Exchange subsidies not doomed under GOP rule

One of the big healthcare policy questions for 2025 is whether enhanced subsidies for health insurance exchange plans will survive Republican control of the federal government.

After all, Donald Trump and a GOP-led Congress nearly repealed the Affordable Care Act of 2010 eight years ago during Trump's first term as president, and he continued to rail against "Obamacare" during his 2024 campaign against Vice President Kamala Harris. But it's not 2017 anymore.

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Republicans and Democrats on Capitol Hill see an opening to renew the more generous subsidies President Joe Biden enacted as part of COVID-19 relief in the American Rescue Plan Act of 2021 then extended in the Inflation Reduction Act of 2022.

Enlarging these tax credits and making them available to more middle-class households spurred record enrollment on the exchanges, which cover 11.6 million more people this year than they did in 2021, the Centers for Medicare and Medicaid Services announced Wednesday.

As of Monday, 23.6 million people had signed up for marketplace plans during the open enrollment period that ends Jan. 15 in most states, CMS reported. According to the health policy research organization KFF, a disproportionate share of the recent growth occurred in Southern states, which are mostly run by Republicans.

The Congressional Budget Office projects that allowing the subsidies to revert to their original level at the end of this year would cause 3.8 million more people to be uninsured over the 2026-2034 period.

A lot of those people voted for President-elect Trump and Republican lawmakers.

The ACA was already starting to rise in popularity in 2017, when late Sen. John McCain (R-Ariz.) famously cast a thumbs down vote to kill the repeal effort. Public support for the law has continued to climb, propelled in part by the enhanced subsidies.

That doesn't mean Republicans have come to embrace the ACA or its programs.

No Republicans voted for the American Rescue Plan Act or the Inflation Reduction Act. Healthcare experts linked to the first Trump administration, such as the influential Paragon Institute, recommend letting them lapse. In Congress, the GOP-led House Budget Committee and the Republican Study Committee, a caucus of conservative House members, have authored proposals to end them.

Trump has not been clear about his intentions, saying during the campaign that he would only try to replace the ACA if he came up with something better. He also said he only had "concepts of a plan" and has not elaborated on that.

Yet congressional Republicans declined to say they would simply let the subsidies expire. Instead, they expect the issue to emerge during talks to extend the Trump tax cuts from 2017.

"Everything's unresolved on that," said Sen. James Lankford (R-Okla.), a member of the Finance Committee, which has jurisdiction over the exchanges. "No one wants to take healthcare away from people, but we've got to be able to figure out how we're managing costs."

Ironically, at least part of the reason Republicans are not sure what position to take is that they unexpectedly won the House, the Senate and the White House. Often in Congress, each party stakes out maximum positions that leave them room to make deals with the other side.

Having won what is known as the "trifecta," Republicans don't necessarily need to negotiate with Democrats if they use the legislative process known as budget reconciliation.

Senate Majority Leader John Thune (R-S.D.) plans to assemble a pair of reconciliation bills, one for energy and border security legislation and another for tax cuts and other GOP priorities.

Under these rules, Congress can advance legislation that directly affects spending or taxation using expedited procedures that prohibit Senate filibusters, which allows measures to pass the upper chamber with simple majorities instead of 60 votes. The American Rescue Plan Act and the Inflation Reduction Act were budget reconciliation bills, and parts of the ACA went through the same process.

The upside of reconciliation is that the majority party can expeditiously advance its interests. The downside is it owns the results. In the case of the American Rescue Plan Act and the Inflation Reduction Act, for instance, Republicans cited them as reasons to blame Biden and Democrats for inflation.

Sen. Todd Young (R-Ind.) suggested the new reality means the GOP will have to think carefully about how it deals with the marketplace premium tax credits.

"In the light of Republicans controlling everything, there's a lot for us to now discuss," said Young, a Finance Committee member. "I don't think most were predicting that Republicans would have kind of unified control, and this is highly important."

Similarly, Sen. Thom Tillis (R-N.C.), who also sits on the Finance Committee, said the GOP conference will have a lot to talk about, and plenty to hear from voters, before they make any decisions.

"I don't know," Tillis said of the fate of enhanced subsidies. "People will look at it. And I think they'll hear from their constituents [and] their legislatures, so it'll be, you know, their folks back home. We'll see how it sorts out."

KFF projects exchange plan premiums would rise an average of $705 a year without the larger tax credits.

Low-income enrollees would lose zero-premium plans. Higher-income households would lose subsidies altogether because the ACA originally cut off eligibility at four times the federal poverty level, which is $103,280 for a family of four in the continental U.S. and higher in Alaska and Hawaii.

More than 958,000 North Carolinians were enrolled in exchange plans for 2025 as of Monday, according to CMS. Allowing the subsidies to expire would raise costs for a significant portion of them. The liberal Center on Budget and Policy Priorities estimates that annual premiums would be $500-$900 higher on average in the Tarheel State. North Carolina families with higher incomes would pay almost $9,000 more, according to the think tank.

Similar premium hikes could be expected in most states. The impact would be greatest in Alaska, Vermont and West Virginia, where middle-class households would face premium hikes well above $25,000 a year, according to the Center on Budget and Policy Priorities.

Such stark numbers can give lawmakers pause, and Republicans remember the backlash they suffered after their repeal campaign in 2017. The GOP lost 41 House seats in the 2018 midterm elections, giving Democrats a majority.

Senate Finance Committee ranking member Ron Wyden (D-Ore.) suggested that McCain might have shielded the Republicans from worse consequences by saving the ACA, and that the GOP may confront a similar dynamic when its rhetoric against the subsidies collides with public approval of them.

"We'll see," Wyden said. "I've always gotten the sense that Donald Trump was hoping for one of those John McCain moments, and somebody wouldn't vote to abolish the ACA."

Wyden declined to discuss what strategy Democrats are employing, but indicated they are not about to let the issue drop. "There are a number of senators on our side of the aisle who want to make sure that middle-class folks can afford healthcare. That's what we're doing," he said.

Analysts see a chance Republicans will agree to some sort of an extension, but it would have to come with Democratic concessions.

For one thing, even though Republican constituents would be impacted by the subsidies disappearing, the GOP had nothing to do with creating the situation, said Rodney Whitlock, a lobbyist at McDermott+ and former GOP congressional aide.

"It would be easy for them to just walk away and say, 'You know, this was your idea. It was temporary. You had chances to extend it. You did not, so it's not our responsibility,'" Whitlock said.

But Whitlock expects Republicans would consider an extension if Democrats and healthcare interests are willing to discuss changes to the ACA that would appeal to the GOP.

"If they go that route, do they have any dance partners? Is anybody willing to say, 'Okay, I'm open to talk?'" Whitlock said. "That's what's defining much of 2025 on this issue, which is if Republicans don't have any type of positive reaction from the advocacy communities that want this, I don't know that anything's going to happen."