State legislators are looking at ways to minimize the anticipated impact of an end to certain healthcare tax credits set to expire at the end of the year.
Yesterday’s federal government shutdown increased the likelihood that the federal government will not extend the Affordable Care Act’s (ACA) enhanced premium tax credits, which are set to expire at the end of 2025. Should the tax credits not be renewed, individuals who make over 400 percent of the federal poverty level (FPL) will no longer have their monthly premiums capped. Extension of the tax credits became a hard line for Democrats in Washington amid negotiations trying to prevent the shutdown.
The legislature’s Insurance and Real Estate Committee held an informational forum on October 1 to discuss the likely impact of the expiration of the tax credits, as well as other changes the state will face under the One Big Beautiful Bill Act (OBBBA).
The OBBBA made several changes to Medicaid eligibility likely to impact certain state residents, particularly legal noncitizens, or ‘green card’ holders. Under the law, lawfully present noncitizens who are in a Medicaid waiting period and who make less than 100 percent of the FPL will no longer be eligible for subsidies through the Medicaid exchange.
The law also restricts the definition of “qualified immigrants” who are eligible for Medicaid and implements work requirements for those on Husky D, also known as Medicaid for low-income individuals, which provides healthcare to those aged between 19 and 65 who have no dependent children. Those on the program will have to show they are working for 80 hours per month for at least the federal minimum wage, or doing 80 hours of community service.
The bill also changes the eligibility determination frequency for expansion of the program from once per year to every six months and changes the time period to backdate retroactive Medicaid coverage from three months to one.
The Office of Policy and Management (OPM) says all these changes will impact the state, particularly the Department of Social Services (DSS). The change in eligibility determination frequency from once a year to twice a year will mean DSS needs to expand its capacity for review, OPM senior policy advisor Claudio Gualtieri said during the forum. He also said the shortening of the time period to backdate Medicaid coverage will impact the department’s capacity.
According to Gualtieri, the changes to Husky D may not result in a loss of healthcare for affected individuals as there are ‘alternative pathways for coverage.” However, the state may end up paying more. Under Husky D cost-sharing, the state pays about a 10 percent match of costs, and the federal government covers the other 90 percent. Under other plans, the federal government’s contribution is only 50 percent.
OPM also warned of changes to the state health insurance exchange, Access Health CT, that will occur if the enhanced premium tax credits expire. According to OPM, the state’s share of the impact for Covered CT, a program that provides no-cost insurance to eligible low-income individuals who aren’t eligible for other programs, should the tax credits expire, will be $7.2 million for fiscal year 2026 and $22.8 million for fiscal year 2027. However, that calculation is based on fiscal year 2025 rates and is likely to increase.
In total, the state exchange will lose around $354 million in subsidies. OPM officials said they are worried about those facing the “subsidy cliff”–those who make over 400 percent of the FPL and will lose all subsidies if the tax credits expire. The agency said it has had conversations with insurance carriers to determine what that group looks like and whether they are likely to drop a plan tier, exit the market, or impose additional risk on the health insurance pool.
OPM also floated several short-term and long-term policy solutions the state could consider, including a partial, short-term backfill of the expiring subsidies and different pathways for service eligibility. Long-term, they suggested exploring reinsurance, insurance which one insurance company purchases from another to insulate against risk, as a potential funding source; applying for a Section 1332 innovation waiver, which allows states to pursue “innovative strategies” for delivering health insurance; or pooling small employers and nonprofits. The state currently has a Section 1332 waiver for Covered CT.
Jennifer Maraschi from DSS also spoke at the forum about the impact the expiration of the tax credits would have on Covered CT. She said over 50,000 people are enrolled in Covered CT, making up 32 percent of the state’s marketplace. She added that the average premium for enrollees will increase by 3.7 percent of their monthly income, or about $71, but that cost will be borne by the program, not members, because the state’s waiver does not allow for cost sharing.
Additionally, Maraschi said the changes in the OBBBA, which place additional limits on what type of non-citizens can receive subsidies, mean that 144 recipients of Delayed Action for Childhood Arrivals (DACA) will lose their Covered CT coverage, and about 5,300 lawfully present noncitizens who are eligible for Medicaid will lose access to subsidies.
Maraschi further said that the bill’s requirement that individuals submit income verification if they have no available tax data also means a likely decrease in marketplace enrollment.
Susan Rich-Bye from Access Health CT said the state anticipates 30 to 35 percent of individuals currently enrolled in the exchange could be uninsured by 2034. Approximately 28,000 people have an annual income 400 percent above the FPL and will lose all subsidies.
The CT Hospital Association also spoke about how the OBBBA may impact hospitals. The bill eliminates the use of state-directed payments to fund community health investments and increases Medicaid payments to hospitals, which the association said could restrict Medicaid eligibility and lead to higher rates of uninsured individuals seeking treatment and larger volumes of uncompensated care from hospitals. Hospitals receive reimbursement rates from Medicaid and the state that are below the cost of care, increasing their reliance on reimbursements from private insurers.
They worried that the OBBBA would reduce Medicaid and marketplace insurance coverage and reduce access to preventative care, resulting in greater reliance on emergency medicine and the need for more intense and costly treatment, as well as an increase in care for which they do not receive compensation.
The association also noted that the taxes it pays to the state help fund its share of the costs of the Medicaid program, which leaves General Fund revenue free for other purposes.
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