Debate Over ACA Tax Credits Intensifies as Expiry Looms for Millions

In the U.S. House of Representatives, there is growing opposition to renewing tax credits linked to the Affordable Care Act (ACA), particularly among Texas members. Despite this stance, Congress has not yet proposed a unified alternative approach, raising concerns as the midterm elections loom. The debate over these subsidies is central to ongoing federal budget discussions and follows a recent government shutdown. With Congress in recess, the enhanced premium tax credits are likely to expire on December 31.

Recently, Texas Republican House members backed a health care proposal that reforms association health plans, introduces new rules for pharmacy benefit managers, and allocates funds for ACA cost reductions while permitting subsidies to end. In contrast, some Republicans have joined Democrats in pushing for a temporary extension of these tax credits, with a vote slated for January, ensuring the issue remains on the legislative agenda into the new year.

The premium tax credits, established in 2014, have been essential in reducing marketplace costs for ACA enrollees by providing federal payments to insurers. During the COVID-19 pandemic, these credits expanded enrollment significantly, particularly in Texas where enrollees increased from 1.3 million in 2021 to 3.9 million this year. KFF, a health policy organization, projects that discontinuing these subsidies could double premium costs for recipients, prompting insurers in Texas to seek premium hikes and risking substantial coverage drops.

Potential Impact of Subsidy Expiration

Without the subsidies, coverage could diminish for an estimated 4 million Americans, many in Texas. Despite these projections, most Texas Republicans continue to oppose ACA-related subsidies, arguing that they encourage fraud and fail to sufficiently address rising health care costs. A divide exists within the Republican party, as U.S. Rep. Monica De La Cruz supports extending the credits for a year, incorporating fraud prevention measures, and advocating for a broader, more comprehensive health care strategy.

As the 2026 midterms approach, Republicans are increasingly concerned about the political ramifications of expiring subsidies. Some in contested districts have aligned with Democrats to advocate for lengthening the ACA subsidy extension, culminating in a January floor vote. Meanwhile, the GOP is striving to develop an alternative health care package, but a consensus remains elusive.

Current Legislative Efforts

The House-approved bill seeks to fund ACA cost-sharing reduction payments beginning in 2027, aiming to reduce out-of-pocket costs for enrollees. It includes provisions to adjust association health plans and mandate transparency from pharmacy benefit managers. However, it stops short of redirecting funds from ACA subsidies to health savings accounts. Rep. August Pfluger's separate proposal suggests creating “Trump Health Freedom Accounts” to enhance consumer control.

Texas Democrats unanimously opposed the House bill, warning of potential restrictions on health coverage, particularly for specific medical procedures. As bipartisan discussions continue between House and Senate members on a strategy for the expiring subsidies, no additional votes are expected before the new year. In the Senate, the situation remains complex, although some moderates view the House discharge petition as a positive step towards advancing Senate discussions.