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WASHINGTON, D.C.—One major issue of contention in the current government shutdown debate is over ACA exchange subsidies—premium tax credits set to expire at the end of 2025.

Democrat lawmakers are pushing for a one-year or longer extension of these enhanced subsidies to maintain affordability for millions of enrollees, while Republican lawmakers are proposing to redirect the hundreds of billions of dollars in federal subsidies currently allocated to insurance companies under the Affordable Care Act (ACA, or Obamacare) directly to American individuals and households instead.

This shift aims to cut out what President Doanld J Trump calls the “fat cat” insurance companies as middlemen in the subsidy process, which he describes as a corrupt system that props up “really bad Obamacare.”

Under the proposal, the money—previously paid as premium tax credits to insurers to reduce costs for enrollees—would go straight to consumers. People could then use these funds to purchase their own private health insurance policies on the open market, potentially selecting better and more affordable options than those mandated or available through ACA exchanges.

Specific mechanisms being discussed include depositing the subsidies into expanded Health Savings Accounts (HSAs) or pre-funded federal flexible spending accounts. HSAs, typically paired with high-deductible health plans, allow tax-deductible contributions, tax-free growth, and withdrawals for qualified medical expenses like doctor visits, prescriptions, or even insurance premiums.

The Trump admin would give individuals more direct control over their healthcare spending, bypassing insurers’ management of benefits and enabling shopping for coverage without relying on government-subsidized plans from large health insurance companies in the ACA.

The idea emerged amid government shutdown negotiations, where Democrats are demanding an extension of enhanced ACA tax credits (set to expire soon) in exchange for funding deals, while Republicans, encouraged by Trump, are pushing back to prioritize tax cuts, border security, and this redirection instead.

Proponents of the plan argue transparency, efficiency, and personal savings by empowering individuals to negotiate or choose alternatives like short-term plans or direct-pay arrangements with providers.

Critics, including Democrat lawmakers, warn (not a certainty) it could leave millions without adequate coverage, especially for pre-existing conditions, and disrupt the market without clear implementation details.

By the numbers

Research performed by the Lynnwood Times shows that the federal government has spent approximately $650 billion on ACA exchange subsidies (premium tax credits and cost-sharing reductions) from 2014 (when ACA exchanges officially launched) through 2024.

The major health insurance companies have seen enormous financial gains from the ACA’s structure, with federal subsidies (including those expanded under the Inflation Reduction Act) amounting to $92 billion for ACA exchange subsidies (premium tax credits) in 2023 alone—much of it flowing to insurers. These major insurers cover approximately 31 million enrollees as of September 2024.

Below are the major publicly traded health insurers participating in the ACA exchanges, along with their stock price increases since the ACA was signed into law on March 23, 2010:

The ACA received estimates calculated by the Lynnwood Times focus on federal premium tax credits and cost-sharing reductions for ACA marketplace plans, apportioned by approximate market shares derived from 2024 enrollment data. The total cumulative subsidies ($650 billion) is based on reported annual figures and calculations from CBO projections.

Author: Mario Lotmore