Obamacare Premium Benefits Targeted as GOP Pushes for Tax Cuts

Conservatives, fighting for tax cuts, are building a case for letting Obamacare’s premium tax credits expire next year, potentially leaving nearly 4 million people uninsured.

People in low-to-moderate income households can get a refundable tax credit to buy health insurance through Affordable Care Act marketplaces, a provision Democrats expanded in 2021. The following year, Democrats extended the expansion through the end of 2025. President Joe Biden has called for making the expanded tax credit permanent to avoid driving up insurance premium costs that could increase the number of people in the US going without health coverage.

The credits’ expiration aligns with lapses of many individual income tax cuts in the 2017 GOP-led tax law, tying one issue Republicans want to talk about with one they’d rather avoid.

“It’s going to draw a lot of attention about how we proceed forward,” Rep. Kevin Hern (R-Okla.) said. “There’s a lot of money being spent so we got to figure out every avenue to get after this.”

Hern told reporters that Republicans are working to understand the precise costs of extending parts of the 2017 tax law, which includes the credits. He said the Congressional Budget Office would soon speak with the Republican Study Committee on the issue.

Growing Problems

As the growing national debt plays a larger role in the 2025 tax fight for Republicans, the credit’s price tag could become an attractive target for Republicans eager to cut spending and willing to look at permanent pieces of the tax code to offset costs. Democrats seeking to preserve their landmark health care law have vowed to make defending it a top priority along with other wins such as green energy credits.

“It is shaping up to be a bigger part of the debate,” said Rachel Snyderman, the managing director of economic policy at the Bipartisan Policy Center.

The credits are unique in that the timeline for extending them may be ahead of other tax priorities, Snyderman said.

That’s not only because of where political lines are being drawn, she said, but also because of how the insurance market works. Because open enrollment happens in the fall, companies will need to understand the impact of these potential expanded tax credits when they set rates, far sooner than the end of 2025.

“Insurers are going to need that clarity earlier in the calendar year,” she said. “That might put some of the pressure on the political landscape to front-load this debate.”

The Biden administration has touted the expanded premium tax credit as a benefit that saves the average American $800 per year and has called on Congress to make it permanent.

Attack Lines

House Republicans are probing the effect the expanded tax credit has on government spending and whether people are fraudulently getting health plans with no premium costs.

The Republican heads of the House Energy and Commerce, Ways and Means, and Judiciary committees July 1 asked government watchdogsfor a review of improper enrollment in Obamacare plans. The week before the CBO released a report requested by Budget Chairman Jodey Arrington (Texas) and Ways and Means Chairman Jason Smith (Mo.) finding that making the expanded premium tax credits permanent would increase the federal budget deficit by $335 billion while adding almost 7 million more people to marketplace plans over 10 years.

Republicans are contending with the popularity of Obamacare.

A recent poll from Hart Research, supported by the Democrat-aligned Protect Our Care, found that a majority supports extending the expanded premium tax credits and that Obamacare’s popularity has only grown since Republicans last attempted to overturn the health law seven years ago.

Democrats, in their re-election message this fall, should paint Republicans as favoring tax breaks for the wealthy over helping middle- or lower-income voters with health costs, Geoff Garin, president of Hart Research, told reporters in a briefing.

“Leaning into health-care issues is the best way for Democrats to meet voters where they are in terms of their concerns about the cost of living,” Garin said.

Annual premium increases would reach $792 for a single individual making $21,000, while that number would be closer to $2,700 for a family of four making $60,000, according to data from the Center on Budget and Policy Priorities.

Democrats also fear that letting the credits lapse would push some Americans to go back to forgoing health insurance, “which means the number of uninsured would surge again,” said Rep. Don Beyer (D-Va.).

Rising premiums could also become a Democratic attack line, because letting the credits disappear conflicts with Republicans’ messaging going into 2025, Beyer said.

Lawmakers like Jason Smith have dug in hard on how Biden’s pledge to refrain from raising taxes on earners making less than $400,000 would be possible only if he retained parts of the 2017 tax law Republicans passed without Democratic support.

Democrats would likely pounce on that, as they continue characterizing the law as a handout to the wealthy at the expense of vulnerable Americans, Beyer said.

Conservative groups, however, argue the expanded tax credits largely benefit insurance companies and brokers by selling plans with no premium costs to people who don’t use them or may not even know they’ve been signed up.

Brian Blase, president of the think tank Paragon Health Institute and an adviser in Donald Trump’s White House, said he’s told Republican lawmakers that allowing the expanded tax credits to expire would save the government billions of dollars and align Obamacare more with its original structure.

“A large part of our proposal on this is just restore ACA to what it was intended to do,” Blase said.

Republican tax-writers say the cost of Obamacare has grown too high, shielding people who buy plans from premium costs while not bringing down the costs of health services.

“We need to get beyond this subsidizing that is recently the only means to bring down the cost,” Rep. Adrian Smith (R-Neb.) said. “I would like to think we could do a lot better.”