The Affordable Care Act’s enhanced subsidies are at risk of expiring at the end of 2025, and healthcare leaders are worried about what could happen if Congress doesn\u2019t renew them. For instance, more Americans would become uninsured, premiums would increase, and hospitals would be saddled with more bad debt due to uncompensated care.
\nThe post The High Stakes Of ACA Subsidies: What\u2019s At Risk For Hospitals And Patients appeared first on Above the Law.<\/p>\n
The Affordable Care Act\u2019s enhanced tax credits \u2014 which were introduced during the pandemic to expand healthcare affordability during a time of widespread unemployment \u2014 are at risk of expiration at the end of this year if Congress doesn\u2019t extend them. For many Americans, these expanded subsidies have meant the difference between affording routine care for themselves and their loved ones and skipping these visits entirely.\u00a0<\/p>\n
But it\u2019s not simply a matter of affordability and access. This looming policy change could also create significant challenges for hospitals already battling financial pressures.<\/p>\n
Healthcare leaders have a number of concerns about what could happen if Congress does not renew the ACA\u2019s expanded tax credits. Premiums could increase, a larger share of Americans could become uninsured, hospitals could be forced into more bad debt and uncompensated care, and most worrisome, American public health would deteriorate.<\/p>\n
Still, the hefty price tag of the ACA\u2019s enhanced tax subsidies makes it seem unlikely that they will be renewed by a Republican-led Congress \u2014 in fact, a bipartisan bill that was passed<\/a> in December to prevent a shutdown before Christmas didn\u2019t include it. An expert interviewed for this article noted that these subsidies were established to provide support during a public health emergency that has now expired \u2014 and they cost taxpayers $91 billion<\/a> last year.<\/p>\n When the ACA health insurance marketplaces launched in 2014, tax credits went into effect to make coverage more affordable for individuals and families. These tax credits \u2014 which are based on ACA shoppers\u2019 income and household size \u2014 were later expanded temporarily under the American Rescue Plan Act in 2021 and extended through the Inflation Reduction Act in 2022. This came in the form of larger subsidies and broader eligibility criteria\u200b.<\/p>\n When the marketplaces were first established, the government provided subsidies<\/a> to people earning 100-400% of the federal poverty level, and individual premium contributions ranged from 2.07-9.83% of their income.\u00a0<\/p>\n The American Rescue Plan Act and its extension under the Inflation Reduction Act boosted<\/a> these subsidies by lowering premium contributions to 0-8.5% of income and approved $0 premiums for people earning 100\u2013150% of the federal poverty level. The changes introduced during the pandemic also allowed Americans earning above 400% of the federal poverty level to qualify for subsidies if premiums exceeded 8.5% of their income.\u00a0<\/p>\n Char MacDonald, executive vice president of public affairs at the Federation of American Hospitals<\/a>, noted that these credits have played a key role in reducing the country\u2019s uninsured rate. Last year, the national uninsured rate reached an all-time low<\/a> of 7.9%.<\/p>\n \u201cWhat these tax credits have done is make sure that people have coverage for all the services they need \u2014 not just coming into the emergency room, but also that they continue with care that they need for their chronic condition, for oncology care, for primary care. That\u2019s where it\u2019s really critical \u2014 with the patients that we\u2019re seeing, the hospital is not the first stop, it\u2019s not the first entry into the healthcare system,\u201d she explained.<\/p>\n Expanded subsidies reduce patients\u2019 out-of-pocket costs, which makes them more likely to do things like book check-ups and preventive care appointments, MacDonald noted.<\/p>\n Jolene Calla, vice president of finance and legal affairs at HAP: The Hospital and Healthsystem Association of Pennsylvania<\/a>, agreed that enhanced ACA tax credits are a major factor leading patients to seek preventive care.<\/p>\n \u201cWe have seen people coming to the hospital more because they have coverage, and that is a good thing. When I say coming to the hospital, I mean for things like preventive care services, access to prescription drugs, and getting early diagnosis and treatment for some of the chronic conditions that become the most expensive when people show up in the ED,\u201d Calla remarked.<\/p>\n When people don\u2019t have affordable health insurance, they tend to delay care, skip primary care visits and forego screenings, she pointed out. This often means that their conditions progress into a less manageable state, resulting in more expensive and acute care episodes down the road.<\/p>\n In Calla\u2019s view, ensuring that Americans have access to affordable healthcare coverage \u201cmakes good financial sense.\u201d<\/p>\n When people have coverage, they are much more likely to make check-up appointments to maintain their health and visit an urgent care site rather than a high-cost emergency department, she explained.\u00a0<\/p>\n \u201cJust because you don\u2019t have coverage, that doesn\u2019t mean you don\u2019t get sick. These patients are still going to the hospital, and there is a cost to that. That means the hospital is going to end up paying for at least part of that uncompensated care \u2014 and that puts financial strain on the hospital because they might get some of that back, but they\u2019re generally not getting it all back, so they have to absorb that,\u201d Calla declared.\u00a0<\/p>\n That means hospitals then have to make tough decisions, like hiring less nurses or forgoing new equipment they may need to better serve their patients, she remarked.<\/p>\n She said that ACA tax credits \u2014 along with individual states expanding Medicaid coverage \u2014 have led to lower rates of uncompensated care at hospitals. Last year, Pennsylvania\u2019s uncompensated care rate dropped to 1.39%<\/a>, Calla noted.<\/p>\n \u201cBut still, even at that percent, that is $774 million that hospitals are not getting,\u201d she stated. \u201cCoverage is a really big deal for hospitals, and with the loss of the [tax credits], we expect that the number of insured patients is going to rise dramatically, and that\u2019s going to have a ripple effect on costs for hospitals and the amount they\u2019re losing.\u201d\u00a0<\/p>\n She noted that more than half<\/a> of Pennsylvania hospitals had negative operating margins in 2023.<\/p>\n \u201cIt\u2019s really bad timing for a really bad development for Pennsylvania patients and hospitals, if those [tax credits] were to go away,\u201d Calla said.<\/p>\n Another healthcare leader in Pennsylvania \u2014 Devon Trolley, executive director of Pennie<\/a>, the state\u2019s official health insurance marketplace \u2014 noted that her organization has seen a 50% increase in enrollment since the ACA\u2019s expanded subsidies were introduced.<\/p>\n This is because coverage is now more affordable for a wide variety of people \u2014 such as those with low and moderate incomes, self-employed people, short-term contract workers, individuals who have recently lost their jobs.<\/p>\n \u201cThere\u2019s a more affordable bridge from Medicaid to the private health plans through the marketplace. There\u2019s also more options for people who are above 400% of the federal poverty level. Before this, they had no tax credits. When they say 400% you may think that\u2019s a lot of money, but that\u2019s $60,000 per year for a single person, so it\u2019s not as big as it sounds. This is for people who really find full price coverage to be very challenging to afford,\u201d Trolley said.<\/p>\n If Congress fails to renew enhanced ACA subsidies, \u201cevery single enrollee through Pennie\u201d \u2014 which is more than 435,000 people \u2014 would be affected, she declared.<\/p>\n On average, premiums would rise by 81%, Trolley remarked.<\/p>\n \u201cIt would double, sometimes even quadruple, what they are paying for health coverage right now,\u201d she said.\u00a0\u00a0<\/p>\n Trolley said her main concern about the subsidies\u2019 potential expiration is that this would force thousands of families in her state to make difficult decisions about whether to maintain their health insurance coverage. Given the significant increase in out-of-pocket costs, many will drop their plan, which would reverse the \u201cincredible progress\u201d that\u2019s occurred since the enhanced tax credits were put into place, she stated.<\/p>\n Jeremy Nordquist, president of the Nebraska Hospital Association<\/a>, also expressed worry that uninsured rates would increase significantly if expanded subsidies are not renewed.<\/p>\n He noted that about 120,000 Nebraskans have health coverage through its state marketplace, and \u201cpretty much all of them\u201d are receiving enhanced tax credits. He also said that enrollment in the state\u2019s marketplace plans has increased by about a third since the subsidies were upgraded through the Inflation Reduction Act.<\/p>\n \u201cThe generous subsidies help reduce the average premium for those that are receiving subsidies by about 50%, obviously more on the lower income side than higher, but there\u2019s a big impact to those individuals getting coverage. Without them, we know more Nebraskans are likely to skip buying coverage and would remain uninsured,\u201d Nordquist declared.<\/p>\n If Congress does not renew the ACA\u2019s expanded tax credits, the nation\u2019s number of uninsured citizens would rise by 3.8 million each year on average from 2026 through 2034, according to estimates<\/a> from the Congressional Budget Office.\u00a0<\/p>\n The agency predicted that gross benchmark premiums would increase by 7.9% on average over the same period.<\/p>\n MacDonald of the Federation of American Hospitals pointed out that robust enrollment in ACA plans benefits the risk pool. The more people enrolled in the marketplace, the healthier the risk pool is, which brings down premiums for everybody, she stated.<\/p>\n \u201cIf we see the tax credits expire and people are unable to obtain insurance, you\u2019re going to see only the sickest patients enrolling, and that\u2019s problematic for the risk pool. That means the premiums are higher for everyone else, and it just has an effect that will continue and will be negative for everyone out there,\u201d MacDonald explained.<\/p>\n Nordquist of the Nebraska Hospital Association noted that the elimination of enhanced ACA subsidies \u201cwould be really disastrous\u201d for rural communities in particular.<\/p>\n Rural areas tend to have a higher percentage of people who are self-employed or employed by small businesses \u2014 oftentimes working in agriculture or trades like woodworking and blacksmithing, he said.\u00a0<\/p>\n He also pointed out that rural hospitals operate on extremely tight operating margins<\/a>. This is due to a number of factors, such as lower patient volumes and limited access to specialized services that generate higher revenue.<\/p>\n \u201cIf you now have a 10% uninsured rate in your community, as opposed to a 5% uninsured rate or even lower, it really makes the path hard to figure out how to break even at the end of the day,\u201d Nordquist declared.<\/p>\n Brock Slobach, COO of the National Rural Health Association<\/a>, pointed out that about half of rural hospitals are losing money<\/a> on operations.\u00a0<\/p>\n He said this share will grow significantly if expanded ACA tax credits are not renewed, which could force some hospitals to close their doors.<\/p>\n \u201cAbout 460 rural hospitals are in danger of closing, according to our statistics, and 216 of those are highly vulnerable to closure. So something like this, for those 216 highly vulnerable hospitals to closure, could really produce some significant negative impact,\u201d Slobach remarked.<\/p>\n If enhanced subsidies are not renewed, the negative impacts will be both immediate and long-term, Trolley of Pennie pointed out.<\/p>\n She highlighted the fact that about a quarter<\/a> of the U.S. population is between the ages of 45 and 64. Many people in this pre-Medicare age range are early retirees or people who have switched to lower-stress jobs that may not offer health insurance, she noted.<\/p>\n Without affordable ACA options, many of these people may opt to go insured and wait until they are eligible for Medicare, Trolley explained.<\/p>\n \u201cThere\u2019s a lot of focus on how to make Medicare more effective and how to curb some of the cost increases there. If you have people who are uninsured for five years before they hit Medicare and they haven\u2019t gotten preventive care or maintenance care for things like diabetes or heart conditions, they\u2019re going to hit Medicare with unmanaged chronic or serious conditions that are going to cost a lot more at that stage to treat than if they had gotten in early and been able to have that ongoing access,\u201d she declared.<\/p>\n The expiration of tax credits might also lead to a renewed focus on price transparency, said Josh Berlin, CEO of rule of three<\/a>, a healthcare consulting firm.\u00a0<\/p>\n The failure to renew these subsidies will make healthcare access even more unaffordable, which could ignite greater fervor around efforts to present pricing information transparently, he noted.\u00a0<\/p>\n \u201cYou might see a reemergence or doubling down of the transparency requirements, with some political support and maybe even bipartisan support, that could provide an emphasis on the way costs are transparently pushed out in and across the health system,\u201d Berlin stated.<\/p>\n Last month, Congress passed a stopgap funding bill that included <\/mark>some healthcare provisions, such as extensions for Medicare telehealth flexibilities and the Acute Hospital Care at Home program \u2014 but it did not extend the ACA\u2019s enhanced tax credits.<\/mark><\/p>\n In an interview \u2014 before the stopgap bill was introduced minus the tax credits extension \u2014 Michael Abrams, managing partner of Numerof & Associates<\/a>, predicted that it is not likely that Congress would extend the subsidies.<\/p>\n \u201cRepublicans have an issue with the legislation in the sense that they believe that the subsidies distort the use of the program by extending it to people who don\u2019t need it. Now, that may not have been true during the pandemic, but the question is, is it still true now?\u201d he remarked.<\/p>\n The ACA subsidies were expanded during the pandemic \u2014 a time when many Americans unexpectedly lost their jobs, Abrams pointed out. Now, the U.S. unemployment rate is 4.2%<\/a>, which is \u201cabout as close to full employment as we\u2019re going to get,\u201d he said.<\/p>\n In Abrams\u2019 view, Congress will probably use this logic: tax credits were expanded in response to a public emergency, and now that that emergency is over, it\u2019s time to wind these credits down.<\/p>\n \u201cThe ACA itself should not be competing with alternatives that are available to individuals through employment,\u201d he declared. \u201cIt\u2019s hard to, I think, justify the continuation of a program that was a Band-Aid for a particular point in time.\u201d<\/p>\n He also pointed out that \u201ctoo many people\u201d are focused on the fact that enhanced tax credits have increased ACA enrollment.<\/p>\n \u201cFor them, more enrollment in the ACA is an end in and of itself, but it shouldn\u2019t be. The ACA is a safety net kind of program, and not that there is no place for it, but whether it thrives or not is really a measure of strength of our economy. And if the economy is getting stronger, it\u2019s only logical that the use of the safety net program shrinks,\u201d Abrams explained.<\/p>\n If Congress takes this stance, \u201cthere is no question\u201d that hospitals will suffer negative financial consequences, which is why both hospital<\/a> and commercial insurance<\/a> lobbies are working hard to keep enhanced subsidies alive, he said. But at the end of the day, he has serious doubts their efforts will be successful.<\/p>\n Photo: Niyazz, Getty Images<\/em><\/p>\n","protected":false},"excerpt":{"rendered":" The Affordable Care Act’s enhanced subsidies are at risk of expiring at the end of 2025, and healthcare leaders are worried about what could happen if Congress doesn\u2019t renew them. For instance, more Americans would become uninsured, premiums would increase, and hospitals would be saddled with more bad debt due to uncompensated care. 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