ACA Subsidies at Risk: How Project 2025 Could Unravel Affordable Healthcare for Millions
ACA Subsidies at Risk
How Project 2025 Could Unravel Affordable Healthcare for Millions
The Affordable Care Act (ACA) has been a cornerstone of American health policy for the last decade, providing financial assistance to millions of individuals through subsidies like Premium Tax Credits (PTCs) and Cost-Sharing Reductions (CSRs). These mechanisms have made health insurance accessible to low- and moderate-income Americans while fostering a healthier, more equitable society. However, the proposed changes outlined in Project 2025 pose risks to the structure and effectiveness of these subsidies, with far-reaching consequences for public health, insurance markets, and economic stability.
Impact of Market Segmentation
Market segmentation, in the context of health insurance, involves dividing consumers into separate groups based on characteristics like subsidy eligibility, risk profiles, or other factors. While segmentation can sometimes tailor offerings to specific groups, it often leads to imbalances in shared risk pools.
Project 2025’s call to separate subsidized ACA exchange markets from non-subsidized markets introduces the risk of adverse selection, undermining both markets. Subsidized plans could become concentrated with higher-risk individuals, driving up premiums for enrollees who can least afford increases. Conversely, unsubsidized plans may attract healthier individuals, but the reduction in shared risk pools would likely drive up administrative costs and destabilize the market.
The proposed segmentation ignores the delicate balance achieved under the ACA, which integrates diverse populations to stabilize premiums and improve access. The division of markets contradicts fundamental insurance principles, creating inefficiencies that would leave many Americans with fewer, costlier options.
Reduction of Medicaid Expansion
Medicaid expansion has been a proven success, providing coverage to over 12 million people and reducing uninsured rates across the nation. The Project 2025 critique of ACA-driven Medicaid expansion jeopardizes coverage for individuals earning up to 138% of the Federal Poverty Level (FPL). A rollback would force low-income individuals into the ACA Marketplace, where subsidies may be insufficient to fully offset premium costs. This shift would increase financial strain on already vulnerable populations and overwhelm the subsidy system, undermining its efficiency and purpose.
Authors of the proposal assert that Medicaid expansion "crowds out" those in need due to a broader coverage scope that detracts from the capacity to serve the intended core beneficiaries. However, evidence consistently shows that Medicaid expansion has improved health outcomes for low-income populations without compromising access for traditional Medicaid beneficiaries.
Regulatory "Relief" and Its Implications
Regulatory relief typically refers to easing or eliminating government-imposed rules and mandates to reduce compliance burdens on businesses, often with the goal of fostering innovation or lowering costs. In the context of health insurance, however, such relief often means scaling back requirements that ensure comprehensive coverage and consumer protections. By targeting regulatory relief for unsubsidized markets, Project 2025 risks eroding essential health benefits and consumer protections.
The ACA mandates, such as coverage for pre-existing conditions and standardized cost-sharing reductions, are critical to ensuring equitable access to care. Regulatory relief, especially with regulations that require extensive compliance measures, reporting, and adherence to complex rules can directly decrease the administrative overhead for carriers. For example, streamlined processes for plan certification, pricing, and benefit design could reduce the time and resources carriers must dedicate to regulatory compliance, freeing up funds for other areas such as innovation or customer service. Although fewer mandates may allow for more flexible, lower-cost insurance options, the reality is that these stripped-down plans often exclude vital services, leaving enrollees underinsured. Loosening these regulations would disproportionately harm vulnerable populations, including those benefiting from CSRs, which have significantly reduced out-of-pocket costs for individuals earning between 100% and 250% of the FPL.
Eliminating or reducing these protections in the name of "relief" is a strategy that may prioritize short-term cost savings for insurers over long-term societal benefits. The focus should remain on prioritizing and preserving the integrity of regulations that uphold equity and accessibility in the health insurance marketplace and eliminating those that do not serve administrative or patient benefit.
Broader Public Health Consequences
Project 2025 proposed changes risk reversing the significant gains made under the ACA in improving public health metrics, such as increased access to healthcare (e.g., Medicaid expansion has been associated with a significant increase - 6.6 percentage points - in physician visits among low-income adults) and improved patient equity (e.g. health insurers can no longer practice discriminatory gender rating nor treat pregnancy as a preexisting condition). Reduced access to affordable insurance would lead to delayed care, higher rates of preventable illnesses, and increased reliance on emergency services, driving up overall healthcare costs. Furthermore, these changes could exacerbate health disparities, particularly for rural communities, racial minorities, and low-income individuals.
Carrier Caution
Project 2025 poses a potential concern to the stability and profitability of insurance carriers by dismantling the balanced markets established under the ACA. The proposed segmentation of subsidized and unsubsidized insurance markets would likely lead to adverse member selection. Subsidized plans would absorb higher-risk individuals, driving up claims costs and premiums, while unsubsidized plans attract healthier individuals, destabilizing the risk pool. This fragmented market would erode predictability for carriers, making pricing strategies and long-term sustainability increasingly untenable. Such disruption risks pushing carriers out of the ACA marketplace entirely, leaving millions of Americans with fewer options and skyrocketing costs.
The rollback of Medicaid expansion adds further pressure, flooding ACA marketplaces with low-income individuals who may require higher subsidies but contribute less in premiums. For carriers, this influx threatens to overwhelm administrative systems and destabilize risk pools already reeling from segmentation. Moreover, the "regulatory relief" promised by Project 2025 would strip essential protections, enabling bare-bones plans that might seem cost-effective but alienate consumers and reduce trust in the market. These changes would force carriers into a precarious position - chasing short-term gains at the expense of long-term viability and eroding the framework that supports a sustainable insurance market.
Wrap Up
ACA subsidies - PTCs and CSRs - are indispensable for maintaining access to affordable, quality healthcare. Project 2025’s proposed changes undermine these pillars, posing risks to market stability, public health outcomes, and economic equity. Improving upon the ACA foundation is essential to ensuring a healthier, more resilient America.
The focus should be on strengthening the existing framework rather than dismantling its core components. Expanding access, refining subsidy calculations, and addressing cost-efficiencies are viable pathways that align with public health objectives. Policymakers must prioritize strategies that enhance, not erode, the critical protections provided by the ACA.
Sources & Resources
The Impact of the Payment and Delivery System Reforms of the Affordable Care Act
The Effects of Medicaid Expansion under the ACA: Studies from January 2014 to January 2020
The Affordable Care Act’s Impacts on Access to Insurance and Health Care for Low-Income Populations
How Undoing the Affordable Care Act Would Affect Americans’ Health Care
Explaining Health Care Reform: Questions About Health Insurance Subsidies
