ACA Premium Tax Credits Face Expiration, Sparking Debate

If enhanced premium tax credits under the Affordable Care Act (ACA) are allowed to expire at the end of the year, out-of-pocket premiums for 22 million enrollees that receive premium assistance will increase by an average of 114%, or $1,016 per person.

Democrats have pushed for the enhanced tax credits to be extended, and a vote is expected on their proposal in December. Ther have also been some bipartisan negotiations and proposals to extend the tax credits for up to two years, with changes like a cap on who is eligible by income and efforts to address any fraudulent signups by insurance brokers.

Meanwhile, proposals have emerged from some Republicans in Congress to effectively repeal some or all of the ACA premium tax credits and replace them with contributions to Health Savings Accounts (HSAs) or something similar. President Trump posted recently:

“THE ONLY HEALTHCARE I WILL SUPPORT OR APPROVE IS SENDING THE MONEY DIRECTLY BACK TO THE PEOPLE, WITH NOTHING GOING TO THE BIG, FAT, RICH INSURANCE COMPANIES, WHO HAVE MADE $TRILLIONS, AND RIPPED OFF AMERICA LONG ENOUGH.THE PEOPLE WILL BE ALLOWED TO NEGOTIATE AND BUY THEIR OWN, MUCH BETTER, INSURANCE.”

(The current ACA premium tax credits do not, in fact, go to insurance companies. the tax credits go to people to help them pay their premiums for ACA Marketplace plans. People can either wait untill they file their taxes the following year to receive a lump sum or qualify for advance tax credits based on estimated income so they do not need to wait until they file their taxes. Those advance tax credits are forwarded directly to the insurance company they choose to purchase, directly lowering the enrollee’s monthly premium payments.)

Senator Scott Proposal

The most expansive health account proposal was recently introduced by Senator Rick Scott of Florida. It would allow the enhanced premium tax credits to expire but keep the value of the ACA premium tax credits from the original law. States could submit a waiver to the federal government to replace the original ACA premium tax credits with contributions by the federal government to accounts similar to HSAs.These “trump Health Freedom accounts” could be used for out-of-pocket health care costs, or to pay health insurance premiums (unlike traditional HSAs).

Unlike ACA premium tax credits, which can only be used for ACA Marketplace plans, the accounts in the Scott proposal could be used for any type of health insurance plan, including short-term plans that can exclude people based on pre-existing conditions. States could also waive certain provisions of the ACA, including the requirement to cover certain