In the leadup to this month’s election, House Speaker Mike Johnson promised that Republicans would make “ massive ” changes to the Affordable Care Act if they won a government sweep.
With a trifecta now in hand, the party will soon have its chance to make good on that vow.
So far, GOP leaders have been vague about what exactly they might do. During his debate with Vice President Kamala Harris, President-elect Donald Trump notoriously said he had only “concepts of a plan” for how to deal with the health care law, which his party failed to repeal and replace after a grueling, months-long effort during his first term in office.
But there’s at least one key reason to think that this time will turn out differently: A major expansion of the Affordable Care Act’s insurance subsidies passed by the Biden administration is currently set to expire after 2025, which will lead to large premium and deductible increases for many Americans who get their health coverage through the program’s exchanges.
That means Republicans could pare back Obamacare without lifting a finger. But the looming subsidy cliff might also give the party political cover to make broader changes that would otherwise be difficult for more moderate lawmakers to swallow.
What Biden did
Democrats temporarily made Obamacare’s insurance tax credits more generous as part of President Joe Biden’s $1.9 trillion American Rescue Plan. Those changes to the law’s subsidies, which lower the cost of health coverage purchased on federal marketplaces, knocked premiums to zero for many lower-income families while further limiting their out-of-pocket expense. They also for the first time capped the price of insurance for Americans who earn more than 400% of the federal poverty line, equal to $124,800 for a family of four today.
Since then, enrollment on the exchanges has jumped about 80% , from 11.9 million in 2021 to 21.4 million in 2024. Much of that growth came from poorer and moderate-income households, some of whom had previously fallen into the law’s coverage gap because they earned too little to qualify for marketplace subsidies but lived in states that declined to expand Medicaid.
Democrats extended the changes through next year as part of the Inflation Reduction Act, but chose not to make them permanent in order to limit that legislation’s cost. Instead, lawmakers hoped that the beefed up subsidies could be renewed as part of the bigger negotiation over the tax code that’s looming next year, when parts of the 2017 Tax Cuts and Jobs Act are also set to expire.
With Republicans in full control of the White House and Capitol Hill, however, a renewal seems unlikely.
What happens if bigger subsidies expire
Allowing Biden’s subsidies to sunset would make Obamacare coverage more expensive across the board — Households currently pay 44% less for health plans on average than they would under the original law’s subsidy scheme, according to the Kaiser Family Foundation. The think tank finds that a single 45-year-old making $40,000 a year would pay an extra 67% for a mid-tier silver plan, or $1,247 a year. A similar adult earning $65,000 a year would pay 17% more, or $941.
Some larger, middle-class families could be facing thousands of dollars in sticker shock. The Urban Institute finds that among all households earning more than 400% of the poverty line, the cost of coverage would be $2,900 higher without the enhanced subsidies, since they’d once again be forced to pay their full premium without any government assistance.
Experts expect price hikes would lead some Americans to drop their coverage, while others would downgrade to cheaper plans. The Congressional Budget Office estimates that in total, 3 million more Americans would likely go uninsured.
“There’s a record number of people enrolled in the marketplaces right now,” said Sara Collins, a senior scholar and vice president for health coverage at the Commonwealth Fund. “Letting these enhanced marketplace premium tax credits expire would be a significant blow to low- and middle-income people who depend on them.”
With fewer customers to spread around the costs of claims, insurance companies may also have to raise their premiums higher than if Biden’s subsidies remained in place. But the marketplaces aren’t likely to see the same kind of turbulence they did early on under Presidents Obama and Trump, when money-losing insurers dramatically increased their prices year-after-year and dropped out of some markets.
“I’m not necessarily expecting a return to those really volatile days of premiums skyrocketing because that was driven by insurers being unprofitable and having to adjust,” said Kaiser Family Foundation vice president Cynthia Cox.
What Republicans might do
Republicans may go beyond simply letting Biden’s enhanced subsidies expire. House Budget Committee Chair Jodey Arrington has called on his party to find savings in federal health care programs, and some members will likely eye cuts to the ACA or Medicaid as a way to offset the cost of their tax plans.
While GOP lawmakers haven’t revealed much in the way of specific plans for Obamacare, the legislation they considered in 2017 may offer a guide. The party sought to slash spending on both the ACA and Medicaid by converting their currently unlimited funding into capped block grants to states that would grow more slowly than the programs are currently expected to. They also sought to loosen regulations requiring insurance companies to cover certain benefits.
In September, Vice President-elect J.D. Vance suggested Republicans would also seek to allow insurance companies to separate healthy customers and people with pre-existing conditions into separate risk pools. That could make insurance cheaper for many families, but more expensive for those facing health problems.
Jordan Weissmann is a senior reporter at Yahoo Finance.
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