Democratic lawmakers making a last-ditch attempt to pass a tax and spending bill are now weighing whether to extend pandemic-era Obamacare subsidies to avoid skyrocketing premiums that will hit just as voters head to the polls in November.
Senate Democrats negotiating the broad package are under pressure to include additional funding for the subsidies. Democrats approved the subsidies in March 2021 as part of a $1.9 trillion COVID-19 relief package. The subsidies are set to expire on Dec. 31. If the subsidies are not extended, health policy experts say, premiums in the 33 states that use the government health care marketplace will rise by 53% as people begin shopping for new plans in November.
“Millions of Americans face the prospect of losing health care coverage or seeing their premiums spike,” a group of 57 Democratic House members, many from battleground districts, recently wrote to Senate Majority Leader Charles E. Schumer, New York Democrat, and House Speaker Nancy Pelosi, California Democrat.
Senate Democrats on Monday didn’t rule out adding extended Obamacare subsidies to the package, which they hope to pass this month.
Also in the negotiations are money to bolster Medicare, a plan to lower some prescription drug prices and a slate of clean energy tax credits. The measure would be funded with a 3.8% tax on pass-through business income.
Adding permanent, enhanced Obamacare subsidies to the package would cost more than $200 billion over the next decade. It could complicate negotiations among Democrats to finalize the tax and spend package under discussion. The party hopes to pass the bill unilaterally using a budgetary tactic that would circumvent a Republican filibuster in the Senate. That means all 50 Democrats would have to support the final bill.
A key Democratic negotiator, Sen. Joe Manchin III of West Virginia, hasn’t ruled out including the Obamacare subsidies in the package, but he said the subsidies should be directed toward individuals at the lower end of the income scale.
Democrats also might consider another temporary extension.
“I haven’t heard them mentioned, but it doesn’t mean they aren’t on the agenda,” Senate Majority Whip Richard J. Durbin, Illinois Democrat, said when asked whether negotiators were discussing adding the subsidies to the package.
The pandemic aid package approved in March 2021 broadened eligibility for Obamacare subsidies to those earning up to 400% of the poverty level.
As a result, earners well over the poverty line are now eligible.
Brian Blase of the Galen Institute, a public policy research organization, calculated that a family of four headed by a 60-year-old earning $240,000 per year “will now qualify for a subsidy of nearly $9,000.”
Mr. Blase is among a group of health care policy experts who say the subsidies drive up costs for consumers and should end.
The libertarian Cato Institute’s director of health policy studies, Michael F. Cannon, said health insurance companies stand to benefit the most from continuing the subsidies and are lobbying Congress for an extension “because the subsidies are so lucrative and they don’t want the gravy train to stop running.”
Left-leaning policy groups say the Obamacare subsidies have increased the number of people covered by health insurance during the Biden administration.
Taking away the subsidies would raise net premiums by 53%, likely resulting in 3 million people dropping coverage, said Emily R. Gee, vice president and coordinator of health policy at the Center for American Progress, a liberal think tank.
Ms. Gee said fewer enrollees will change the risk pool and insurers will raise rates as a result.
“That is what drives individual insurance company rates up,” Ms. Gee said.
For Democrats, rising rates and ending subsidies could be a recipe for disaster in the midterm elections as voters, increasingly frustrated with inflation and high gas prices, face additional costs for health insurance.
Insurers in some states are already proposing substantial rate increases. They are basing rates on the assumption that the subsidies will not be extended and people will drop coverage, though they are not saying the subsidies are the main reason for drastic hikes.
New York state health insurers last month proposed a 19% rate increase. The insurers blamed additional costs associated with the COVID-19 pandemic, rising medical costs and inflation.
Insurers in the Connecticut health care marketplace are seeking an average increase of 20% for next year. They say the driving factors are the high costs of drugs, medical care, and treatment and testing for COVID-19.
Health insurers in the state said the looming end of enhanced Obamacare subsidies was also a factor.
Mr. Cannon said he is not surprised at the rate increases.
“When you subsidize something, the price goes up,” Mr. Cannon said. “This is not hard. If you want insurers and find more efficient, affordable ways of doing things, if you want providers to find more efficient, affordable ways of doing things, you need to stop subsidizing them so heavily.”
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