First look: New argument against enhanced ACA subsidies
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The Affordable Care Act's subsidy structure, especially with COVID-era enhancements, discriminates against people with employer insurance and creates disincentives to work, an influential conservative think tank argues in a new brief provided first to Axios.
Why it matters: Treat this as a preview of a likely new line of attack on the Hill as Congress continues to brawl over the future of the enhanced subsidies.
- Paragon Health, which has close ties to both the former and current Trump administrations, has long argued against an extension of the subsidies.
- It recently demonstrated its influence with congressional Republicans when its attacks against Medicaid provider taxes and state-directed payments ultimately were reflected in major components of the GOP's Big Beautiful Bill.
How it works: Let's take a brief detour to Wonkville.
- ACA subsidies are paid for by federal taxpayers and vary in size based on enrollees' incomes.
- Employer health benefits aren't taxed as income, meaning employees save on taxes that they would have paid if they were given the value of their health benefit in wages.
- So arguably, both ACA enrollees and people with employer insurance receive a tax benefit.
What they're saying: Paragon crunched numbers and is arguing that ACA enrollees receive a much bigger tax benefit than those with employer insurance, which has several negative consequences.
- "Workers face a large penalty if they receive health insurance through their employers rather than through the exchanges," the authors write.
- Older workers may have an incentive to retire early, and the structure of the law "discourages people from working for employers who offer health coverage" and encourages small companies to drop health coverage.
- Plus, "the ACA subsidies present a disincentive for work and income growth as each additional dollar of income modestly reduces the subsidy amount," the paper argues.
The other side: "This tortured logic could not be more out of touch with the millions of regular people who will have to pay twice as much for health care if the tax credit expires," said Brendan Buck, a spokesman for the advocacy group Keep Americans Covered.
- "When they're choosing between health care or rent or food on the table, they don't care much about this kind of academic babble."
The bottom line: Paragon obviously has a perspective, and there are plenty of other reasons why small business coverage may be declining or why people would still prefer an employer that happens to offer health insurance benefits.
- But still, "bad for people with employer insurance" could end up being a potent political argument against the enhanced subsidies.
This story has been updated with a comment from Keep Americans Covered.
