Democrats unveil ACA tax credit plan, teeing up next health-care fight

Congress must “take swift action at the first legislative opportunity to make the tax credits permanent,” Underwood said in an interview.

Lawmakers have spent years battling over the future of the expanded tax credits — often referred to as the enhanced premium tax credits, or enhanced PTCs, on Capitol Hill — and whether the coverage gains provided by the subsidies outweigh their cost. The nonpartisan Congressional Budget Office this year projected that permanently extending the tax credits would help several million people obtain health coverage each year — but also cost the federal government about $335 billion during the next 10 years.

President Joe Biden and Vice President Kamala Harris have pledged to make the ACA tax credits permanent, and Harris is campaigning on the issue as part of her effort to lean into the Affordable Care Act.

“Vice President Harris is fighting to improve health care and lower costs, and part of her plan includes making permanent credits that are lowering health care premiums by an average of about $800 a year for millions of Americans,” Joseph Costello, a campaign spokesman, said in a statement.

The White House on Wednesday also touted new Treasury Department data showing that the majority of small-business owners who shopped for health coverage through the ACA have relied on the premium tax credits to reduce the costs of coverage.

Republicans have decried the tax credits as an expensive federal giveaway, saying they distort the purpose of the ACA by subsidizing Americans who don’t need the assistance. Before the enhanced tax credits took effect, people with incomes above 400 percent of the federal poverty line — about $58,000 for an individual or $120,000 for a household of four people — were not eligible for assistance with their ACA premiums.

Sen. Mike Crapo (Idaho), the top Republican on the Senate Finance Committee, last week in a hearing castigated the “costly and inflationary-enhanced premium tax credits” and said they “camouflage the ongoing flaws with the individual health insurance market.” Republicans have also opened investigations into allegations that insurance brokers are fraudulently enrolling customers into some ACA health plans and the potential misuse of federal insurance subsidies.

The tax credit fight is part of a broader political debate over how to administer the ACA, said Rodney Whitlock, a vice president at McDermott+Consulting who analyzes health policy. Harris, the Democratic presidential nominee, has promised to expand enrollment through the law if elected president. Sen. JD Vance (Ohio), the Republican vice-presidential nominee, recently floated a plan to roll back the ACA’s approach to how chronically ill people shop for health plans.

“The future of the ACA remains a significant political battle, ongoing on a number of fronts,” Whitlock said. “This is one.”

The enhanced premium tax credits were crafted in the depths of the coronavirus pandemic, as some Americans delayed care because they were underinsured or uninsured. Democrats in 2021 introduced the premium tax credits in the American Rescue Plan Act and extended them in the 2022 Inflation Reduction Act.

The tax credits have been linked to expansions in health coverage, with about 5 million Americans becoming eligible for zero-premium ACA plans, according to KFF, a nonpartisan think tank. Many other Americans received significant discounts on their plans.

The Urban Institute, a nonprofit organization specializing in policy research and analysis, concluded that about 4 million people could become uninsured if Congress stops funding the enhanced subsidies.

“There’s no ambiguity — premiums would spike in every state,” Shaheen said Wednesday. “More people would be uninsured and … too many Americans would be priced out of getting vital health-care coverage.”

While the tax credits are not set to expire until the end of 2025, Democrats maintain it is imperative to renew them as soon as possible so consumers can be assured the credits are not going away. State insurance commissioners have called on Congress to act — whether thumbs up or thumbs down — to provide clarity and allow commissioners to begin the lengthy process of setting future rates.

“Regardless of Congress’s final choice on extending the enhanced credits, state insurance regulators urge a decision before the end of 2024,” the National Association of Insurance Commissioners wrote in a bipartisan letter to congressional leaders in July.

Democratic leaders say they’re on board to move quickly.

“Congress has to protect families from a giant premium spike that’s coming next year when the middle-class tax credits for health care expire,” Sen. Ron Wyden (D-Ore.), who chairs the Senate Finance Committee and has agreed to co-sponsor the new legislation, said in remarks last week. “I’m all in to extend these credits to help millions of working families make sure that they don’t see a premium increase.”

But Republicans have largely avoided the topic or said they are against the subsidies.

“These expanded subsidies will only perpetuate a never-ending cycle of rising premiums and federal bailouts — with taxpayers forced to foot the bill,” the influential House Republican Study Committee wrote in its budget proposal this year. “… The RSC Budget would end these taxpayer bailouts while adopting reforms that reduce premiums and increase access to and choice of care for all Americans.”

The Paragon Health Institute, a conservative think tank, this year concluded that as many as 5 million Americans may be wrongly receiving ACA insurance subsidies. Brian Blase, a former Trump White House official who serves as Paragon’s president, said the debate over the tax credits on Capitol Hill revolves around “smoke and mirrors.”

“It’s not surprising insurance companies want more government subsidies,” Blase said in an interview. “It would be really nice if we could have a conversation about flaws with the ACA … rather than just continue this subsidy structure, which I think we’ve pretty conclusively proven has led to massive waste.”

Whitlock, a former GOP aide on the Senate Finance Committee, said he’s skeptical the current Congress will reach a deal on the tax credits, noting the considerable policy gap between the Democratic-controlled Senate and the GOP-controlled House.

“I can’t construct any type of trade that House Republicans in November, December, would let the [tax credits] go,” Whitlock said, though he mused about the prospect of several Republicans abruptly leaving after the election and affecting the narrow balance of power in a lame-duck Congress.

If lawmakers fail to agree on the subsidies this year, that means their fate could rest with Donald Trump if the GOP presidential nominee wins election in November. Trump, who recently pledged that he would run the Affordable Care Act “as good as it can be run” if he retakes the White House, has not staked out a position on whether he would extend the subsidies — but his campaign has telegraphed his opposition.

“New research shows that because they were so poorly designed, the program costs taxpayers over 20 billion dollars per year just in FRAUD,” Karoline Leavitt, a Trump campaign spokeswoman, wrote in a statement, linking to a Wall Street Journal opinion piece by Blase that panned the expanded subsidies. “These subsidies benefit big insurance companies and brokers more than American patients.”

Underwood said Republicans have “no credibility” when discussing the tax credits.

“They’re the same people that walk around talking about, ‘We have to repeal the ACA.’ They’re the ones cheering on JD Vance — so crazy! — with his completely unhinged proposal around repeal-and-replace,” Underwood said.