The Obamacare subsidy clock is ticking

Politico

25-07-2025

Presented by
With Carmen Paun, Erin Schumaker and Robert King
Driving the Day
COUNTING DOWN — Obamacare open enrollment is fewer than 100 days away, and huge uncertainties loom over how much millions of Americans will have to pay out-of-pocket for coverage.
Enhanced federal Affordable Care Act subsidies, which offer premium assistance to millions of low- and middle-income Americans, are set to expire at the end of the year. Insurers, hospitals, doctors and patient groups still hope that Congress will extend the tax credits, which were established in the American Rescue Plan Act of 2021 and later extended in the Inflation Reduction Act of 2022.
Why it matters: The clock is ticking. Open enrollment begins Nov. 1, and insurers will start sending their renewal notices to enrollees in the coming months.
If Congress doesn't extend the subsidies before then, enrollees are sure to see their premiums skyrocket compared with last year's prices. Insurers and state marketplace directors have warned that widespread confusion and sticker shock could lead people to opt out of health insurance coverage altogether.
Insurers in some states are filing two sets of rates — one assuming the subsidies expire and another assuming they're extended. While Congress could extend the subsidies later in the year, after open enrollment begins, that would likely add to the confusion and pose heavy administrative burdens on insurers and states.
Even so: While some Republicans, including Alaska Sen. Lisa Murkowski and retiring North Carolina Sen. Thom Tillis, have recently signaled openness to an extension or a deal with Democrats on the issue, there's little urgency to address the issue sooner rather than later.
'It's coming, but in senatorial times, we have time to deal with this,' Sen. Shelley Moore Capito (R-W.Va.) told POLITICO this week.
Senate Finance Committee ranking member Ron Wyden (D-Ore.) said he wants to strike a deal with GOP members on extending the subsidies, but 'right now they are talking about more reconciliation bills.' Republicans on key committees look to pass a bipartisan health package by the end of the year, but some Democrats are already playing hardball and demanding a subsidy extension before restarting negotiations on a larger package tackling bipartisan issues like drug pricing and pharmacy benefit manager reform.
'We are aware they are going to expire, and I am engaged in discussions with colleagues on both sides right now,' Senate Finance Chair Mike Crapo (R-Idaho) told POLITICO.
Key context: The Congressional Budget Office has estimated that the number of uninsured people would rise by an average of 3.8 million every year between 2026 and 2034 if the credits expire. But an extension would be costly for the federal government — estimated at $335 billion over 10 years.
Obamacare premiums for people at or near the federal poverty line would skyrocket if the tax credits expire, potentially growing from $1 to $24, according to the Robert Wood Johnson Foundation.
Insurers have been pushing the message to lawmakers that failing to extend the subsidies could be politically perilous — as Republicans have also just passed a megabill that could lead to 10 million people losing health insurance, including those on Medicaid and Obamacare.
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At the White House
TRUMP CHASTISES HARM REDUCTION — President Donald Trump signed an executive order Thursday barring federal funding meant for substance use disorder from being used for harm-reduction programs, Carmen reports.
The order said the programs, which can include syringe exchanges or supervised consumption sites, are ineffective and 'only facilitate illegal drug use and its attendant harm.'
The order directs the health secretary to ensure that discretionary grants from the Substance Abuse and Mental Health Services Administration, part of HHS, don't go to such programs.
Safe-injection sites remain illegal under federal law, but they've been allowed to operate in states such as New York and Rhode Island.
Advocates of such harm-reduction programs say that needle exchanges and safe-injection sites save drug users' lives by preventing overdoses and also protect them from contracting diseases from infected syringes.
Public drug use is another target of Trump's executive order, which asks the attorney general, the health secretary and the housing secretary to determine whether they can prioritize grants to states and local authorities who enforce prohibitions on open illicit-drug use. This includes bans on urban camping, loitering and squatting.
The order also focuses on using civil, or involuntary commitment, to put people living on the street, many of whom use illicit drugs or have a mental illness or both, 'into long-term institutional settings for humane treatment.'
Why it matters: The executive order is in line with Trump's law-and-order approach to dealing with substance use disorder, mental illness and homelessness.
It follows a Trump campaign promise to 'use every tool, lever and authority to get the homeless off our streets,' the president said in a 2023 campaign video.
'Surrendering our cities and citizens to disorder and fear is neither compassionate to the homeless nor other citizens,' Trump's executive order says.
The order requires the health secretary to ensure that federal funds for Federally Qualified Health Centers and Certified Community Behavioral Health Clinics 'reduce rather than promote homelessness by supporting, to the maximum extent permitted by law, comprehensive services for individuals with serious mental illness and substance use disorder, including crisis intervention services.'
Eye on Insurers
MOLINA SLASHES EARNINGS, AGAIN — Major Medicaid and Obamacare insurer Molina Health slashed its earnings guidance for the second time this month, citing 'unprecedented' rising medical cost pressures.
The rise has been driven by higher costs in behavioral pharmacy and inpatient and outpatient care, CEO Joe Zubretsky said. Molina's Medicaid business in particular has seen an uptick in behavioral health costs and the use of expensive drugs outside of the high-cost weight-loss drugs known as GLP-1s, including treatments for cancer and HIV, Zubretsky said.
He also noted an increase in patients being admitted to the ER for complex health episodes and seeking out primary care and preventive screenings.
'The magnitude and persistence of these medical cost increases are unprecedented,' Zubretsky said.
The insurer's medical cost ratios — how much it spends on medical claims compared to administrative costs — were elevated across its Medicaid, Medicare Advantage and Obamacare businesses in the second quarter.
The pressures led the company in early July to slash its yearly financial guidance by $5.50 per share, and the company lowered its guidance an additional $3 in Thursday's earnings report.
Why it matters: Molina is one of several major insurers experiencing elevated cost pressures that exceed the companies' initial projections for the year. UnitedHealthcare, Centene and Oscar Health have all recently slashed their 2025 guidance amid higher cost trends.
And insurers face a rocky road ahead, with federal changes to Medicaid and the Affordable Care Act threatening their bottom lines over the next few years and indicating a potential downturn for the industry, which has been buoyed by record Obamacare enrollment numbers over the past few years.
Even so: Molina expects the impact of changes to Medicaid enacted in the GOP megabill 'will be modest and gradual,' as the work requirements the law imposes won't go into effect until 2027 or later and most of its members will still qualify for Medicaid. But the impact of the bill's provisions that will hit state Medicaid funding will depend on how states react to the changes — and whether they limit eligibility or reduce benefits as a result, Zubretsky said.
'We believe these changes will be implemented over the course of the two-year period of 2027 and 2028 and possibly into 2029 and, therefore, allow the market time to react appropriately, so any impact would be gradual and not abrupt,' he said.
In the courts
GRANT WARFARE — The Trump administration seeks to lift a lower court order that blocked cuts to grants from the National Institutes of Health related to diversity, equity and inclusion, Erin reports.
The administration filed an application at the Supreme Court on Thursday requesting emergency relief from the order on the grounds that the federal government shouldn't have to continue to pay for research not aligned with President Donald Trump's executive orders and his administration's priorities.
Big picture: Thursday's filing comes after U.S. District Judge William Young ordered the administration last month to restore hundreds of scientific grants the NIH terminated this year.
During a hearing on two lawsuits about grant terminations, the Massachusetts judge and former President Ronald Reagan appointee rebuked the administration for what he called 'appalling' and 'palpably clear' discrimination against racial minorities and LGBTQ+ Americans.
WHAT WE'RE READING
POLITICO's Simon J. Levien reports on the Senate HELP Committee advancing Dr. Brian Christine's nomination to be HHS assistant secretary for health.
STAT's Jason Mast reports on the impact of the halt of shipments of Sarepta's gene therapy on families affected by Duchenne muscular dystrophy.
KFF Health News' Kate Ruder reports on new state privacy laws aimed at protecting brain data collected by devices.