Health Insurance Costs Will Soar If Republicans Let Subsidies Die

Millions of people who benefit from expanded subsidies for Obamacare plans will lose the aid in 2026 if the newly elected doesn’t Congress extend them—something it’s seen as unlikely to do in their current state.

Some conservatives complain the subsidies are too costly and incentivize fraud. But without them, health insurance premiums will rise steeply—93% on average for people in states that use Healthcare.gov. An estimated 3.4 million people could lose health insurance coverage because it would become too expensive. 

Subsidies: Success at a Cost

If you enroll in a Marketplace health insurance plan during open enrollment this year, chances are, you’ll receive government subsidies. Ninety-two percent of enrollees do, and 74% receive premium tax credits that lower their premiums to $10 a month or less each month.

But the expanded subsidies end in late 2025 and likely won’t survive beyond that “in their current shape,” said Chris Pope, senior fellow at the Manhattan Institute, a conservative-leaving policy organization. “They’ll either be phased out or replaced with a new subsidy structure. It might be easier to do the latter.”

The premium tax credit lowers enrollees’ payments for Marketplace health insurance. The amount of the subsidy depends on the person’s income level.

First included in the Affordable Care Act, the credits were expanded in the American Rescue Plan Act of 2021 and the expansion was extended through 2025 with the Inflation Reduction Act (IRA). The legislation extended eligibility to middle-class people with income above 400% of the federal poverty level (FPL).

If the subsidies expire in 2026, enrollees will face significant premium hikes, and some may drop their coverage—a potential flashpoint in a midterm election year. According to left-leaning health-policy organization KFF, this “would result in the steepest increase in out-of-pocket premium payments most enrollees in this market have seen.” 

Why Republicans Want to Curb Subsidies

In June 2024, the Congressional Budget Office (CBO) estimated that making the expanded premium tax credits permanent would increase the U.S. budget deficit by $335 billion between 2025 and 2034. The CBO also predicted that the policy extension could attract an additional 6.9 million enrollees to the marketplace each year, on average.

Pope said the subsidies may encourage health insurers to raise costs indiscriminately.

“If an insurer with market power increases costs by 20%, the subsidies go up by 20%. It’s likely that the Trump administration and Republican Congress will look for a subsidy structure that doesn’t have an incentive to inflate prices,” Pope said.

The ACA has become increasingly popular. During open enrollment for the 2024 plan year, 5.1 million more consumers signed up for coverage compared to the year before, a 31% year-over-year increase.

According to KFF analysis, the number of people receiving premium tax credits more than doubled from 9.6 million to 19.7 million during the same period.

Yet some are concerned these results are due to fraud and lack of accountability, including Brian Blase, former Trump White House official and current president of Paragon Health Institute, a conservative-leaning policy organization focused on healthcare. 

According to Paragon’s research, brokers and individuals likely misestimate their income to qualify for higher subsidies. 

“The subsidies turned [health insurance] exchanges into the Wild West,” Blase said. “There’s rampant waste and abuse, with millions of people improperly enrolled. The broker gets a big commission, the insurer gets a monthly payment, but the individual doesn’t even know she’s enrolled.”

KFF Health News also found that licensed agents were switching ACA enrollees into new plans, or misrepresenting their income and eligibility.  

The Centers for Medicare and Medicaid Services took steps to crack down on fraud, but recent news reports say some agents are finding ways around new protections. 

“The Biden Administration allowed this to go unchecked for three years,” Blase said. “They only started making changes when people started contacting the administration en masse.”  

Concerns About Ending the Credits 

Pope said Republicans could unilaterally alter spending levels and amend the subsidies through the budget reconciliation process.  

If the Inflation Reduction Act’s enhanced subsidies expire, the subsidy’s advocates, including KFF, say several things may happen:

• The percentage of uninsured Americans would rise.
• Premiums would double or more, on average, for subsidized enrollees in 12 Healthcare.gov states, with the largest increase (195%) seen in Wyoming.  
• Low-income enrollees would experience the steepest premium increases by percentage.

According to KFF, the largest region for Marketplace enrollment is the South, and a little over half of the federal funding for enhanced subsidies goes to enrollees in Florida, Texas, Georgia, and North Carolina, most of which have not expanded Medicaid to cover most low-income residents.

One Proposed Way Forward 

The subsidies may not go away entirely. Blase and Paragon have suggested continuing expanded subsidies for current Marketplace enrollees but not new enrollees—noting that most Marketplace enrollees leave within a year for employer coverage.

Either way, the new administration faces a deadline for deciding what to do: Insurers must finalize premium rates for 2026 by August 2025.