ACA enhanced tax credit fight exposes healthcare's funding crisis

What happens if the enhanced premium tax credits expire?

Allowing enhanced premium tax credits to expire at the end of the year will significantly change the state of insurance coverage.

Since the temporary subsidies took effect, Marketplace enrollment has more than doubled, according to data from CMS. If they expire, about 7.3 million fewer people would receive subsidized Marketplace coverage in 2026, the Urban Institute recently reported.

Without broader tax credits, the Urban Institute estimated 4.8 million more people would become uninsured next year, increasing the uninsured population by 21%. The loss of coverage would disproportionately affect non-Hispanic Black people, non-Hispanic White people and young adults.

Those who maintain Marketplace coverage would also feel the pinch without enhanced premium tax credits. Marketplace premium payments would more than double, on average, in 2026, without the continuation of the subsidies, KFF found. In contrast, extending the subsidies through 2026 would save eligible enrollees $1,016 in premium payments next year.

Healthcare providers are bracing for this shift in insurance coverage. They expect a significant drop in revenue and a rise in uncompensated care costs -- to the tune of more than $32.1 billion in lost revenue and $7.7 billion more in uncompensated care in 2026, according to the Robert Wood Johnson Foundation.

This financial strain could prompt healthcare providers to cut jobs and decrease overall access to care.

For healthcare payers, the expiration of the enhanced premium tax credits would disrupt the risk pool and lead to higher overall premiums, per a recent analysis from the American Academy of Actuaries.

A worst-case scenario unfolding

The expiration of enhanced premium tax credits could be like adding kindling to an already large conflagration. President Donald Trump signed into law this summer significant reforms to Medicare, Medicaid and CHIP, as well as the ACA Marketplace, which are slated to leave 10 million uninsured by 2034, according to the Congressional Budget Office.

Providers are preparing for a worst-case scenario, according to Lauren Lattany, director of government relations at AMGA.

"We know if people don't have coverage, their first place for care is the ER," she said. "That is something that is quite standard, so if this happens, we know that the waits, according to some of our members, might double or even triple."

Enhanced premium tax credits, in particular, provided affordable coverage options for Americans, and when people have decent coverage, they are more likely to establish a primary care relationship, receive preventative care and avoid the emergency department.

"When those enhanced premium tax credits go away and it looks like prices are going to double for folks, that means people are going to drop plans, they're going to delay care and that's certainly, when you're given the larger impact of what this looks like for the healthcare ecosystem and our economy, never a great thing," Lattany explained.

Healthcare providers, she said, are starting to ask themselves: How do they staff with longer wait times in the ER? What does productivity have to look like when people are in the ER twice as long as normal? Additionally, how do organizations manage decreased spending and potentially sicker patients on already razor-thin margins?

Mara R. Holton, M.D., a physician at Anne Arundel Urology and chair of the Health Policy Committee at LUGPA, also said providers should anticipate more calls from patients as changes unfold.

"I suspect that we are going to see exchange patients, fairly shortly, looking at their estimated costs on the ACA websites, and that could be a big," Holton stated. "I would anticipate seeing patients being concerned about that and patients calling in about that. So, at least developing some sort of response to what that might mean for patients."

The push for a comprehensive solution

A lot hinges on how lawmakers agree to fund the federal government. In addition to the potential expiration or continuation of enhanced premium tax credits, payers and providers are also wondering if telehealth flexibilities and the Hospital at Home program that expired on Oct. 1 will get another reprieve.

While many healthcare stakeholders are pushing for the extension of all these provisions, they also acknowledge that this is the problem. The appropriations bill will not provide a permanent answer for payers and providers.

"We bring up a lot to members of Congress and their staff that the long-term financial outlooks of our medical groups and integrated systems of care are not on a patchwork basis," Lattany said. "Also, this is the first government shutdown since 2019; is this going to be more common moving forward? Those types of interruptions are not great when you're thinking about long-term financial planning, as well as what your patient mix is going to look like every day."

Healthcare organizations like Holton's have already halted telehealth services without congressional action to ensure reimbursement. This means some patients can't access services the way that they want to and have for years now.

"This crisis -- and I think it can fairly be represented as a crisis -- demonstrates that healthcare reimbursement reform is needed across the board in a variety of different ways and that the piecemeal approach that has been taken, for example, with subsidies and Medicaid, are probably not going to address the fundamental problems that are resulting in increased healthcare costs, both for individuals and for the country writ large," Holton stated.

Claims reimbursement has been at a crossroads lately. CMS is trying to maximize savings in a nearly $5 trillion-dollar and growing industry, while healthcare providers are fighting for fairer rates. For example, CMS recently proposed a modest base rate hike of 2.5% in the 2026 Medicare Physician Fee Schedule after several years of rate cuts. The federal agency has yet to finalize rates for next year, but the American Medical Association has said the bump would not be enough to ensure physician practice sustainability after decades of underfunding.

AMGA is seeking a permanent fix to the telehealth flexibilities conundrum through legislation like the CONNECT Act, which would codify those telehealth waivers. However, Lattany doesn't see a permanent fix happening anytime soon.

"Cost is always the issue when you go to codify these things, and we currently exist in an environment where there are cuts to healthcare," she explained. "So, it's very unlikely."

Holton envisions this battle happening every two years if the extensions are approved as part of the government reporting.

"There needs to be comprehensive healthcare reimbursement reform that involves site-neutral payments, meaningful reform to MIPS and MACRA, insurance reform and PBM reform," she stated. "Until someone really takes a hard look at the global problems, we're just piecemealing along, going from crisis to crisis, unfortunately."

Jacqueline LaPointe is a graduate of Brandeis University and King's College London. She has been writing about healthcare finance and revenue cycle management since 2016.