A key election question: What will happen to the enhanced Affordable Care Act subsidies?

Earl Pomeroy knows from experience that the politics surrounding the Affordable Care Act (ACA) are dicey.

As a Democratic member of the House Ways and Means Committee, Pomeroy helped pass the ACA during his ninth term representing North Dakota. After that, “I lost my job,” he recalled.

Since his time in Congress ended with his loss in the 2010 election, Pomeroy has kept close tabs on the state of healthcare reform. Now he has his eye on the fate of a specific component of the 14-year-old law. The status of subsidies that have significantly boosted insurance enrollment likely hinges on the November election.

If former President Donald Trump wins a second term and Republicans control Congress, they’re expected to look at implementing a rollback after the enhanced subsidies expire at the end of 2025. If Vice President Kamala Harris wins the presidency and Democrats control the legislature, the status quo figures to prevail. In the event of a split government, the picture becomes murkier.

At a time when the ACA marketplaces are a relative bright spot in hospital reimbursement schemes, the next 16 months could bring stability or turmoil. Regardless of the election outcome, Pomeroy hopes the tone of the debate somehow takes a turn.

“If we are stuck in the old partisan frame of how we look at this, we’re going to do a disservice to the American people,” said Pomeroy, now senior counsel at the law firm of Alston & Bird.

“This ought to be an area where the parties can agree. … You’ve got an awful lot of good, staunch Republican voters across the country who don’t want their hospital to fold, who don’t want their neighbor to lose coverage.”

What’s at stake

Enrollment in marketplace insurance reached a record 21.4 million for 2024, an increase of roughly 10 million from four years earlier. A key boost was provided by subsidies authorized in 2021 and extended in the Inflation Reduction Act a year later.

In a change from the original subsidies that were part of the ACA, the new subsidies were available to households with incomes beyond 400% of the federal poverty level if nonsubsidized premiums would cost more than 8.5% of their income. People with lower incomes could obtain substantially greater savings than before. A data analysis by KFF put the average savings on premiums via the new subsidies at 44%, or $705 per person per year.

Pomeroy thought a shortcoming of the ACA at the legislation’s outset was the lack of support for people who struggled financially but were over the income limit, leaving them unable to afford a marketplace plan. The subsidies of the last three years “really provided game-changing relief to families that [previously] were almost able to get help but were left out of the initial bill.”

Healthcare consumer advocates say the subsidies proved especially crucial amid the redeterminations of Medicaid enrollment that began in 2023 near the end of the COVID-19 public health emergency. More than 25 million people had been disenrolled from Medicaid as of Aug. 23, KFF reported. Among those disenrolled in 2023, an estimated 25% migrated over to marketplace insurance for 2024.

At the nation’s largest health system, HCA Healthcare, Q2 brought a jump of 12.5% in billing admissions for managed care. The marketplaces were a key driver, with those admissions rising by 46% quarter-over-quarter, compared with 5% for other managed-care volumes.

A source of disagreement

Conservative-leaning policy analysts have expressed concern that the enhanced subsidies not only are costly, at an estimated $335 billion for 10 years if extended past 2025, but also are accessible to people who don’t really need them when the federal focus should be on fiscal responsibility. A family of four with a household income of $100,000 now is eligible for a partial subsidy.

Industry analysts note that the subsidies make health insurance affordable but don’t always do the same for actual healthcare. ACA deductibles surpassed $7,000 for a bronze plan and $5,000 for a silver plan in 2024. Provisions to reduce cost-sharing payments for low-income enrollees are available but were not expanded along with the premium-related subsidies.

Regardless, Democrats say the premium-focused subsidies are too important of a lifeline to eliminate and instead should be made a permanent part of the ACA.

“What is not being reported on as much is where people are in the middle,” said Jane Lucas, a partner at Alston & Bird and formerly a White House special assistant for legislative affairs during the Trump administration. “That will, in part, dictate what happens to [the enhanced subsidies], of course factoring in the election outcome as well.”

Unless one party has the White House and both houses of Congress, “It becomes a negotiation,” Lucas said. “I don’t think anybody yet knows what the dynamics of that negotiation will be and how that will be sorted out in 2025.”

Democrats most likely will have a measure of leverage unless they’re out of power across the government. The subsidy issue probably will be decided as part of a larger package, Lucas said, and among other items up for debate is an extension of tax cuts that were legislated early in the Trump administration.

Alternatives to subsidies

Trump’s campaign has released few details about proposed healthcare policies, “not because they don’t have thoughts, but just because it opens them up to criticism,” said Lucas, who also spent 10 years in the Senate working for current Republican Whip John Thune (R-S.D.), including as legislative director.

She said actions during Trump’s previous time in the White House can provide signals about what will happen in a second stint.

“The last Trump administration focused a lot on choice and competition in healthcare markets,” Lucas said. “That’s a theme that they could return to.”

She also said think tanks at which leaders have past ties to the Trump administration, such as the America First Policy Institute and the Paragon Health Institute, can be seen as “a proxy” for where his second administration might go on healthcare policy.

For example, Paragon put out proposals that included recommendations to end higher subsidies, expand coverage options outside the marketplaces and authorize small employers to join together on insurance coverage.

HHS passed regulations to expand the availability of short-term, limited-duration health plans while Trump was in office, but the final rule largely was rescinded this year by the Biden administration. CMS expressed concern that the plans would dilute ACA marketplace enrollment, adversely affecting the risk pool while leaving customers of the short-term plans with less coverage than they might have expected. Many such plans reject claims that are linked to a preexisting condition, for example.

Urgency builds

Practically speaking, a resolution to the subsidy issue needs to happen before the latter part of 2025, Lucas noted. The terms and conditions of health plans offered through the ACA marketplaces for 2026 most likely need to be determined by early next year.

If the situation drags out, “That makes it very difficult for insurance companies, and even providers who are seeing patients on these types of plans, to have a lot of clarity about what’s going to happen,” Lucas said.

Even with the record numbers in the marketplaces, enrollment is roughly one eighth of the employer-sponsored market. That’s a reason why the issue does not seem to resonate with voters, Lucas noted.

But healthcare stakeholders should consider making their voices heard in the runup to the election, said Pomeroy, who before going to Congress was North Dakota’s insurance commissioner and served as president of the National Association of Insurance Commissioners. Putting aside views on whether the subsidies are sound fiscal policy, it’s evident that retaining them would be more advantageous for insurers’ membership rolls and providers’ reimbursement streams and bad-debt levels.

In terms of advocacy, “I think it’s been too quiet out there,” Pomeroy said.

Providers “never signed up for providing free care to the American people,” he added. “If this all goes away, you’re going to see a tremendous hit to hospitals and doctors suddenly forced to provide care to people who have no reasonable means to pay for it.”