Democrats’ ACA Subsidy Fight Is Really About Red States

Democratic lawmakers in Washington have made Affordable Care Act premium subsidies a central talking point during the government shutdown — but it’s not their constituents that would feel the biggest squeeze if they expire.

Blue states have the smallest shares of residents who claim ACA tax credits of any kind, including the enhanced premium tax credits at the center of the fight on Capitol Hill.

Many Democratic states also have programs that “insulates us from the impact of these enhanced tax credits one way or the other,” as Bill Hammond, a senior fellow for health policy at the New York-based think tank Empire Center, said.

“The people who are active on this issue, and Democrats in particular, will say premiums are going to skyrocket, without saying, ‘Premiums for the fraction of people who are buying insurance through the exchanges will skyrocket,’” Hammond said of New York, which offers a state health plan that absorbs many of the people who would otherwise use ACA tax credits.

It’s a very different story in other parts of the country, however.

The enhanced tax credits expand eligibility for people with incomes up to 400% of the poverty level to receive health care subsidies and lower the price of premiums for many enrollees.

The biggest financial hits would be felt in Republican-led states like Alabama, Georgia, Texas and Florida, where so many low-income residents are reliant on the subsidies, said Jason Levitis, a senior fellow for the Urban Institute’s Health Policy Division and a former Treasury Department employee who worked on implementing the Affordable Care Act.

Those four states would see some of the largest declines in the country in the percentage of people who receive subsidized health care coverage, as well as some of the biggest jumps in people who would be uninsured if the tax credits expire, according to data analysis from the Urban Institute.

Several other red states like West Virginia and Wyoming consistently rank among the places with the highest health care premiums for all tiers of insurance plans. Those states also have not adopted Medicaid expansion, which offers Medicaid coverage to most adults who make up to 138% of the federal poverty level, meaning a larger chunk of the population there would be hit if the enhanced ACA subsidies expire.

Of the 10 states that don’t have Medicaid expansion, nine are red states and one, Wisconsin, is a swing state.

Democratic lawmakers say that behind closed doors, Republicans are weighing the effects of expiring subsidies on their own constituents. Sen. Peter Welch of Vermont told NOTUS last week that his Republican colleagues have acknowledged that the impending premium increases would be “brutal” for residents in their states. And voters have started to publicly express frustration to their elected officials about rising health care premiums.

But the GOP lawmakers who have been most vocal about tackling the subsidy expiration largely want to deal with the issue after the government reopens. Most of the Republicans who do want to negotiate are politically vulnerable or from states that would see comparatively small effects on residents.

Republicans have largely blasted Democrats for wanting to negotiate on ACA subsidies as a shutdown tactic, have said that extending the subsidies is not affordable and have called for an overhaul of Obamacare more broadly.

Sen. Rick Scott of Florida, for instance, called the program a “disaster.”

Constituents in his state could see the biggest changes if enhanced subsidies expire, because many don’t receive insurance coverage from their workplace and would not receive coverage under Medicaid if they drop their existing health plans due to rising ACA costs.

“The fact that Florida hasn’t expanded Medicaid, as well as the fact that it has this higher proportion of low-income gig workers, makes it a place where the premium tax credit enhancements are really, really critical for ensuring that people have access to coverage,” Elizabeth Zhang, a health policy research assistant at the Center on Budget and Policy Priorities, a liberal think tank, said.

Many blue states, meanwhile, are on the opposite end of the spectrum.

Nine states — California, Colorado, Connecticut, Maryland, Massachusetts, New Jersey, New Mexico, Washington and Vermont — offer additional state-level premium assistance beyond the standard federal subsidies, which means people there may avoid some of the biggest price hikes if federal enhanced tax credits expire. Other blue states like Hawaii have a leg up because of state laws that require health insurance even for part-time workers.

And like New York — which has the lowest share of people who claim any ACA tax credits out of all the states — Oregon and Minnesota also have state-led basic health plans that would dull the impact of the expiration.

“It’s a big deal for many of the people who are affected,” Hammond said of enhanced subsidies. But he added that “relatively few people are benefiting from them, and relatively few people will care when they go away.”

Gov. Kathy Hochul of New York is still focusing her messaging on the ACA, though.

“By refusing to extend the Affordable Care Act tax credits, they are turning their backs on their constituents and ripping away access to affordable, quality health care,” Hochul said in a statement. “Republicans in Congress need to do the right thing and extend these credits that make health insurance for New Yorkers more affordable.”

And nationally, party leaders keep centering the subsidies even as their own constituents may escape the biggest effects.

House Democratic Leader Hakeem Jeffries called the impending subsidy expiration a “Republican health care crisis” during an interview on CNBC last week.

“As Democrats, we’re going to continue to fight for the American people all across the country, in rural America, urban America, small-town America, the heartland of America and of course Black and brown communities throughout America,” Jeffries said.