Summary:
- Congress should extend the year-end expiring Affordable Care Act (ACA) premium tax credits relied upon by 22 million Americans to afford health coverage.
- Congress should not recklessly rush in the next few weeks to replace the ACA because there is no draft legislation and no time for hearings and vetting.
- Republicans have floated at the last minute, vague alternative ideas to replace the tax credits, apparently to deflect public blame when ACA premiums double on January 1st.
The Responsible Approach: Extend the Tax Credits for Several Years
In the next two weeks before recessing for the holidays, Congress is scheduled to vote on whether to extend the ACA premium tax credits that make health coverage affordable for 22 million Americans (including 900,000 North Carolinians). These ACA insureds are mainly self-employed or work for small employers. They rely on the premium tax credits for affordable coverage because their employers do not provide group health insurance.
Without an extension, their tax credits expire December 31st ,and their health insurance premiums will double on average. For insureds who are older or have lower incomes, their premiums will be much higher. An estimated four million will drop coverage. The rest will pay the steep premiums and face financial hardship.
At this late date, the American public is best served by extending the expiring premium tax credits for several years. A straightforward, bi-partisan bill exists to extend the tax credits with only minor agreed-upon changes. This legislation would provide Congress with the time needed to carefully draft and discuss any future reforms to improve healthcare access and affordability.
In addition, an extension would allow voters an opportunity to have a say on reforming their health coverage. In the 2024 election, presidential and congressional candidates did not significantly discuss, much less debate, replacing the ACA. Before the November 2026 elections, Senate and House candidates could present different proposals to voters, who then could weigh in on their preferences.
The Reckless Approach: Pass a Last-Minute, ACA Overhaul Without Any Review
Republicans recently have tossed out various, vague alternative ideas to replace extending the ACA credits. As of December 4th, however, they have released no specific legislation, held no hearings, and had no public input. Congress is in no position to pass last minute major changes in this critical, complex area.
Because of their importance and complexity, health coverage reforms should be developed transparently and deliberately. Trying to draft and adopt complex health coverage changes in a few weeks is a recipe for disaster. The inevitable result will be poor draftsmanship and hidden larding of the bill with special interest goodies for the powerful. Health coverage is too important for Americans’ well-being to be treated so cavalierly.
This Congress has had an entire year to draft legislation, hold hearings, craft revisions, and pass transparent and well-vetted legislation. Its irresponsibility should not be used as an excuse to pass hasty, ill-considered legislation.
Even worse, because the ACA tax credits expire December 31st, any new legislation (or transition provisions) would also have to be implemented in a few weeks to protect the 22 million Americans facing doubled premiums. This is impossible. The resulting chaos would harm not only millions of ACA insureds but potentially create chaos in our health insurance markets and undermine our struggling economy.
This is no way to adopt important public policy. The ACA’s adoption, in contrast, reflects a thorough and careful process that occurred over a number of years. Massachusetts adopted the first state-level ACA system in 2006. In early 2009, the Congress began developing similar, nationwide ACA legislation. After many revisions and hearings, the ACA passed in March 2010. The ACA’s complex legislation then was not fully implemented for four years. Even with this thorough, deliberate process, there were a number of implementation problems, as would be expected with major changes to a very complex system.
The Republican Alternatives Are Undefined and Problematic
The Senate is also expected to consider next week several Republican alternatives to replace the ACA. Republicans, however, have not even settled among themselves on a specific approach, much less the details. They have only vague concepts. The details are so lacking that it is impossible to evaluate how and whether any alternative would work. Toone health care expert, such “poorly fleshed out” ideas, suggest the President “was just stumbling around to say he has something to offer.’”
There are a number of serious questions and problems with their general approaches. Republicans are mainly discussing using Health Savings Accounts (HSAs) somehow to replace the ACA. Under current law, HSA accounts play a minor role in health coverage. Americans can contribute tax-free, a limited amount annually to these accounts to pay only for out-pocket costs for high-deductible plans. The accounts receive no direct government funding and can only be used for out-of-pocket health care expenses for high-deductible plans.
HSAs have not reduced health care costs. They have primarily benefited the wealthy, and not average Americans, who most need assistance in affording health coverage. HSAs are used overwhelmingly by the wealthy, because most Americans do not have the disposable income to fund HSAs to cover higher out-of-pocket costs. HSAs have served not to provide average Americans affordable health coverage, but tax shelters for the wealthy.
Republican proposals appear to be suggesting that all or part of the ACA tax credit funds be placed into new HSAs, which then could be used to pay premiums for insurance plans with high-deductibles and less coverage than ACA comprehensive plans. These sketchy ideas leave many basic questions unanswered, such as:
- how much of the cost of premiums and out-of-pocket costs will government funds cover and how much will be borne by insureds?
- how much will the premiums vary based on income, age and location?
- will wealthy Americans be required to spend their HSA government funds on health coverage, or will they be allowed to divert the funds to make even larger tax-sheltered investments;
- what current ACA benefits will be cut and will they include eliminating pre-existing condition coverage and limitless, lifetime benefits (for chronic, catastrophic illnesses)?
It is important to understand that these HAS “proposals” save the federal government money only by reducing funding for health insurance costs and by reducing the benefits covered. In short, these proposals intend for average Americans to pay higher costs for less benefits— the opposite of what is being promised.
HSA proponents claim that their approach is better because it gives the federal funds directly to insureds rather than to insurance companies. This is highly misleading. Like the ACA, government funds to HSAs would still go to pay for private insurance policies. Government funds would go first to the HSAs of insureds, who then would purchase private insurance; rather than ACA insured’s picking their insurance company, and then the government sending the funds to the insurer. At the end, the result is the same: insurance companies receive the federal subsidies and provide the health coverage.
There, however, is a critical difference. Under the ACA, the government regulates the insurance company’s rates and policy benefits to protect consumers. Under the Republican approach, insureds would be on their own to “negotiate” their own rates and coverage.
In reality, as opposed to ideological theory, most Americans do not understand the details of insurance policies, putting them at a great disadvantage with insurance companies. In fact, in the past before the ACA standardized policies, many insureds bought over-priced individual plans that provided few benefits. Good for the insurers, not good for your family.
At this late date, the only responsible course is to extend the ACA tax credits. To pass and implement now undrafted and unvetted complex legislation, would be reckless and likely result in harm to millions of Americans. Because the choice is so clear, it suggests that these last minute proposals are not intended to pass but to confuse the public and deflect blame for failing to extend the ACA tax credits.
What can you do?
Please contact your federal legislators and tell them to EXTEND NOW the ACA premium tax credits for several years. Tell them not to gamble with your health care and your family’s finances.
