Action on health insurance subsidies urged

As budget negotiations play out in Congress, Houston health care leaders are urging lawmakers to maintain federal subsidies that have helped millions of Americans afford health insurance.

The number of Texans enrolled in Affordable Care Act plans has doubled since Congress passed enhanced premium tax credits in 2021, to nearly 4 million this year. Almost all of them could see the cost of their health insurance premiums increase if the subsidies expire at the end of 2025.

If the tax credits expire, ACA premiums could increase by more than 115% -- or $456 annually -- in Texas, according to an estimate from the health policy organization KFF. Certain groups, such as higher-income enrollees or adults nearing retirement age, could see their premiums increase by thousands of dollars per year.

Leaders from Harris Health, Houston Methodist, Memorial Hermann Health System, St. Luke's Health and HCA Houston Healthcare have urged the city's congressional delegation to support an extension of the tax credits. In a letter to lawmakers, they said many Texans will lose their coverage because they will be unable to afford the higher costs.

"We need to make sure that our politicians understand that this is beyond whatever ideological differences they may have about the Affordable Care Act," said Dr. Esmaeil Porsa, the president and CEO of Harris Health, in an interview. "This is really going to be harming our communities, especially communities that really are already struggling."

The tax credits do not expire until the end of the year, but there is urgency for lawmakers to act before the ACA marketplace's open enrollment period begins Nov. 1.

If the subsidies are not extended before then, Americans will see higher prices when they go to sign up for health insurance, said Lynn Cowles, the health and food justice director at the nonprofit Every Texan.

"It's becoming really evident to people that there are some pretty dire consequences coming up if the enhanced tax credits expire," she said.

Premium tax credits

Congress created the tax credits in 2021 through the American Rescue Plan Act, also known as the COVID-19 stimulus package. The subsidies have helped to lower or offset health insurance premiums for many Americans, with KFF estimating that 22 million Americans have saved an average of $705 annually.

The tax credits have been a key reason that enrollment in the ACA marketplace has more than doubled since 2020, to more than 24 million enrollees this year, health policy experts have said.

Roughly half of ACA enrollees are small business owners, small business employees or self-employed, said Katherine Hempstead, a senior policy officer at the Robert Wood Johnson Foundation. Small businesses are less likely to offer health insurance than larger employers, so the subsidies have helped many entrepreneurs afford health coverage.

"If you ruin this resource, you also might stymie entrepreneurial activity," Hempstead said.

If the tax credits expire at the end of the year, the Congressional Budget Office has estimated that the higher cost of premiums could lead to an additional 4.2 million Americans becoming uninsured by 2034.

Effect on Texas

The subsidies have helped to reduce health insurance premiums for about 3.4 million Texas residents, including more than 667,417 in Harris County, the Houston health care leaders said in the letter to lawmakers.

Texas residents could see "devastating" cost increases if the subsidies are not extended, the health care leaders said in the letter. They estimated that couples in their 60s could see their out-of-pocket costs triple to about $17,500 annually.

"Clearly, there's going to be a sticker shock for a lot of residents," said Troy Villarreal, president of HCA Healthcare's Gulf Coast Division and HCA Houston Healthcare. "At the end of the day, if you have your insurance go up by $17,000, you're most likely not going to buy insurance."

The subsidies have had other benefits aside from lower costs, Porsa said. Studies have found that people with health insurance are more likely to seek routine and preventative care.

If the enhanced premium tax credits expire, though, many could lose their health coverage and opt to forgo routine care, Porsa said. That could lead to worse health outcomes, and make it more expensive to care for those patients when they become very sick, he said.

"Forget about the fact that the cost of care is going to skyrocket," Porsa said. "That person will have a more limited livelihood and life expectancy than they would have if they had gone to any hospital to take care of the situation (sooner)."

Biggest changes

The enhanced premium tax credits expanded eligibility to individuals making more than 400% of the federal poverty level, many of whom are adults nearing retirement or small business owners. They also capped premiums for a benchmark ACA plan at 8.5% of a person's income.

If the subsidies expire, it could lead to significant cost increases for the 126,000 enrollees in Texas who make more than 400% of the federal poverty level. A 55-year-old couple making $85,000 annually could see their premiums triple to more than $24,000 per year, according to a KFF analysis.

That could put many Americans in the position of making the difficult decision of whether to keep their health coverage, said Brendan Buck, a spokesperson for the Keep Americans Covered coalition that has been advocating for maintaining the subsidies.

"It's been estimated that millions of Americans are going to be priced out of the market entirely," Buck said. "You lose that peace of mind, and you lose that safety net in case something happens to your family."

Additionally, some lower-income enrollees could be paying a monthly premium for the first time if the subsidies expire, Cowles said. She worries many of those enrollees could lose coverage if they struggle to navigate the complexities of the system.

"It's one more bill to pay every month. But if it's one that people are not used to paying, then they will likely forget it," she said.

State of negotiations

Democrats have made extending the tax credits a top priority in negotiations over a bill to fund the government. Lawmakers must reach an agreement by Oct. 1 to avoid a shutdown.

Republicans did not include an extension of the subsidies in the sweeping tax breaks and spending cuts bill passed earlier this year, but they have signaled a willingness to negotiate in recent weeks. When the news outlet Semafor asked U.S. Sen. John Cornyn about the possibility of allowing the subsidies to expire, he responded: "I don't think that's a good idea."

Buck said politicians from both parties have begun to believe that "something needs to be done" before the subsidies expire.

"Both parties probably have different views on what that something is, but I think what's become very clear is there's a bipartisan recognition they can't just let these tax credits expire," Buck said.

The most significant hurdle to an agreement has been the cost of maintaining the tax credits. The CBO has estimated that a permanent extension would cost $335 billion over the next 10 years.

However, many lawmakers have acknowledged the importance of the issue, because it's one that affects families across the country, Villarreal said.

"It's a kitchen table issue," Villarreal said. "It doesn't really matter whether you're a Republican or Democrat, it's going to be millions of people that are going to lose (coverage)."