House Speaker Mike Johnson and Republican leadership are responding to the looming expiration of Obamacare insurance subsidies by offering legislative measures that the party has long sought, and have faced stiff resistance from Democrats.
Johnson’s legislation, the Lower Health Care Premiums for All Americans Act, is a hodgepodge of Republican priorities for healthcare that have failed to pass through the legislature in the 15 years since the passage of the Patient Protection and Affordable Care Act, also known as Obamacare.
House Republicans are aiming to drive this healthcare bill through using the urgency of addressing the looming expiration date for enhanced premium subsidies for Obamacare enrollees.
During the pandemic, Democrats passed enhanced premium tax credits for Obamacare enrollees, expanding subsidies to more people of higher incomes than were eligible under the original 2010 Obamacare structure. Those enhanced subsidies were designed to expire as of January 2026, creating what policy experts refer to as a “subsidy cliff.”
The enhanced subsidies caused enrollment in the Obamacare exchanges to more than double, with 24 million enrolled this year, but the Congressional Budget Office estimates that roughly 4 million people will no longer be able to afford Obamacare plans if the subsidies expire at the end of the month.
Centrist Republicans have been negotiating with Johnson and fiscal hawks for a bipartisan agreement to extend the subsidies temporarily, but Johnson told reporters Tuesday that ultimately “an agreement wasn’t made.”
The healthcare bill that Johnson is offering as an alternative does nothing to address the premium tax credit issue, but it includes several reforms that Republicans have long supported, which they claim will lower the cost of health insurance for all Americans, not just those on Obamacare plans.
House Rules Committee Chairwoman Virginia Foxx (R-NC) praised the new bill during a preliminary meeting, advancing it to a floor vote scheduled for Wednesday.
“Unlike those who manufactured the unaffordable Care Act, Republicans are offering a clear, responsible, and straightforward solution so that all Americans have access to health care that is affordable and meets their needs,” said Foxx.
Rep. Jim McGovern (D-MN), the top Democrat on the Rules Committee, said that the bill’s introduction proves “Republicans are perfectly comfortable with our broken system.”
“They’re bringing up a bill that was slapped together at the last minute, a bill that does nothing, nothing, nothing to solve the problem of premiums skyrocketing, in just a few weeks, and a bill that is dead on arrival in the Senate,” said McGovern.
Here’s a breakdown of the key provisions in the Lower Health Care Premiums for All Americans Act.
Appropriating Cost-Sharing Reductions
Front and center in Johnson’s healthcare bill is the appropriation of cost-sharing reductions, a secondary subsidy system built into the original Obamacare law. Cost-sharing reductions lower an enrollee’s out-of-pocket costs, such as deductibles and copayments, for those who opt for mid-tier Obamacare insurance coverage, referred to as silver plans.
From the start of the Obamacare rollout in 2014, the federal government paid insurance companies directly for cost-sharing reductions, amounting to $7 billion annually by 2017. However, a federal court ruled in 2016 that CSR payments without explicit congressional appropriation were illegal.
In 2017, the Trump administration chose to end CSR subsidies to insurance companies, but the companies were still required to provide enrollees with lower out-of-pocket expenses.
That in effect incentivized insurance companies to dramatically increase the costs of silver plans, or “silver-load.” This “silver-loading” also allowed insurance companies to collect higher subsidies through premium tax credits, which are tied to the costs of silver-plan premiums.
Brian Blase, head of the free-market think tank Paragon Health Institute, has argued that properly appropriating CSR subsidies will lower the costs to the government of paying for premiums overall and reduce federal spending. He and other supporters argue that CSRs are a more efficient way to reduce insurance premium costs compared to premium tax credits, which conceal the true cost of insurance.
“A CSR appropriation is a true policy no-brainer that lowers ACA premiums and federal deficits and aligns the ACA with its original design,” Blase said in November before the Senate Finance Committee.
The CBO estimated on Tuesday that appropriating CSRs would decrease benchmark silver plan prices by an average of 11% over a decade.
But Democrats raised the objection that, according to the CBO estimates, the plan would results in an average 100,000 people per year from 2027 to 2035 losing health insurance coverage, on top of the 4 million expected to lose coverage as a result of the expiration of the enhanced premium tax credits.
Expanding non-traditional health insurance options
The GOP bill would allow for small employers and self-employed workers to band together in Association Health Plans allowing workers across industries to use collective bargaining to purchase better group rates.
The bill would also create CHOICE Arrangements, which allow employers to provide their workers with tax-free money to purchase their own health insurance plans. This provision strengthens a first Trump administration rule from 2019.
House Ways and Means Committee chairman Jason Smith (R-MO) said that offering alternative plans “levels the playing field for the 66 million workers at small businesses by giving them the same pre-tax benefits utilized by Fortune 500 companies offering health coverage.”
“This would allow employers to provide tax-free contributions to workers who can then use those payments to purchase health coverage that they choose because it works for them,” Smith said.
Pallone called the Association Health Plans “junk insurance” that hearken back to pre-Obamacare plans that covered very few medical circumstances.
“What’s going to happen is, once again, people are going to think, I’m going to go out and buy a policy, and the policy is going to cover my healthcare, when, in fact, it does not,” Pallone said.
Bipartisan PBM reform
Long-awaited bipartisan measures regulating the practices of Pharmacy Benefits Managers are also incorporated into Johnson’s bill, adding a bipartisan area of compromise into a hotly partisan legislative package.
PBMs serve as intermediaries between drug manufacturers, insurers, and employers, negotiating rebates from pharmaceutical companies and determining coverage for insurance plans.
Johnson’s bill recycles language from bipartisan PBM reforms that have advanced in both chambers but failed to reach final passage.
OBAMACARE FRAUD BOOSTS FISCAL CONSERVATIVES IN SUBSIDY FIGHT
While most of the deficit reduction power behind Johnson’s bill comes from CSRs, implementing these PBM reforms is slated to decrease the deficit by $1.9 billion over 10 years.
Earlier this month, Senate Finance Committee leadership, led by Mike Crapo (R-ID) and Ron Wyden (D-OR), introduced a targeted PBM reform bill comparable to the 2024 legislation.
All but six members of the Finance Committee co-sponsored the Crapo-Wyden bill, signaling a possible point of compromise should Johnson’s bill make it to consideration in the Senate.
