WASHINGTON, D.C. – The biggest sticking point that has resulted in lack of a federal budget and the government shutdown is the high increase to health insurance premiums for millions of Americans and around 50,000 New Hampshire residents.
The proposed budget does not include renewal of the expanded health care tax credit for individuals and households who get health care insurance through the Affordable Care Act. The tax credit allows people whose income is above what’s needed for Medicaid to get a reduced health care premium under ACA, an estimated 24 million Americans.
Ripple effects include higher health care insurance premiums and copays overall, higher hospital costs, and big hits for small, rural hospitals that area already being affected by Medicaid cuts.
“I have been clear that my two priorities as we approach the end of the fiscal year are to avoid a government shutdown and to extend the ACA premium tax credits that keep affordable health care within reach for tens of millions of Americans,” U.S. Sen. Jeanne Shaheen, D-NH said in a Monday night news release.
Shaheen had voted against House Republicans’ continuing resolution, which would keep funding the government until a budget is agreed on, and also voted in favor Senate Democrats’ bill to fund the government with a provision that protected access to affordable health care. Neither bill passed.
Before 2021, those who got the tax credit had to have a modified adjusted gross income of less than 400% of the federal poverty guideline (which is $15,650 for an individual this year). That would be $62,600 in 2025. The American Rescue Plan in 2021 extended the premium to those with higher incomes, and the Inflation Reduction Act in 2022 extended it to the end of this year.
The extension caps the cost of ACA health insurance premiums at 8.5% of modified adjusted gross income (the income a person pays taxes on) for those who make more than 400% of the federal poverty guideline. That means that the tax credit covers the difference between 8.5% of income and what the person would pay for their own health insurance, usually 10-20% of income, analysts say. About 50,000 people in New Hampshire get the ACA expanded premium tax credit.
Republicans who oppose the extension argue that the credits were enacted to help people during the pandemic and are no longer needed. They also argue that the tax credits cost too much – about $35 billion a year – and people and households with the incomes allowed by the expansion should be able to afford their health insurance premiums.
Some Republicans also claim that Democrats want undocumented immigrants to be eligible for the tax credit. This isn’t true. To be eligible for ACA health insurance, the individual must be a legal U.S. citizen or a lawfully documented citizen, and no Democratic proposal changes that.
Senators and representatives and their staffs get insurance through the ACA’s Small Business Health Options Program, with the federal government, as their employer, paying an average 72% of the cost of a premium. Most uninsured individuals and households who get ACA don’t have an employer to help offset the cost; most of those who do are employed by a small business.
A Kaiser Family Foundation report released Monday said that insurance premiums will likely double for those who get their insurance from the ACA marketplace.
The expanded tax credits are designed to help people who don’t get insurance through their employers, Cynthia Cox, director of the Program on the ACA for KFF said in a PBS interview.
“This is really small business owners, farmers and ranchers, other people who work at small companies that don’t offer health insurance,” Cox said. “And so, for them, they’re buying their own insurance and getting a tax credit to help with the cost.”
She said premiums for 22 million who get ACA will double, or more, without the tax credit.
“This could mean that they have to, say, make a change to their employment and get a different job that does offer health insurance if they can’t afford to continue paying for their own insurance, or they might become uninsured if they just aren’t able to afford to continue that coverage,” Cox said.
Cox said the ripple effect is that it’s already having an effect on insurance markets, with some insurers “charging even higher premiums for next year because they think that healthier people are going to drop out of the insurance market.”
She said hospitals are also concerned that more people without insurance will show up in the emergency room, something hospitals have to cover the cost of.
“So they’re concerned that there might have an increase in the number of people who aren’t able to pay for their hospitalization,” Cox said. “That might mean that some hospitals, particularly in rural areas, where they’re already struggling, might have to close.”
In her news release Monday, Shaheen said that many of the millions of Americans who rely on the tax credits are small business owners and their employees, older Americans and people living in rural communities.
Shaheen is the author of legislation to permanently extend ACA enhanced premium tax credits, the Health Care Affordability Act, along with U.S. Rep. Lauren Underwood, D-Ill. It’s still in committee in the House and Senate.
“Without those tax credits, millions of Americans will have to make a difficult choice about what they’ll have to live without so they can afford health insurance,” Shaheen said during a Democratic spotlight hearing Monday. “I think that’s unacceptable in the United States of America.”
Shaheen, U.S. Sen. Maggie Hassan, D-NH, and nine other Democratic senators, as well as Maine’s Angus King, who is independent, held the spotlight hearing Monday on the impact not extending the tax credits will have. A spotlight hearing is an unsanctioned congressional hearing held by Democrats, since they’re not authorized to hold hearings because they are not the party in power.
Shaheen said at the hearing that not extending the tax credits will affect all Americans, not just those who rely on them for health care.
“An increase as large as what’s being projected for health insurance could be devastating,” she said.
She said small businesses will also feel the impact. She said every single business she’s talked to that has employees who rely on ACA health care has shared their concerns with her about the impact on their business and their employees.
“This comes after the president and congressional Republicans passed a bill this summer that kicks 10 million Americans off of Medicaid. That was done in order to raise the money to pay for a huge tax cut for the wealthiest Americans.”
She said the nonpartisan congressional budget office estimated that if nothing is done until the end of the year, 1.5 million people will already have lost their health insurance.
She said there is “real urgency” to extending the premium tax credit now, “because kicking the can down the road is going to make a real difference for working Americans.” She said if nothing is done at all, more than 4 million Americans will likely lose their health insurance and 24 million more will pay higher premiums.
“So, without those tax credits, millions of Americans will have to make the difficult choice about what they’ll have to live without so they can afford health insurance.”
Hassan, too, issued a statement pointing to the ACA tax credits as her reason for not siding with the Republican budget.
“The American people want to be able to afford health care and they want to keep the federal government open,” Hassan said. “I voted today for a bill that would have done both. Unfortunately, President Trump and congressional Republicans refused to work across the aisle and instead chose to shut the government down.”
Hassan added, “I urge leaders on both sides of the aisle, including President Trump, to come to the negotiating table and reach an agreement to protect health care and keep the government open.”
Shaheen said she has been “in intensive conversations with colleagues from both sides of the aisle on how to find a path forward.”