By Sally Pipes
After a monthslong battle that included a historic 43-day government shutdown, Congress has headed home for the holidays without extending the COVID-era enhanced premium subsidies for Obamacare exchange coverage. They’ll now expire on schedule at the end of the year.
That outcome should come as a relief. The enhanced subsidies were an outrageously wasteful and expensive attempt to conceal problems in America’s insurance market that Obamacare itself created.
Despite their impending expiration, the fight over these subsidies is not over. House Democrats—with the support of a few Republicans—have managed to force a vote on a three-year extension of the subsidies, expected early next year.
That vote should be an exercise in futility. A similar proposal failed to advance in the Senate earlier this month, underscoring just how shaky the case for extending them has become.
It’s worth remembering that Democrats themselves wrote the subsidies’ expiration date into law as part of the Inflation Reduction Act of 2022, which passed Congress without a single Republican vote. They did so because even supporters knew that making them permanent would be enormously costly.
The latest projections from the Congressional Budget Office peg the cost of a three-year extension at $85 billion. Making the subsidies permanent would cost taxpayers an estimated $350 billion on top of the subsidies already embedded in Obamacare.
Those price tags are so high because the subsidies are propping up a market that is fundamentally broken.
Obamacare imposed unprecedented federal mandates on health insurance: dictating what plans must cover, restricting how insurers can price risk, and forcing insurers to accept all applicants regardless of health status.
These rules predictably drove premiums higher. Individual insurance premiums have tripled since Obamacare’s exchanges opened for business. Many exchange plans will greet enrollees with double-digit premium increases next year.
Rather than fixing these underlying problems, the enhanced subsidies simply blinded consumers to the true cost of coverage. They capped premiums at 8.5% of income, even for high earners, and expanded eligibility far beyond Obamacare’s original design. As a result, nine in ten exchange enrollees now receive taxpayer-funded premium assistance.
The cost has been tremendous—some $138 billion this year, according to the Committee for a Responsible Federal Budget.
The flood of federal money has also invited fraud. An analysis by the Paragon Health Institute found that roughly 12 million exchange enrollees filed no medical claims last year. That raises serious concerns about improper or unauthorized enrollments. The estimated cost of subsidies for these “phantom enrollees?” More than $40 billion in a single year.
None of this is sustainable.
It is unfortunate that some Americans may face higher premiums when the enhanced subsidies expire. But continuing to pour taxpayer dollars into a flawed system only delays the reckoning—and makes the eventual correction more painful.
When Congress returns in January, lawmakers will face a clear choice. They can continue doubling down on temporary subsidies to conceal rising premiums. Or they can pursue market-oriented reforms that lower costs, expand choice, and make coverage affordable without endless emergency spending.
The enhanced subsidies were billed as a temporary fix. Letting them expire is not a failure. It is an opportunity—one Congress should not waste.
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