Tick Tock . . . The Clock Is Running Out on Enhanced Premium Subsidies for Obamacare
How Congress is plotting to raise health insurance costs for families
Today, financial pressures are a real sore point for ordinary Americans, now that half of U.S. households lack enough income to live on. For earners in the bottom half, homeownership is increasingly unattainable, retirement savings are scant, and college education usually means going into debt. Their wages have been stagnant and their jobs are insecure. Many live lives of quiet financial desperation.
Instead of thrusting heavy economic risks on individual families’ shoulders, it would make more sense to pool those risks and spread them across society. Some households bear more risk, some bear less, but usually those risks do not materialize for everyone at once. By sharing risk across society, everyone pools their funds (now or down the road) to cover losses to the group. If the worst happens and the risk strikes a member, the injured person does not bear the loss alone. Instead, the pool will defray most or all of the loss. In the process, risk sharing improves everyone’s well-being by protecting them from financial losses while giving them peace of mind, as I discuss in my new book Sharing Risk: The Path to Economic Well-Being for All.
In the United States, risk-sharing arrangements are nothing new. There are many familiar examples, ranging from Social Security and unemployment insurance to homeowners’ insurance and health insurance. Unfortunately, some of the most crucial risk-sharing arrangements are teetering and in dire need of modernization. Meanwhile, government and businesses have shifted increasing amounts of financial risk onto ordinary households.
However, I do have one piece of good news to report. In the past 60 years, the United States has made major strides in giving access to health insurance to virtually everyone. This monumental achievement took years and was extremely hard won. But now it is in jeopardy. That is because Congress is poised to dismantle health coverage in several devilishly fiendish ways, as I will discuss in this column. And if Congress succeeds, the financial squeeze on households will grow.
We can trace the first improvements in health coverage back to 1965, when Congress passed Medicare and granted universal health insurance to people age 65 and up. Medicaid, enacted that same year, extended health coverage to a narrow group of “deserving poor.”
Despite these advances, other yawning gaps in health coverage became apparent over time. In the individual market, private insurers increasingly refused to cover pre-existing conditions or preventative care. They also refused to insure young adults on their parents’ policies. Meanwhile, private-sector employers did not have to offer health insurance (absent a union contract) and many did not. Finally, most poor, childless adults could not qualify for Medicaid, even if they were working (which most of them were).
Congress took significant steps to close those gaps in the Affordable Care Act (the ACA) in 2010. First, the ACA requires large employers (with 50 full-time employees or more) to offer health insurance to their employees or pay a tax penalty. Second, as I discussed last week, Congress expanded Medicaid to cover virtually all poor and near-poor residents, at least in the 40 states (plus the District of Columbia) that adopted this expansion. Finally, Congress created the new “Marketplace” (popularly known as “Obamacare”), which offers individual health insurance policies to almost everyone else under age 65. These are high-quality plans providing a broad range of coverage, including for pre-existing conditions, prescription drugs, preventative care, and children through age 26.
Today, by virtue of these landmark pieces of legislation, virtually all U.S. citizens and lawful residents have access to good health coverage. This is a signal achievement and noticeably improved conditions for millions of families.
When Congress created Obamacare, it worried that too few healthy people would enroll in Marketplace plans if the cost drove them away. To address this problem, Congress provided subsidies to make Marketplace policies more affordable. There are two types of subsidies: one for health insurance premiums and the other for other out-of-pocket expenses that come with health insurance.
The first of these are “premium tax credits,” which, as their name implies, help keep premiums down on Marketplace plans. During the COVID-19 pandemic in 2021 and again in 2022, Congress sweetened these premium tax credits substantially and extended those higher credits temporarily, through the end of this year. The amount of people’s premium tax credits varies by income. The biggest tax credits go to those making less than $23,475 in 2025 a year (for an individual) or $48,225 a year (for a family of four). These beneficiaries can enroll in Marketplace plans for $0 or almost $0 in premiums. At higher income levels, households pay bigger premiums as their incomes rise. And for the highest earners, the subsidies phase out. To get some sense of how prevalent premium tax credits are, fully 92 percent of people who signed up for Marketplace plans for 2025 received subsidized premiums, with the monthly premium averaging $113 this year.
“Cost sharing reductions” are the other Marketplace subsidy. These reductions help offset deductibles, coinsurance, and copays. Compared to premium tax credits, cost sharing reductions have lower income cutoffs. Still, about half of Marketplace participants qualified for cost sharing reductions for 2025.
These subsidies have made it possible for families to get Marketplace coverage who otherwise could not afford it. As a result, Obamacare is now highly popular, with 24.3 million people enrolled in Marketplace plans in 2025. This is the highest enrollment ever, and Obamacare enrollments have risen every year since 2020, thanks in part to the subsidies.
What a difference fifteen years makes. Back in 2010, the Affordable Care Act was highly contentious, due to widespread resentment of the “individual mandate.” Opposition was so fierce that by 2017, Republicans in Congress tried to repeal or prune the ACA at least 70 times without success. In the meantime, more and more people who had been shut out of individual health plans before 2010 flocked to Marketplace plans. After Congress eliminated the unpopular fine for not having health insurance effective 2019, Obamacare enrollments more than doubled between 2020 and today.
Not surprisingly, given the high take-up of Obamacare plans, congressional Republicans are no longer calling for Obamacare’s outright repeal. Instead, they are taking a different tack, which is to keep Obamacare in name but make it harder to enroll—and make Obamacare unaffordable—for millions of Americans.
The One Big Beautiful Bill Act, which the House of Representatives passed last month, goes about this through a series of almost impenetrable provisions that amount to death by a thousand cuts. These provisions, all told, would make it highly inconvenient to apply for Obamacare. They would also slash the premium tax credits and make fewer people eligible for them.
So how would the bill go about this? Let us count the ways. First, Congress would chop the annual open enrollment period in half, down from 90 days to 45 days, to give people less time to sign up. If they needed to prove their eligibility, now they would have only half the time to pony up the necessary documents. Just to tighten the screws, the House bill further says that people would no longer have an automatic 90-day extension to verify their incomes.
Second, people already on Obamacare would not be automatically re-enrolled. Instead, they would have to take active steps to sign themselves up again.
Third, the Marketplace system would eliminate one-stop shopping for many people. Right now, one great thing about Obamacare is that people can log on to a Marketplace exchange and enroll in one easy session. (Trust me, I helped enroll a relative and it worked really well). One reason the online system works is that the Marketplace checks federal databases instantly to verify information such as income and citizenship, while applicants are still online. Under the new legislation, however, numerous applicants would lose this streamlined processing. Instead, they would have to round up paper documents and submit them to prove things like income, family size, and citizenship status. Then Marketplace employees would have to review them manually.
Fourth, the clock is ticking on an extension of the higher amounts of premium tax credits, which Congress only approved through 2025. The House, however, does not plan on renewing those increases, which would cause the premium tax credits to shrink in size. If that occurred, Obamacare premiums would go up considerably for over 90 percent of participants next January. This is the most underhanded of all of the House’s decisions, because the One Big Beautiful Bill says nothing on the subject: the House would just let the higher tax credits lapse. The Congressional Budget Office recently estimated that this would cause 4.2 million participants to lose their coverage in 2034.
Fifth, the One Big Beautiful Bill would also tinker with formulas for Obamacare premiums and the premium tax credits. The result would be to push premiums even higher.
And finally, other parts of the House bill would create more red tape for people to qualify for premium tax credits. If their documentation didn’t check out, they would lose their subsidies. The bill singles out people who currently paying $0 in premiums for special scrutiny in that regard.
Last week, the Congressional Budget Office predicted these Obamacare changes would cause the number of uninsured to jump by 7.3 million people in 2034. On top of that, the One Big Beautiful Bill would cut Medicaid, pushing 7.8 million more people off of health coverage that year. That’s a grand total of 15.1 million uninsured in 2034, most of whom would be forced to make hard choices between getting the medical care they need or paying for their other necessities of life.
Alarming as these numbers are, the House’s proposed cuts could further destabilize Obamacare’s finances and deal it the death blow. If Congress enacts the proposed House cuts into law, predictably, the sickest people would do whatever they must to keep their Marketplace policies, while many younger, healthier people would go uninsured in order to save money. But risk-sharing programs like Obamacare cannot survive if everyone in the pool is high risk. If that occurs, insurers would likely have to raise premiums to cover higher and costlier claims. That, in turn, would drive more safe customers away, potentially leading to a death spiral where high claims capsized the Marketplace and caused its insolvency. Bottom line, if the House proposals become law, those provisions will put Obamacare’s survival at stake.