Pennsylvania residents who buy Obamacare health plans could see their insurance costs rise an average of 82% next year if Congress does not renew a critical financial incentive program set to expire at the end of the year.
Pennie, Pennsylvania’s Obamacare marketplace, and state lawmakers warned that some 150,000 people could drop their coverage next year because they can’t afford the plans without the so-called enhanced premium tax credits that ensure no one pays more than 8.5% of their income on health insurance.
The enhanced subsidies don’t expire until the end of the year, which means Congress has several more months to renew them for 2026 plans. The credits, now imperiled in all states, have become a major sticking point in the ongoing federal budget debate threatening a government shutdown.
Pennie officials say that if the program isn’t renewed by Sept. 30, they will begin sending the nearly 500,000 people currently enrolled notifications of their new — significantly higher — anticipated cost for next year. Prices could double or even triple for some people, according to state officials.
Pennie’s open enrollment period runs Nov. 1 through Jan. 15. Administrators said it is critical that they have time to notify people of their anticipated costs in 2026, because the vast majority of people with Pennie plans are automatically reenrolled.
This year, that could mean being automatically reenrolled in a plan that costs much more, if they do not take action to cancel or switch to a less expensive plan.
“We expect to see people drop off as early as Nov. 1 because of those higher prices,” said Devon Trolley, Pennie’s executive director.
In Washington, Democrats are pushing for a permanent extension of the tax credits as part of government funding talks ahead of the Sept. 30 shutdown deadline.
Republican leaders have rejected including ACA subsidies in a deal to avert a shutdown, saying it’s something Congress can debate in November or December, without committing votes to extend the money.
In Pennsylvania, some Republican representatives have faced protests and pressure on the issue. U.S. Rep. Brian Fitzpatrick, a Republican from Bucks County who co-chairs the Problem Solver’s Caucus, has urged his party to address the issue before rate hikes kick in and is working on possible compromises to extend the subsidy, Politico reported this week.
If Congress acts later this fall, Trolley said that Pennie would do its best to quickly update cost estimates for customers and apply tax credits for anyone who has already signed up if Congress renews the tax credits after 2026 premium notices have been sent and open enrollment begins. But by then, people may have abandoned their health plan and not come back, she fears.
History of ACA enhanced premium tax credits
State-based marketplaces were created under the 2010 Affordable Care Act as a way to extend insurance coverage to working Americans who do not have access to insurance through an employer and earn too much to qualify for Medicaid, the government’s health coverage for low-income people and those with disabilities.
Pennsylvania initially used the federal Healthcare.gov marketplace and launched the state-run Pennie in 2020.
Pennie reached record enrollment of nearly 500,000 people this year, largely due to the enhanced premium tax credits.
Under the ACA, people who earn less than 400% of the federal poverty level — about $60,000 — are eligible for tax credits on a sliding scale, based on their income, to help offset the monthly cost of an insurance premium.
That tax credit is part of the law, and therefore not expiring. The change affects an expansion in 2021, when Congress increased financial assistance so that no one buying coverage through an Obamacare marketplace pays more than 8.5% of their income.
As a result, people who already received a credit got larger subsidies, and people who previously missed the income cutoff were able to get financial assistance.
About 90% of people who bought insurance through Pennie for the current year qualified for some amount of tax credit.
If the enhanced credits end, people who earn less than $60,000 will still qualify for income-based financial help. But the size of their tax credit will decrease.
Rising Pennie premiums
At the same time, insurers have submitted the highest premium increases for Pennie plans since 2010, Pennsylvania Insurance Commissioner Michael Humphreys said.
Average increases of 19% for individual plans and 13% for small business plans reflect insurers’ anticipation that the premium tax credits will disappear, resulting in overall higher costs for insurers, his department announced in August.
That’s because insurers expect that only the sickest (and most expensive to cover) individuals will continue to prioritize buying health insurance, he said.
Others may choose to dedicate limited financial resources to other household expenses, Humphreys said Tuesday during a call with reporters organized by Pennsylvania Health Access Network, a nonprofit organization that helps people enroll in health coverage.
But with that deadline rapidly approaching, Humphreys and others worry any financial relief won’t come in time.