Shutdown deal leaves popular Obamacare subsidies on shaky ground

WASHINGTON — Expiring Obamacare subsidies face an uphill battle for renewal in the coming weeks as Democrats race against the clock to try to find enough Republicans willing to back an extension.

Millions of Americans facing a sharp spike in premiums must soon decide whether to pay the higher bills or forego health care, as insurance companies brace for a potentially large dent in revenue.

While some Senate GOP moderates say they would like to see the subsidies extended at least temporarily with some additional guardrails, leading health care policy voices in the party — long skeptical of the underlying Obamacare law itself — have sought to steer conversation away from the enhanced premium tax credits in favor of more sweeping alternative proposals that could reshape U.S. health insurance markets.

Lawmakers are running short on time. The subsidies expire at the end of the year.

“We start from the premise that Obamacare is a disaster and unaffordable, unsustainable, and so how do we provide access to coverage that is meaningful, but is sustainable?” Senator John Cornyn told reporters Monday. “There are many, many ideas and no conclusions.”

A group of eight Senate Democrats cut a deal with Republicans to end the shutdown in exchange for a vote in the coming weeks on the enhanced Obamacare premium tax credits expiring at the end of this year. The deal to resolve the shutdown didn’t guarantee the extension of the Affordable Care Act subsidies, and that omission sent health insurance stocks tumbling Monday.

Senate Majority Leader John Thune said Monday the Senate would try to strike a deal that addresses the expiration of the subsidies that lower costs for most of the 24 million people enrolled in ACA exchanges.

“My expectation is the president will want to do something on health care costs,” Thune said. President Donald Trump spent the weekend bashing Obamacare online and floating alternative plans that would send direct payments to enrollees.

Campaign fodder

Other Republicans were skeptical of reaching a compromise, noting the time constraints and cost of the subsidies.

In the House, the expiring premium tax credits face even higher hurdles. Speaker Mike Johnson has so far refused to promise a vote on the issue.

“I don’t think you can get a health care deal because it’s unaffordable,” GOP Senator Markwayne Mullin of Oklahoma said. Extending the subsidies for an additional year through 2026 would cost the federal government an estimated $23.4 billion.

Even the Democrats who struck the deal with Republicans acknowledged that the guaranteed vote was unlikely to result in an extension of the subsidies, but a vote would force Republicans on the record on the politically popular subsidies.

If such a vote fell short because Republicans objected, or if the GOP-led House refused to take up an extension plan at all, the failure to extend the popular policy could hand Democrats a potent political campaign issue leading into the 2026 midterm elections.

Democratic candidates in New York City, New Jersey and Virginia all won elections last week campaigning on the economy, and both parties expect affordability to be a central issue when voters go to the polls next year.

“Now we’ll see if they are really going to work with us to make sure that Americans can afford their health insurance,” Democratic Senator Jeanne Shaheen said on CNN.

‘I’d bet against it’

A handful of moderate Senate Republicans would like to see tighter limits to the Affordable Care Act subsidies, which cap premiums at 8.5% of household income for those making more than four times the poverty level and further lower costs for those making below that.

Maine Republican Susan Collins, who faces reelection next year in a state Trump lost in 2024, said she would like to extend the subsidies with an income cap.

Senator Thom Tillis, a retiring Republican from North Carolina, said a one-year extension paired with a “serious strategy” to bring down health care costs, not just premiums might win enough GOP support to pass.

Of the chances for a clean one-year extension without policy changes, Tillis said, “I’d bet against it.”

While Democrats might agree to an extension to the subsidies with small changes, such as an income cap or a minimum premium payment, Republicans charged with negotiating with them seem to be taking things even further.

Senator Bill Cassidy, who is taking the lead on negotiations along with Senate Finance Chairman Mike Crapo, according to Collins, is pitching an alternative plan that would replace the enhanced premium tax credits, which are paid to insurance companies, with federally funded flexible spending accounts for ACA enrollees.

Cassidy, in a speech on the Senate floor, touted his plan’s alignment with Trump’s call on Congress to use the money it would cost to extend the enhanced premium tax credits to people directly to spend on health care needs.

“Instead of paying insurance companies to manage more of our money, let’s trust Americans to manage those extra dollars and manage their own care,” said Cassidy, who chairs the Health, Education, Labor and Pensions Committee.

That idea is unlikely to gain traction with Democrats. While Shaheen told reporters she hadn’t yet seen the Cassidy proposal, she said extending the subsidies themselves must be part of any deal.

“We’ve got to address that as part of it, because we’ve got to address health insurance costs,” Shaheen said Monday, adding that she thinks there’s “a fair amount of common ground on the subsidies.”

Shares fall

Markets reacted poorly to the news that the deal to end the government shutdown wouldn’t extend the health care subsidies — as well as to Trump bashing the ACA subsidies over the weekend as a handout to health insurance companies.

Shares of health insurers with significant business in the Affordable Care Act exchanges dropped Monday as it became clear lawmakers do not intend to extend expanded subsidies alongside government funding legislation. Centene Corp. plunged 8.8%, Oscar Health Inc. dropped 17.5% and Molina Healthcare Inc. fell 7.3% at the close of regular trading Monday.

UnitedHealth Group Inc closed down less than 1% Monday after Chief Financial Officer Wayne DeVeydt said at the UBS Global Healthcare conference that the managed-care provider had assumed that the enhanced tax credits wouldn’t be extended. The company expects its ACA business to reach low-single-digit profit margins next year, he added.

David Merritt, who leads external affairs for the Blue Cross Blue Shield Association, said that 100% of the tax credits are applied to lowering premiums that people pay for health insurance. Health insurers are ready to work with regulators to update premiums if Congress extends the enhanced subsidies, Merritt said.

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With assistance from Steven T. Dennis and John Tozzi.

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