Premiums to increase if ACA enhanced subsidies expire, CBO says
Without an extension, the CBO estimates that the number of uninsured Americans would increase by 2.2 million in the first year.
Photo: Jose Luis Pelaez/Getty Images
The Congressional Budget Office has estimated that the expiration of enhanced subsidies for Affordable Care Act plans – which are set to expire in 2026 – could drive up premiums in the individual market.
In a letter to Senator Ron Wyden, chairman of the Committee on Finance, the CBO said that not extending the premium tax credit structure provided in the American Rescue Plan Act of 2021 (ARPA) would also increase the number of uninsured Americans.
It is likely, the agency said, that some people will exit the marketplaces and become uninsured due to higher out-of-pocket costs for premiums. Without an extension through 2026, the CBO estimates that the number of uninsured Americans would increase by roughly 2.2 million during that year.
And without a permanent extension, the number of uninsured people is projected to rise by 2.2 million in 2026, by 3.7 million in 2027, and by 3.8 million, on average, in each year over the period from 2026-2034.
WHAT'S THE IMPACT
The premium tax credit is an advanceable, refundable credit that lowers the out-of-pocket cost of health insurance premiums for people who are insured through the marketplaces. The credit is calculated as the difference between the benchmark premium (i,e., the premium for the second-lowest-cost silver plan available in a region) and a maximum contribution per household, calculated as a percentage of household income and adjusted over time.
Until 2021, the premium tax credit was available to people who met certain criteria, such as having a modified adjusted gross income between 100% and 400% of the federal poverty level (FPL); lacking eligibility for public coverage, such as Medicaid; and lacking affordable employer-based coverage.
The ARPA expanded eligibility to include enrollees whose income was above 400% of the FPL and lowered the maximum household contribution, while the 2022 reconciliation act extended those provisions through 2025.
"CBO expects that healthier-than-average people will exit the marketplaces if the expanded credits are no longer available and, in response, insurers will raise premiums for the remaining enrollees," the agency wrote.
THE LARGER TREND
In a letter to the Senate Finance Committee in 2022, the CBO wrote that if the enhanced subsidies on the Affordable Care Act's exchanges were extended on a permanent basis, there would be just shy of five million new signups annually.
However, making the subsidies permanent would also increase federal deficits by $247.9 billion from 2023 to 2032 – a result of about $181.4 billion in increased direct spending and decreases in revenue of $66.5 billion over that time.
These effects primarily reflect a $305.5 billion increase in premium tax credits, partially offset by higher revenues stemming from a shift in employees' compensation from tax-favored health insurance to taxable wages.
Jeff Lagasse is editor of Healthcare Finance News.
Email: jlagasse@himss.org
Healthcare Finance News is a HIMSS Media publication.
