extreme partisan polarization, I won’t hold my breath.
Zooming out to the national picture, the Congressional Budget Office recently released projections of what would happen if the enhanced subsidies expire:
By CBO’s estimates, the share of people without health insurance reached an all-time low of 7.2 percent in 2023. The rate in 2034 is projected to be 8.9 percent—higher than it was during the 2021–2023 period but lower than the rate of 10.0 percent in 2019, before the coronavirus pandemic. CBO attributes much of the increase over the next 10 years to the end of Medicaid’s continuous eligibility provisions in 2023 and 2024 and the expiration of enhanced marketplace subsidies after 2025.
As Gaba points out, that’s nearly 6 million more Americans without insurance. On top of that, those who continue to get insurance via the ACA exchanges will take a major hit to their wallets.
Unfortunately, the future of the enhanced subsidies may depend on whether Republicans think that’s a problem worth solving.