Older, self-employed enrollees more likely to lose ACA subsidies if enhanced tax credits lapse: KFF

Dive Brief:

• Older Americans, self-employed people and those living in rural areas are disproportionately likely to lose federal subsidies for health plans purchased on the Affordable Care Act marketplaces if enhanced premium tax credits expire, according to an analysis by KFF.
• Nearly all ACA enrollees will see their premiums rise if the more generous financial assistance expires at the end of the year. But beneficiaries who earn more than four times the federal poverty level wouldn’t be eligible for subsidies at all, leaving them on the hook for the full price of their insurance, according to the health policy research firm.
• People who are close to retirement or recently retired are one group who could be disproportionally likely to lose subsidies. About half of enrollees with incomes over four times the poverty level are between the ages of 50 and 64, compared with 23% of the non-elderly population. 

Dive Insight:

The enhanced subsidies, first enacted in 2021, provide higher premium tax credits to most enrollees in ACA plans, and allow beneficiaries with higher incomes to receive financial assistance when they were previously ineligible.

Higher-income beneficiaries on the exchanges are a relatively small group. Only 7% of ACA marketplace enrollees reported an income over four times the federal poverty level last year, according to administrative data reviewed by KFF.

But these enrollees were exposed to high insurance costs before the enhanced subsidies went into effect, sometimes pricing them out of ACA coverage entirely and leaving them uninsured or reliant on skimpy short-term plans, according to the researcher. 

The enhanced financial assistance will expire at the end of the year without congressional action — and it could significantly increase the amount that this higher-income group pays for insurance. For example, a 60-year-old couple earning $85,000 each year would see their monthly premium increase by more than $1,500, according to KFF.

Some groups are more likely to fall into this gap. Nearly 40% of non-elderly adult enrollees with incomes over four times the federal poverty level are self-employed, compared with just 7% of the U.S. adult population. 

Additionally, 15% of people covered through ACA plans who would lose access to the subsidies live outside metropolitan areas, compared with just 9% of all Americans who have similar incomes.

Allowing the increased financial assistance to lapse at the end of the year is a politically tricky proposition, as they’ve helped more people afford coverage, experts say. Republicans don’t want the federal government to spend more on the ACA, but it can be a challenge to take away assistance — especially if cuts directly affect their constituents.

Plus, failing to extend the subsidies could have negative consequences for state economies, according to a report published this week by the Commonwealth Fund and the George Washington University Milken Institute School of Public Health.

The impact could be particularly severe for the 10 states that haven’t expanded Medicaid. About 194,000 of the 286,000 total job losses linked to the end of the financial assistance would come from these states, according to the report.