What Happens When the GriNch Steals Healthcare?

As taken from “Who Will Pay If ACA Tax Credits Lapse?” A commentary out of MedCity News which speaks to the issue of losing subsidies. The Republicans are the instigators in blocking healthcare subsidies for up to 700-800% FPL for citizens. They must have some serious IOUs tucked away to carry them above and beyond what they are going to do to voters supporting them. MedCity says 22 million people will be affected by this treachery. Read on . . .

About 22 million Americans will face sharply higher healthcare costs if enhanced ACA tax credits expire at the end of the year. Experts warn the impact would extend beyond just families relying on ACA courage. It will also strain hospitals, increase uncompensated care, and potentially cost the economy hundreds of thousands of jobs.

It’s been a week since the nation’s longest-ever government shutdown ended. Millions of Americans still do not know whether they’ll be able to afford their healthcare coverage next year.

The shutdown finally ended November 12 when a funding bill was signed into law. Notably absent from the law was any extension of the enhanced Affordable Care Act (ACA) subsidies that 24 million Americans rely on to keep their premiums somewhat affordable.

Enhanced ACA tax credits were introduced during the pandemic to expand healthcare affordability, and they are set to expire at the end of this year if Congress doesn’t act. 

This year, 93% of ACA marketplace enrollees received the tax credits. For many, the expanded subsidies have meant the difference between affording routine care for themselves and their loved ones or skipping these visits entirely.

As experts say, the expiration of these subsidies would not just push coverage out of reach for millions of Americans. It could also create significant challenges for large and small hospitals in city and rural areas. Hospitals which already are battling financial pressures. It will also hurt the economy at large. 

Overall, healthcare leaders have a number of concerns about what could happen if Congress doesn’t renew the expanded tax credits. If the premiums increase, a larger share of Americans would lose insurance. Hospitals would take on more bad debt, and also additional uncompensated care. Most worrisome, the American public health would further deteriorate.

Tax Credit History

When the ACA health insurance marketplaces launched in 2014, tax credits went into effect to make coverage more affordable for individuals and families. These tax credits (which are based on ACA shoppers’ income and household size) were later expanded temporarily under the American Rescue Plan Act in 2021. Then extended again through the Inflation Reduction Act in 2022. As a result, people receiving larger subsidies and eligibility criteria​ was incresing.

Not that the tax credits were not necessary. Cumulative costs of healthcare increased faster than the rest of the nation’s costs to citizens.

The American Rescue Plan Act and its extension under the Inflation Reduction Act boosted these subsidies by lowering premium contributions to 0-8.5% of income and approved $0 premiums for people earning 100–150% of the federal poverty level. The changes introduced during the pandemic also allowed Americans earning above 400% of the federal poverty level to qualify for subsidies if premiums exceeded 8.5% of their income.

ACA revised and expanded Medicaid eligibility starting in 2014. All U.S. citizens and legal residents with income up to 133% of the poverty line would qualify for coverage. When the ACA market places were first established, the government provided subsidies to people earning 100-400% of the federal poverty level. Individual premium contributions ranged from 2.07-9.83% of their income.

These credits have played a key role in reducing the country’s uninsured rate. Last year, the national uninsured rate reached an all-time low of 7.9%. However,

The expiration of enhanced tax credits would turn a $460/month premium to a $700/month premium for a family of four according to ACA marketplace enrollee Shana Verstegen, during a media call hosted by nonprofit advocacy group Keep Americans Covered. She is a small business employee at a gym in Madison, Wisconsin, along with her husband. They rely on ACA marketplace coverage for themselves and their two children.

Verstegen remarked, “Seven hundred dollars per month in 2026 may seem like a small number, but that’s over $2,500 a year. Right now, our family would really struggle with that — losing that tax credit would create a real crisis for us.”

Verstegen also noted, she and her husband have discussed the possibility of him leaving the job he has loved for decades to secure employer-based coverage. This a difficult and emotionally painful decision. It is also one needing to be made under a severe time crunch. 

Open enrollment for 2026 ACA coverage is already underway, with deadlines approaching. Enrollment must be complete by mid-December for coverage starting January 1, leaving little time for families like the Verstegens to adjust.

She described this time as a “really tough and, quite frankly, scary” moment for her family.

Verstegen declared. “This isn’t about politics and polling, or winners and losers in Congress, or red or blue or purple states. It’s about real families and real kids — real people who need healthcare. Marketplace coverage and the premium tax credits are essential for entrepreneurs and small business employees like myself to afford healthcare.”.

Can hospitals handle another financial hurdle?

Executive vice president of public affairs at the Federation of American Hospitals Charlene MacDonald noted. “About 22 of the 24 million people who have ACA insurance will see their premiums double if the tax credits expire, and 5 million are expected to lose coverage completely.”

When coverage erodes, hospitals’ levels of uncompensated care go up. 

MacDonald said hospitals are bracing for a significant uptick in uncompensated care especially in states that have not expanded Medicaid coverage. Private marketplace plans are an especially critical source of coverage in those areas.

“Hospitals treat all patients who come through their doors regardless of their insurance or their ability to pay. Those costs just do not disappear. They shift back onto hospitals, employers and taxpayers.”

This strain will affect all healthcare providers/ However, rural and safety net hospitals will be hurt the most. These providers tend to have lower patient volumes and a greater share of patients on Medicaid and Medicare. Both programs reimburse hospitals at lower rates and often fail to cover the full costs of providing care.

MacDonald: For many of these vulnerable hospitals, the loss of the ACA tax credits isn’t just another financial hurdle. It is a threat to service lines and, in some cases, their long-term viability, she stated.

“When coverage declines, the impact shows in reduced access for patients and diminished capacity in the healthcare system. Hospitals facing higher levels of uncompensated care are forced to make difficult choices to sustain a community’s access to 24/7 care, whether that’s scaling back services or delaying investments that improve quality and access for patients,”

She also noted the higher rates or uncompensated care can reduce hospitals’ ability to offer competitive wages, which exacerbates healthcare’s workforce crisis.

The broader economy could take a hit, too

The expiration of ACA enhanced subsidies could also have a negative effect on the broader economy.

Julio Fuentes, CEO of the Florida Hispanic Chamber of Commerce, warned that the additional healthcare costs from the credit’s expiration could force small business owners to make “decisions that really no one wants to make.” Decisions such as delaying hiring, raising customer prices and cutting employee hours.

Even though these small business owners don’t sponsor their employees’ insurance, they often cannot afford to absorb sudden spikes in personal healthcare costs without cutting hours or staff.

“This is a main street crisis. It’s certainly not a Wall Street problem, by no means. The first people who feel this pain are the ones who keep our communities running — you’re talking about the landscapers with five employees, the woman who runs a small cleaning business, the contractor who depends on a handful of subcontractors,” he explained.

Economists estimate that allowing ACA tax credits to expire would lead to about 286,000 job losses, as well as reduce the country’s GDP by $34 billion.

Those estimates come from the Commonwealth Fund and the George Washington University, Milken Institute School of Public Health. Their teams first calculated how much federal spending on enhanced ACA tax credits would disappear if the subsidies expired — roughly $26 billion next year alone. 

That reduction in spending affects not only households — but also providers and payers, who would see lower revenues as a result of fewer people being able to afford coverage. About 10% of Americans are employed in the healthcare sector — so putting financial pressure on industry will inevitably lead to a wave of job losses, the researchers explained.

The researchers used an input-output model to estimate the broader effects on the economy — accounting for direct impacts, like providers losing income and laying people off, and indirect effects, such as decreased lifestyle spending by families. 

Time is running out

Some lawmakers, including Senator Bill Cassidy (R-Louisiana), floated the idea of replacing the ACA premium tax credits with other mechanisms, like pre-funding Health Savings Accounts (HSAs). They are curious as to whether directing funds straight to individuals could increase efficiency and reduce overhead.

Chair of the Senate Committee on Health, Education, Labor and Pensions Bill Cassidy: “Is there anybody who would not want to take a large portion of that, which we’re using to help Americans purchase healthcare, and give it directly to the individual, so that 100% of its used to purchase healthcare, as opposed to, as opposed to giving that money to the insurance company, of which 20% goes for profit and overhead?” A Monday hearing.

AB; Cassidy’s idea is about as dumb as they come. The Gov can negotiate pricing for its citizens. One individual pays the going rate. They have no power to negotiate a lower rate.

This approach would be impractical, according to Lauren Aronson, executive director of Keep Americans Covered. She pointed out that this could would cost the federal government more than simply extending the tax credits. There is not enough time to implement a whole new system.

Arson adds: “If you were to theoretically pre-fund an HSA that would very likely cost more federal dollars than the cost of extending the tax credits themselves. You’d have to pre-fund between $1,500 and $6,000 per year. Then thinking about it operationally, plans would have to then refile rates and put new high-deductible health plan offerings into the market for 2026. There’s no time to do that between now and January 1.”

She said the ACA’s current design of applying credits directly to monthly premiums is essential for keeping coverage affordable in real time for middle-class families.

Senators from both parties are forming working groups to address the issue, but there hasn’t yet been a public hearing or vote on extending the ACA premium tax credits, despite the looming healthcare affordability crisis.

Aronson emphasized that immediate action is needed to prevent the crisis from occurring. 

“Who Will Pay If ACA Tax Credits Lapse?” MedCity News

“How does medical inflation compare to inflation in the rest of the economy?” Peterson-KFF Health System Tracker