Bipartisan coalition aims to prevent health premium spike for the self-employed

By HPN Staff

A bipartisan group of 21 federal lawmakers is pushing to extend tax subsidies for insurance plans that are purchased by self-employed workers and small business owners.

Without the extension, these individuals could face thousands of dollars in higher insurance premiums next year, according to the 12 Republican and nine Democratic representatives who have introduced a bipartisan fix in the U.S. House. 

However, an extension could cost the federal budget tens of billions of dollars per year, which is raising the ire of conservative groups.

The extension has become a major factor in budget negotiations between leaders on Capitol Hill and the White House, with a potential government shutdown looming on Oct. 1 if Republicans and Democrats cannot reach a compromise.

If a deal isn’t reached, the authors of the proposal are also preparing to push their proposal as a standalone measure before the end of the year. 

Why it matters

During the Obama and Biden administrations, a series of means-tested tax credits were created and later expanded during the COVID-19 pandemic to lower the cost of premiums for health plans purchased through ACA marketplaces. The subsidy will expire at the end of 2025 unless Congress and the White House pass legislation to extend it.

Premiums for ACA marketplace plans could increase by 75% on average if the subsidy expires, according to a study from the Kaiser Family Foundation and the Peterson Center on Healthcare. 

However, if the subsidy is extended, the holders of ACA plans would face a smaller increase of 20%, the study found.

“Without this extension, millions of self-employed workers and small business owners will see their premiums increase by more than $11,000 a year,” U.S. Rep. Brian Fitzpatrick (R-PA) said in early September.

While the majority of Americans have health insurance through employment or government programs like Medicare and Medicaid, more than 24 million people buy their insurance directly through marketplaces created by the 2010 Affordable Care Act (ACA).

Roughly 3 million people who buy health insurance through ACA marketplaces are small-business owners or self-employed individuals, according to U.S. Treasury data.

The bigger picture

The Congressional Budget Office (CBO) recently estimated that a permanent extension would cost an average of $35 billion per year, or $350 billion over the coming decade. However, by making health insurance more affordable, the number of Americans with health coverage would increase by 3.8 million, CBO said.

A coalition of 35 conservative groups, including Americans for Tax Reform and the Club for Growth, wrote a letter to President Donald Trump. In it they said the costs outweigh the benefits and the pandemic-era expansion of the tax credits should be allowed to expire. The groups further argued that the subsidies largely benefited high-income households and insurance companies. 

“The expanded subsidies have encouraged rampant fraud and are putting taxpayers on the hook for high-income earners’ payments,” they said.

However, supporters of the bipartisan proposal have countered that the measure only extends the subsidies for ACA marketplace health plans for one year.

“We don’t need permanent pandemic-era policy — but we do need a responsible off-ramp,” Fitzpatrick said. “Letting these subsidies expire without a plan would put health coverage out of reach for millions of families in my community and across the country.”