Senate reaches deal to extend enhanced ACA premiums for 3 years and on drug price reform

Senate Majority Leader Chuck Schumer, D-New York, has reached a deal with centrist holdout Sen. Joe Manchin, D-West Virginia, to extend enhanced Affordable Care Act (ACA) subsidies for three years through 2025. 

The deal is part of a larger $300 billion package announced late Wednesday that includes new tax and energy policies as well as giving Medicare narrow authority to negotiate prescription drug prices.

“Rather than risking more inflation with trillions in new spending, this bill will cut the inflation taxes Americans are paying [and lowers] the cost of health insurance and prescription drugs,” Manchin said in a statement Wednesday.

If the legislation becomes law, it will avoid a major cliff that could spark double-digit spikes in premiums starting next year. 

The American Rescue Plan Act boosted ACA subsidies for the 2021 and 2022 coverage years. The new subsidies, which helped ensure some low-income Americans pay nothing in premiums, contributed to a record-breaking 14.5 million sign-ups on the exchanges for 2022. 

The Biden administration has been pressing Congress to extend the subsidies, saying insurers need to know soon whether the enhanced subsidies will be there as they are formulating rates now.

Manchin originally appeared reluctant to add subsidies to a deal to give Medicare narrow authority to negotiate for lower drug prices and introduce other drug pricing reforms, saying it could make inflation worse. He later agreed to a two-year extension of the subsidies.

Democrats are relying on a procedural move called reconciliation that enables budget bills to move through the chamber via a simple majority vote as opposed to 60 votes needed to break a filibuster. Democrats have a 50-50 majority in the Senate with Vice President Kamala Harris serving as a tie-breaking vote.