With the GOP tax-and-spending megabill enacted into law, the next politically charged health care debate is heating up. Congress must decide relatively soon whether to extend the enhanced premium credits for Affordable Care Act (ACA) coverage beyond the end of the calendar year. While Republicans have yet to reach a consensus, Democrats are already demanding a permanent extension as part of the continuing resolution negotiations as Congress works to avoid a government shutdown on October 1.
Neither of the main choices available to Congress—allowing the credits to expire with no transition, or approving a one-year extension—is terribly satisfying. If the credits expire, current modeling suggests that the average premium paid by consumers in the ACA exchanges will increase by 75 percent in 2026, which will lead some to drop their coverage and become uninsured. On the other hand, the longer the enhanced credits remain in place, the harder it will be to revert to the pre-2021 schedule. The Congressional Budget Office (CBO) estimates that an indefinite extension would cost $350 billion over the coming decade.
Providing more generous support for insurance enrollment is a politically convenient way to avoid the core problem, which is that health insurance is too expensive for many households to purchase coverage without assistance, or else its perceived value exceeds what they are willing to pay for it themselves (which increases the chances that taxpayers will end up subsidizing their consumption of medical services through other channels such as direct payments to hospitals for uncompensated care). In 2021, Democrats increased the generosity of the ACA’s subsidies for health insurance—called “premium credits”—because take-up of insurance was below what they had hoped would occur and was at risk of falling further due to job loss during the pandemic. As is often the case, a temporary entitlement expansion is now proving hard to roll back.
