Opposition from fiscal conservatives could block a bipartisan compromise on extending Obamacare subsidies that are set to expire at the end of the year.
Forging a compromise between Republicans and Democrats over the expiring COVID-19-era subsidies for Obamacare marketplace insurance premiums is likely a necessary step to end the longest government shutdown in history and avoid out-of-pocket premium costs doubling on average for Obamacare enrollees next year.
But fiscally conservative policy experts contend that a short-term compromise to extend the subsidies would be tantamount to propping up Obamacare, which Republicans have never supported and tried for years to repeal, starting in 2010.
Brittany Madni of the conservative think tank the Economic Policy Innovation Center told the Washington Examiner that an extension of the subsidies would also represent a missed opportunity for conservatives to advocate free-market reforms, such as association health plans and increasing access to health savings accounts.
“This is a moment where members are looking at the system with clear eyes and saying, ‘Wait a minute, why exactly are premiums so high?'” Madni said. “If Obamacare was affordable, we wouldn’t be having a discussion of subsidies in the first place. What needs to be done to fix that, and a huge part of that is reinjecting freedom into the conversation.”
If the subsidies, known as the enhanced premium tax credits, expire at the end of the year and the original Obamacare income caps for subsidies, which were temporarily lifted by Democrats originally as COVID-19 relief in 2021 and 2022, the Congressional Budget Office estimates that roughly 3.6 million people will no longer be able to afford health insurance.
To avoid what health policy experts call the “subsidy cliff,” Reps. Don Bacon (R-NE), Tom Suozzi (D-NY), Jeff Hurd (R-CO), and Josh Gottheimer (D-NJ) on Monday released what they called a “statement of principles” for a temporary extension of the COVID-19-era subsidies for Obamacare marketplace insurance premiums.
The brief proposal included a two-year extension of the subsidies, several enrollment eligibility verification measures, and a vague income cap requirement to be “phased out between $200,000 and $400,000.”
Senior staff for Bacon confirmed to the Washington Examiner on Wednesday that the proposal is a “springboard” for discussion and that conversations among the four members are ongoing, but the lack of detail makes it difficult for analysts to evaluate its feasibility.
Chris Pope, health policy expert for the Manhattan Institute, told the Washington Examiner that some sort of temporary extension of the PTCs was likely regardless of the shutdown since “Republicans don’t want to be blamed for premium increases,” but it is very hard to predict what the outcome will look like, since the GOP has never negotiated with Democrats on Obamacare.
“We’ve seen the parties negotiate over Medicare, we’ve seen them negotiate over Medicaid, but we’ve never actually seen them negotiate over Obamacare credits or even any kinds of benefits for this sort of cohort, and so we don’t really know where they’re likely to fall,” Pope said.
Pope said he was skeptical of the lack of specificity within the bipartisan compromise measure itself, particularly as to what income levels would receive subsidies and how much.
Former President Barack Obama’s original healthcare legislation set an income cap of 400% of the federal poverty level, roughly $128,000 for a family of four, to be eligible for the PTCs, which capped out-of-pocket costs for premiums to 9.5% of total income for the highest earners.
But the COVID-19-era enhancements, enacted originally by Democrats in the 2021 American Rescue Plan Act and the 2022 Inflation Reduction Act, removed those income limits entirely. These laws made it such that individuals enrolled in Obamacare marketplace plans paid a maximum of 8.5% of their income on insurance premiums, regardless of their total income.
Pope’s main question with the bipartisan compromise proposal from the House is whether all income brackets will receive subsidies, and at what percentage of income will premium spending be capped.
“Whose credits get extended? Everyone’s credit? Is it some subset of people getting the credits? I mean, there are 100 different ways you could slice them,” said Pope.
The CBO estimated that making the enhanced subsidies permanent would cost upwards of $350 billion. It is unclear how much it would cost if a new income limit were put in place or if the subsidies were only extended for the next two years.
Madni said that one of her concerns with the bipartisan proposal is that any temporary extension will inevitably become permanent.
“They started in ARPA; they were extended in the IRA. This is the end of the temporary off-ramp extension. Any extension at this point ultimately amounts to permanence,” said Madni.
Madni also said that Republicans need to insist in their negotiations that any federally subsidized health insurance plans do not fund elective abortions or gender transition treatments for minors. The original Obamacare legislation does not include Hyde Amendment protections, which prohibit federal dollars from being spent on abortions other than in the cases of rape, incest, and life of the mother.
Fiscal conservatives within the GOP have been relatively silent about the compromise measure proposed by their colleagues. But in recent weeks, they have been increasingly vocal about the reasons not to extend the subsidies.
Sen. Rand Paul (R-KY) said on Fox News Business Wednesday morning that Democrats are “holding the government hostage for subsidies for rich people.”
“These aren’t even subsidies or gifts or grants for poor people, they’re subsidies for rich people. Nobody making $250,000 a year should be getting any money from government,” said Paul.
Other fiscal hawks, including Rep. Chip Roy (R-TX) and Andy Harris (R-MD), have railed against the tax credits as effectively a bailout for insurance companies that keeps premium prices high rather than a substantial benefit to enrollees.
FISCAL HAWKS TAKE AIM AT INSURANCE COMPANIES IN OBAMACARE SUBSIDIES FIGHT
House Energy and Commerce Chairman Brett Guthrie (R-KY) told Breitbart on Tuesday after the compromise measure was announced that Democrats have “not once approached me, or my staff, to find a path forward” on lowering healthcare costs without extending the subsidies.
“We stand ready to work across the aisle to advance real solutions that address the root causes impacting healthcare affordability,” Guthrie said.
