CBO: Extending enhanced ACA subsidies permanently may net 4.8M increase in sign-ups each year

Extending enhanced subsidies on the Affordable Care Act’s (ACA's) insurance exchanges would lead to 4.8 million new sign-ups a year and slight declines in non-group coverage, a key congressional scorekeeper found. 

The Congressional Budget Office (CBO) released an analysis Thursday on a proposal to extend the boosted subsidies—set to go away after this year—on a permanent basis. The CBO also found that if the subsidies became permanent, it would balloon federal spending by $247.9 billion.

Senate Democrats are working to pass a two-year extension to the subsidy enhancement passed originally by the American Rescue Plan Act for coverage years 2021 and 2022. The increased subsidies helped ensure some low-income customers didn’t pay anything for premiums.

CBO projected making the subsidies permanent would lead to a 4.8 million increase in enrollment on ACA coverage. Overall, it believes the exchanges will see a 5.2 million increase in subsidized enrollment and a decline of 400,000 people who do not get subsidies. 

The agency also believes there will be declines in other sources of insurance. For example, it projects a 2.3 million decrease in enrollment for employer-sponsored insurance and a 500,000 decrease for non-group coverage purchased outside of the ACA exchanges.

CBO believes that, in addition, Medicaid and the Children’s Health Insurance Program (CHIP) would see a combined increase of 200,000 in enrollment. 

“The estimated reduction in employment-based coverage and the increase in Medicaid and CHIP enrollment are driven primarily by a reduction in offers of employment-based coverage that would result from the enhanced marketplace subsidies,” the CBO said.

However, extending the subsidies permanently would lead to an increase of $247.9 billion in federal deficits from 2023 through 2032. 

“Those effects primarily reflect a $305.5 billion increase in premium tax credits, partially offset by higher revenues stemming from a shift in employees’ compensation from tax-favored health insurance to taxable wages,” the CBO said. 

The agency also examined the effects of repealing the so-called “family glitch” of the ACA. A provision of the law ensures individuals can get premium assistance from their employer if the employer requires them to spend more than 9.5% of household income on a premium. The glitch is the threshold only covers the individual coverage and not the premium for dependents. 

A rule proposed by the Biden administration would create a separate minimum threshold to cover an entire family. 

The CBO estimates that, if the rule is made final, the number of people who get non-group coverage would increase by 900,000 each year from 2023 through 2032. The estimate comes from 600,000 people no longer getting employer-sponsored insurance and 400,000 people that were previously uninsured as well as an increase of 100,000 people getting Medicaid and CHIP coverage. 

Installing the family glitch rule would also increase federal deficits by $33.6 billion.

It remains unclear whether the legislation to extend the subsidies for another two years will reach President Joe Biden’s desk. Senate leadership is hoping to add the extension to a deal to tackle drug prices.