Dems push to extend Obamacare subsidies; may imperil employer-sponsored health plans, employers warn

Employers have warned expanded subsidies in Biden's Build Back Better Act would siphon away employer-plan enrollees, undermine risk pools.

Updated: January 27, 2022 - 10:59pm

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Democrats in Congress are pushing to extend through 2025 taxpayer-funded Obamacare subsidies, which critics say would threaten the stability of the employer-based health insurance market.

Expanded subsidies were included in President Biden's $1.9 trillion American Rescue Plan Act, a pandemic stimulus bill, at a cost of about $34 billion. The subsidy levels vary according to individual and family income and are set to expire at the end of 2022.

The extension through 2025 is included in the original $2 trillion Build Back Better Act that passed the Democrat-controlled House but stalled in the 50-50 Senate. The bill would allow low-income residents in the 12 states that haven’t expanded Medicaid to obtain Obamacare marketplace coverage at no cost from 2022-25, even if they have an offer of employer-sponsored coverage. 

According to the Commonwealth Fund, subsidies "would be available even if employment coverage were offered to employees and their families, and employers would not face penalties if employees selected this form of coverage."

Health and Human Services Secretary Xavier Becerra attributed the American Rescue Plan Act's expanded subsidies to the record enrollment of 14.5 million in Obamacare. HHS estimates that 5.8 million of those enrollees were previously uninsured. 

Maryland Democratic Sen. Chris Van Hollen said Democrats in the Senate are still seeking to pass the subsidies out of Congress in some form.

"Those discussions are ongoing right now in the Senate," Van Hollen said during a press call with Becerra on Thursday. "I'm confident that we will get a number of the major provisions from the bill that passed the House through the Senate, not all of them, as you know.

"And we're in the process now of talking that through, and we're pushing very hard to include this extension of premium support beyond the end of this year, beyond the end of 2022. You can see from the figures we've cited that increased premium help has dramatically boosted enrollment in different plans and made it much more affordable."

According to a Forbes analysis, the increased taxpayer-funded subsidies for health premiums on the Obamacare exchanges resulted in more individuals deciding to drop private health insurance.

Employers issued warnings last November that the expanded Obamacare subsidies in the Build Back Better Act could damage the stability of the employer-sponsored insurance system.

As Bloomberg News pointed out, the Congressional Budget Office estimated that the Obamacare subisdy changes in the Build Back Better Act would decrease employer-based coverage enrollment by 2.8 million from 2022-31.

"The proposed change to the firewall here may disrupt the stability and predictability of employer plan risk pools in ways that are particular to each employer on a case-by-case basis, and in the aggregate may degrade the foundation of our employer-sponsored plan system," read a letter the Partnership for Employer-Sponsored Coverage sent congressional leaders in November 2021.