The federal government shut down after a deadlocked Congress failed to pass funding for Fiscal Year 2026 (FY26), starting Oct. 1 at midnight. The House-passed continuing resolution funding the government until Nov. 21 was voted down in the Senate, 55-45.
A continuing resolution would have steadied federal funding at current levels to keep the government open while FY26 spending debates could continue. While Republicans control majorities in both chambers of Congress, the Senate needed 60 votes to pass the package under current filibuster rules. The current party split is 53-47, meaning they would need seven Democrats and all Republicans to vote in favor of a bill brought forth by the majority to pass annual spending.
PPACA Premiums
An earlier separate government funding bill brought by Senate Democrats failed 47-45. Their package sought to fund at current levels until Oct. 31, make Patient Protection and Affordable Care Act (PPACA)-enhanced subsidies permanent, and reverse almost $1 trillion in Medicaid cuts passed earlier this year. The PPACA subsidies are set to sunset at the end of this year.
Health insurance premiums are projected to rise sharply in 2026, with PPACA marketplace plans facing increases of about 20%. The American Rescue Plan Act established enhanced subsidies in 2021, driving higher enrollment in PPACA marketplace plans. Many households utilizing PPACA marketplace plans will see a large increase in healthcare premiums if they expire, indirectly causing a smaller increase for the rest of the public.
PPACA Tax Credit
PPACA introduced a tax credit that lowers most enrollees’ monthly payment for health insurance. These tax credits were temporarily increased and expanded to more enrollees by the American Rescue Plan Act, including by capping the amount a household pays out-of-pocket for monthly premiums at 8.5% of total income with a combined income at or below 400% of the federal poverty level. This was extended through 2025 by the Inflation Reduction Act. Congress would need to extend the enhanced tax credits by the end of the year to prevent a spike in premiums for households utilizing marketplace plans.
Downstream Market Effects Likely
Due to shared market dynamics, the effects of the end of the 2021 enhanced tax credits will not end at PPACA marketplace plans. As premiums rise, younger and healthier people are likely to drop coverage, leaving behind a sicker risk pool. This drives premiums even higher, a cycle known as “adverse selection.” Higher uninsured rates also mean more uncompensated care, which pushes up costs for everyone, even those with employer coverage. Due to cross-subsidization in health insurance plans, costs are spread through the market, and those staying insured should expect an increase in premiums next calendar year.
The expiration of enhanced PPACA subsidies will not affect all enrollees equally. Particularly vulnerable groups include middle-class families above 400% of the poverty line, older enrollees, and younger and healthier people. Middle-class families will face steep monthly increases, older adults are more likely to struggle with affordability, and younger enrollees may drop coverage as prices rise. Under current policy, enrollees making between 100-150% of the federal poverty level can receive a fully subsidized benchmark plan.
Congress still has until the end of the year to extend or modify the enhanced credits, and states have the ability to supplement or enhance their own subsidy programs. Insurers are assuming the credits will expire and thus projecting increases in monthly premiums for their patients. If action is taken soon, the projected hikes may not fully materialize.
The crux of congressional debate over annual spending stems from this looming increase in premiums on the horizon. Unless Congress or states act, most marketplace enrollees will see higher premiums in 2026, and even those with job-based insurance may feel the ripple effects.
Emma Meehan is ACA associate manager of federal government relations.
