The ARPA-enhanced ACA subsidies: Not dead yet?
The funding may not be entrenched, but maybe the benefit is
I have assumed that with Republicans in control of both houses of Congress and the presidency, the enhanced ACA marketplace subsidies created by the American Rescue Plan Act (ARPA), currently funded through 2025, would expire after that. I’ve written off statements of optimism from insurers and brokers as wishful thinking.
That said, last Friday (Dec. 6) Dan Diamond of the Washington Post reported:
Congressional Democrats have privately proposed a deal to Republicans that would extend expiring Affordable Care Act subsidies by one year, with lawmakers worried by new estimates that 2.2 million people will otherwise lose health coverage, according to five people who spoke on the condition of anonymity to discuss the proposal.
The move accompanied a broader package of health-care proposals submitted to Republicans on Thursday night ahead of year-end spending negotiations.
Well yes, Democrats would propose that. But…Republicans?
A one-year extension sounds oddly plausible, and suggests the tantalizing possibility of the can being kicked down the road year by year. That possibility took me back to a conversation I’d had the day before (Dec. 5) with Ronnell Nolan, CEO of Health Agents for America (HAFA), a trade group for ACA marketplace agents specifically.
Nolan was fresh back from a trip to D.C., where she spoke to numerous members of Congress. She is from Louisiana — home, she pointed out to me, to House Speaker Mike Johnson, Majority Leader Steve Scalise, and Senator Bill Cassidy, a principle architect of much Republican healthcare legislation. With respect to the ARPA-enhanced subsidies, she said, “It could very well stay status quo.”
While many Republican members of Congress “would love to get ride of” the enhanced subsidies, Nolan said that the most common (Republican) reaction to the prospect of letting them sunset was “eh, I don’t think it’s a good idea, don’t think our voters are going to like it.”
What they’re chiefly looking at, Nolan added, “is those who are getting subsidies over 400% of poverty” —that is, those who would become ineligible for subsidies if the enhanced subsidy schedule sunsets, in which case the pre-ARPA income cap on subsidies would snap back into place. “That’s the issue. But they don’t want to mess with any of it.”
As I noted recently, in 2024, about 1.5 million marketplace enrollees (7% of total enrollment) reported income over 400% FPL and so were made at least potentially subsidy-eligible by ARPA. At the same time, 9.4 million enrollees — 44% of the total — had income in the 100-150% FPL range, and so were made eligible by ARPA for free benchmark silver coverage with strong Cost Sharing Reduction. In red states, the concentration at incomes under 150% FPL is even more intense, exceeding 50%. Still, those with income modestly over the pre-ARPA 400% FPL subsidy threshold were the cohort most egregiously ill-served by the pre-ARPA ACA - -and their plight was Republicans’ chief cudgel against the ACA, as coverage was rendered genuinely unaffordable for many. It would be somewhat ironic — and hard to believe — if Republicans move to protect that population by extending the subsidies. But in a way their position is analogous to that of Democrats faced with sunsetting tax cuts enacted by Republicans, as happens every few years. Democrats may decry the cuts, but when push comes to shove they’ll only slice off those affecting the highest income levels.
What makes extension hard to imagine, for me, is the notion of Republicans positively allocating money for it. But perhaps a one-year extension slipped into a broad spending bill is not so unimaginable. I spoke to a Democratic Congressional staffer over the weekend who regarded the extension as possible.
In year-end spending negotiations, this staffer told me, Republicans are cross-pressured in more than one way. On the one hand, they want to keep the continuing resolution (CR) as simple as possible. On the other hand, some problems can be dealt with quickly and quietly in a CR and would become more complicated, with more stakeholders weighing in, in the extended spending bills to be enacted next year.
With respect to the ARPA subsidy enhancements, this staffer echoed Nolan on two fronts: healthcare is not a top Republican priority, and rendering marketplace insurance unaffordable for millions (as CBO recently forecast) is a political loser. On the other hand, Republicans need spending cuts to fund their planned tax cuts, and they will be under ideological pressure from the Trumpist think tank the Paragon Institute and conservative members to cut healthcare spending regarded as wasteful. (See my response to Paragon’s report alleging rampant fraud and wasteful spending in the marketplace.) This source added that the outpouring of public rage against our health insurance system in the wake of the murder of UnitedHealthcare CEO Brian Thompson may increase lawmakers’ chariness of making insurance more unaffordable for millions.
Both sources noted that Trump is a wild card, and no one knows what he may suddenly call for at any given moment (which may simply depend on who happens to bend his ear at a key moment). As far as that goes, Trump added new impenetrable tea leaves over the weekend on Meet the Press. Along with reiterating his debate claim that his team had “concepts of a plan” for healthcare reform, he also reiterated his claim that he had “fixed” the ACA after failing to repeal it. Oddly, he included a claim that he had thrown considerable money at the marketplace (my emphasis below):
right now we have something that I made the best of. I could’ve made the worst of it and it would’ve fallen by the wayside. I did the right thing from a human standpoint. But, you know, I’m sort of proud of my decision. At the same time, sometimes I regret it. I told the people and I gave them the money to do it. I said, “Fix it. Make it work.”
While it’s hard to know what Trump is referring to here — if anything — the claim is not baseless. While the Trump administration cut hundreds of millions of dollars from ACA enrollment assistance and marketing, it also provided hundreds of millions to 15 states to establish reinsurance programs designed to stabilize premiums in their ACA marketplaces in the wake of the steep premium hikes of 2017 (those programs were designed to be revenue neutral, as reduced premiums also reduce federal premium subsidies). And Trump also injected tens of billions of dollars into increased marketplace subsidies by cutting off direct reimbursement of insurers for the value of the Cost Sharing Reduction (CSR) subsidies added to silver plans for low-income enrollees (i.e., most silver plan enrollees) — as CSR ended up priced directly into silver plans, and so into premium subsidies, which are set to a silver benchmark. (See this post for an account of both of these policies.) While Trump boasted in the immediate aftermath that the CSR cutoff rendered the ACA “virtually dead,” CBO had forecast three months prior that ending direct CSR reimbursement would increase federal spending by $194 billion over ten years.
All of which is to say that the Trump wild card could turn up either way — though if he weighs in, I would bet on his malevolence. As I’ve noted previously, if his team opts to stand up a large-scale ACA-noncompliant market with medically underwritten plans, re-establishing the pre-ARPA income cap on subsidies would be essential.
I would not venture any forecast on this front. But it’s fair to say that extension of the ARPA subsidy boosts is at least possible.
Update, 12/10/24: From Politico’s Pulse newsletter, some important context: Democrats do have leverage in the CR negotiations:
Congress will likely pass a stopgap government funding measure before Dec. 20 and fund the government until March at its current levels. But considering House Speaker Mike Johnson’s razor-thin margin and a notable conservative faction of his conference that doesn’t generally support stopgap spending bills, known as continuing resolutions, House Democrats will likely be the ones to get the legislation over the finish line.