Expired ACA subsidies would result in $32.1 billion in lost revenue for providers

If Affordable Care Act enhanced premium tax credits are allowed to expire by the end of the year, healthcare providers would see their revenue hit to the tune of about $32.1 billion in 2026, according to an Urban Institute analysis published by the Robert Wood Johnson Foundation.

That includes a $7.7 billion increase in demand for uncompensated care, according to the numbers.

It also represents about a 1.3% reduction in total healthcare spending on nonelderly individuals.

WHAT'S THE IMPACT 

The expanded premium tax credit – introduced in the American Rescue Plan Act of 2021 and later extended through calendar year 2025 in the 2022 reconciliation act – is an advanceable and refundable credit that reduces enrollees' out-of-pocket costs for the premiums they pay for health insurance obtained through the marketplaces.

If they're allowed to expire, authors project reduced utilization due to changes in care-seeking behaviors, which in turn will be wrought by coverage changes. This will lead to decreases in payments by private insurers for claims.

About $14.2 billion less would be spent on services provided by hospitals, $5.1 billion less on services provided by office-based physicians, $5.8 billion less on prescription drugs and $6.9 billion less on other healthcare services, analysts said.

The burden of the increase in uncompensated care, meanwhile, would fall on all provider types: about $2.2 billion on hospitals, $1 billion on physician offices, $1.5 billion on prescription drugs and $3.1 billion on other services.

A little more than half of the increase in uncompensated care would be financed by providers, analysts said. About 30% would be financed by the federal government, and 19% by state and local governments.

Lower spending on healthcare services is linked to lower revenues for providers and fewer services rendered, authors said, adding that the resulting revenue declines would be particularly harmful for hospitals and communities that are already financially at risk. 

Reductions in health spending and increases in the demand for uncompensated care will vary by state, with the effects being felt most acutely in states that have not expanded Medicaid, authors said.

Health spending for the nonelderly will drop by as much as 4.8% in Florida, Georgia and Texas, analysts predict. At the same time, demand for uncompensated care will grow by more than 27% in Mississippi, South Carolina and Tennessee.

THE LARGER TREND

Permanently extending the Affordable Care Act's marketplace enhanced premium tax credits in this month's funding legislation would increase the federal deficit by an estimated $350 billion by 2035, but also increase the number of Americans with health insurance by about 3.8 million, according to an analysis last week from the Congressional Budget Office.

In addition to increasing both the deficit and the number of insured Americans, the CBO estimates that gross premiums for benchmark plans in the marketplaces would be 7.6% lower, on average, in each year from 2026 to 2035, compared with baseline projections. 

Also, if the permanent expansion were enacted, premiums for the 2026 plan year would be 2.4% lower than baseline projections, the CBO estimated. 

The agency said that enacting these changes later than Sept. 30 would result in lower costs to the federal government but also smaller increases in 2026 enrollment.

Separately, the Urban Institute released its own projections, estimating that 7.3 million fewer people will receive subsidized Marketplace coverage in 2026 if the premium tax credits revert to their standard levels. 

Eight states – Georgia, Louisiana, Mississippi, Oregon, South Carolina, Tennessee, Texas and West Virginia – would see their subsidized Marketplace enrollment fall by more than half, that analysis projected.

AHIP reacted to the potential impending end of enhanced premium tax credits with its own analysis, finding that 4.8 million adults aged 50-64 – or 92% of those enrolled in Marketplace coverage – will face higher premiums if the tax credits expire.