At the heart of the longest U.S. government shutdown in history are federal subsidies that millions of Americans use to buy health insurance through government-run marketplaces.
The shutdown came as Democrats aggressively tried to prevent those subsidies from expiring. And now members of Congress face growing pressure to end the shutdown — not only because of its impact on airports and federal programs like nutrition assistance, but also because of public concerns about rising insurance premiums.
These subsidies were expanded significantly in 2021 by Democrats, who controlled Congress at the time. This has led to a surge in participation in these marketplaces, which were created in 2010 under the Affordable Care Act (ACA), also known as Obamacare.
Why did we write this
The idea of federal subsidies to help more people afford health insurance was built into the Affordable Care Act from the beginning. But they have grown, as has the overall burden on health care in the federal budget.
The extended subsidies expire next month. Increased insurance premiums for many individuals and families who buy health insurance through the Obamacare exchanges. For weeks, Democrats have urged Republicans to agree to extending the subsidies as a condition for reopening the government. Republicans have criticized the subsidies as wasteful and open to abuse, while saying the government must reopen before Congress can debate health insurance.
Open enrollment on the marketplaces for 2026 plans began on November 1st. Published prices show significant cost increases for many plans.which reflects uncertainty about what will happen with the expanded subsidies. Most enrollees receive some level of support designed to make Obamacare more affordable and increase the insured pool. The overall cost of insurance is rising, largely because Healthcare in the US is much more expensive than in similar countries.
Dawn Schmidt doesn't yet know how much her premiums will rise next year, but she's worried about whether she'll be able to afford her insurance plan. She left her job at Boeing in 2020 and lives in Pennsylvania, which has its own ACA market known as Pennie. Administrators warned her that premiums could rise by 82%. “It's a lot. It adds up,” she says.
What are extended subsidies and why do they expire?
Subsidies have been included in Obamacare from the beginning. The idea was to help people who did not have employee-provided plans or access to Medicaid or Medicare but could not afford the market price of private insurance. People with low incomes had to pay between 2% and 10% of their income, and the government paid the rest.
The expanded subsidies were introduced by Democrats in 2021 during the COVID-19 pandemic, when access to health care became a pressing issue. Financial support was provided to Americans whose poverty rate was more than four times the federal poverty level, which now exceeds $60,000 per enrollee, while those with the lowest incomes no longer had to pay any premiums. Enrollment has more than doubled. from approximately 12 million in 2021 to 24 million in 2024.
“We have more people in the system than ever before, and that's a good thing,” says Elena Marks, a health policy expert at Rice University's Baker Institute for Public Policy. But, she adds, “core costs continue to rise… and that's not good.”
To pass the legislation, Democrats had to set an expiration date to satisfy Congressional budget rules. That created a surge in enrollment that was already causing concern before the government spending impasse led to school closures on Oct. 1.
How are Democrats and Republicans reacting to this?
Democrats tried to use the enrollment cliff as leverage to force an extension. Citing higher premiums in New York, Sen. Chuck Schumer accused Republicans of ignoring a “health care crisis” that could cause millions of people to lose insurance if subsidies are cut. “This devastating price increase is completely avoidable, but if Republicans continue to[ing] By burying our heads in the sand, New York families will pay for it.” he said in his statement.
Most Republicans take a different view. They point to the financial burden associated with providing subsidies that, if made permanent, will cost about $350 billion over 10 yearsAccording to Congressional Budget Office estimates. They question the design of Obamacare and its failure to curb rising health care costs, as well as the risk of waste and fraud. Some want to repeal the Affordable Care Act and replace it with an alternative approach.
But repeating Obamacare is politically fraught. A GOP effort to repeal it in 2017 failed to make it through the Senate amid disagreement over what exactly would replace it. Some Republicans would prefer to extend expiring subsidies and work on reforms to markets.Considering that open enrollment for 2026 is already underway. Rep. Mike Lawler, a Republican who represents a swing district in New York, co-sponsored a bipartisan bill extend loans for a period of one year.
Polls show subsidy expansion popular and that cutting them could irritate Republican voters. A survey conducted in September by the nonprofit research group KFF Health found that three out of four respondents want the subsidies extended. In July, Tony Fabrizio, a pollster who worked for President Donald Trump's re-election campaign, warned that “a solid majority of Trump voters and swing voters” supported the subsidies and that their expiration could punish Republicans in competitive districts in the 2026 midterm elections. GOP-governed states such as Georgia and Florida saw one of the largest increases in Obamacare enrollment in recent years.
What are the possible consequences of cutting Obamacare subsidies?
Higher premiums could keep millions of Americans out of the 2026 plan, meaning more people will be uninsured. Those with moderate incomes who did not take advantage of the original subsidy program may decide to pay more out of pocket. Experts say much larger declines are likely among lower-income groups, whose costs have been almost entirely subsidized.
Although critics question why taxpayers support middle-aged couples Those who retired early are a minority. Only 7% of participants on marketplaces had incomes four times the federal poverty level and, as a result, were eligible for expanded subsidies. Of these, about half were between 50 and 64 years old.
Mrs. Schmidt falls into this category: she retired early because her husband is older and they wanted to make the most of their pension. He's now on Medicare and she's too young to be eligible, so he's buying Obamacare. This year she paid $211 a month for her plan with a $6,000 deductible and is preparing to pay more if subsidies are eliminated.
“We'll probably have to cut back on things like holidays. We've already cut back on spending on our grandchildren for Christmas and birthdays,” she says.
Enrolling early retirees in Obamacare was an integral part of her plan, Rice's Ms. Marks said. “One of the reasons for creating the ACA marketplace was to allow people to not stay in jobs they didn't want to stay in and get health insurance,” she says.
However, she adds, they are not the main beneficiaries of federal assistance. “Most of the subsidies go to people with the lowest incomes.”
Even with subsidies, rising premium costs are putting a strain on wallets. Young people are generally more likely to forgo health insurance and risk paying out of pocket for health care. This poses a quandary for insurers and regulators because younger people tend to use health care less than older people; insurance pools rely on serving demographics.
This has long been a problem looming over Obamacare: if not enough young people pay into the system, resulting in a less healthy pool, over time it will no longer be viable for private insurers. An individual mandate to purchase health insurance would solve this problem. Congress deactivated it during Trump's first term.
This difficulty masks a harsh reality: Americans pay far more for health care than other countries, and most provisions in Obamacare that were designed to curb rising costs were canceled or stalled. Tens of millions are still uninsured. And while policy experts have proposed various solutions, so far no political party has expressed a desire to significantly reduce the rising costs of health insurance programs for an aging population.
