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This past week, congressional Republicans and Democrats unveiled competing health care plans that would extend the enhanced Affordable Care Act (ACA) subsidies set to expire at the end of the year. Senate Minority Leader Chuck Schumer (D-NY) proposed a three-year extension of the subsidies. Republican senators countered with a proposal to fund HSAs for purchasers of low-cost ACA plans.
The Congressional Budget Office (CBO) estimates that the Senate Democrats’ plan would add $65 billion to federal deficits over ten years.1 The plan would preserve the temporary COVID-era enhanced subsidies that lowered required ACA contributions and removed income limits.
The Republican plan would provide HSA contributions in 2026 and 2027 to individuals with incomes below 700 percent of the federal poverty line (FPL) who have bronze or catastrophic plans on the exchanges. Individuals ages 18 to 49 would be eligible for a $1,000 annual contribution; those 50 to 64 would be eligible for a $1,500 contribution. CBO has yet to score the plan, but the HSA contributions would likely cost less than $10 billion annually.2
Confused yet? Even prior to the competing plans, the ACA’s subsidy formulas could be hard to understand.
The plot
A recipient’s maximum ACA subsidy is determined by the difference between two numbers:
The recipient’s benchmark insurance premium charged by insurers. Currently, this is set to the recipient’s second-cheapest silver-level plan available on the ACA exchange. Silver plans cover, on average, about 70 percent of insured expenses.3
The recipient’s required contribution. This is determined by the recipient’s family income. Initially, the ACA required that recipients contribute somewhere between 2 to 9.5 percent of their family income. Under the enhanced subsidies, those close to the poverty line are not required to contribute to their plan (their contribution share is zero percent); the maximum required share was set at 8.5 percent.
If the benchmark premium costs $625 per month and an individual’s required contribution is $225 a month, then the federal government provides a $400 monthly subsidy. This week’s plot below shows how the subsidy formula works with and without the enhanced subsidies for select households. We’ll begin with a 40-year-old single enrollee.
The Kaiser Family Foundation estimates that the average silver benchmark premium for a 40-year-old ACA recipient will be $625 per month in 2026.4 But that number doesn’t matter to subsidized enrollees. Their share just depends on their income. A single individual at 100 percent of FPL ($15,650 per year) would pay under $30 per month for a silver benchmark plan regardless of the premium the insurer charges.
In contrast, the amount the government pays—the blue bars in the plot—depend on the premium. The light blue shows the number of available subsidies under the original ACA rules. The dark blue bars show the enhanced subsidies given to recipients. In our example, the absolute value of the enhanced subsidies is largest for those around 300 percent of FPL. This, however, isn’t true for all households. For large families enrolled on the ACA with incomes above 400 percent of FPL, the value of the enhanced subsidies could be much larger. The plot below shows an extreme example of this for a married 64-year-old couple, who are charged higher premiums ($17,600 per person) due to their age.
As the plot shows, married couples with incomes above 400 percent of FPL are big winners with the enhanced subsidies. If they have kids who are also enrolled, their family subsidy would be even larger.
The point
Democrats have been quick to point out that even for those without subsidies, premiums are expected to rise. One reason is that insurers expect that the lower-cost individuals will be most likely to disenroll when the subsidies expire. The remaining pool of enrollees are expected to have much higher average health care costs than those disenrolling. The result is that the average benchmark silver premium—before accounting for subsidies—rose by 26 percent from 2025 to 2026. Again, these rising premiums don’t affect individuals who are still eligible for subsidies. They are quite important, however, to those with incomes above 400 percent of FPL. With the subsidies expiring, they will lose all subsidies while also facing higher premiums.
These individuals are much worse off relative to the unusually generous subsidies and low premiums available from 2021 to 2025. It is less clear, however, how much worse off they are compared with those prior to COVID.
In 2020, 40-year-olds with income above 400 percent of FPL faced an average silver benchmark premium of $462 per month and they were eligible for no ACA subsidies. In 2026, the comparable premium will be $625—a 35 percent increase. That increase sounds large, but prices have risen about 25 percent over the same period. As a result, the 40-year-old just above 400 percent of FPL would have paid 11.1 percent of their income in 2020; in 2026, without subsidies, they would pay 12.0 percent. Their costs have risen, but the eye-catching numbers featured in today’s debate describe only a brief period of unusually generous subsidies that were marked as temporary.
Oddly, it is the Democrats who are pushing to keep these subsidies that disproportionately benefit high-income enrollees with incomes at least four times the poverty level.
The various Republican proposals, including the option from Senators Crapo and Cassidy (which failed to get the necessary sixty votes in the Senate on Thursday), would give flat amounts to those buying HSA-compatible plans, which are disproportionately purchased by those on the lower end of the income ladder. The direct subsidy amount is larger as a share of their income than the share given to higher-income enrollees, making it a more progressive proposal.
Further reading
We highlighted in our previous Plot Points how bronze and catastrophic plans are going to be HAS-eligible starting in 2026. If the ACA is sticking around, Republican and Democrats alike should be thinking about how to encourage better incentives and lower premiums, and therefore reduce any necessary premium subsidies.
Of course, that cost estimate assumes that future Congresses allow the subsidies to expire. CBO projects that permanently extending the subsidies would add $350 billion to the 10-year budget deficits.
In 2025, 6.3 million individuals ages 18 to 64 enrolled in bronze level plans (see the 2025 Marketplace Open Enrollment Period Public Use Files). Nearly half of these recipients were 50 or older so the annual cost would be roughly $8 billion (3.15 million would receive $1,000 and $3.15 million would receive $1,500). This figure may be an overestimate if 2026 enrollment falls as CBO expects or if individuals withdraw the funds for unqualified purchases and pay taxes and penalties. It could be higher if the HSA contributions lead to increased uptake.
Recipients with incomes below 250 percent of the federal poverty line are generally eligible for cost-sharing reductions that raise the actuarial value of these plans.
There is significant variation among states. For example. the average silver benchmark premium in Vermont is $1,299; just across the border in New Hampshire, the premium is $401. The reason for the large difference is that Vermont doesn’t allow insurers to charge different premiums by age, so older individuals don’t pay more. The result is relatively higher premiums for young enrollees.
Tom Church is a policy fellow at the Hoover Institution. He studies health care policy, entitlement reform, income inequality, poverty, and the federal budget. He is co-author of “Choices for All,” a set of commonsense health care reforms.
Daniel Heil is a policy fellow at the Hoover Institution. He studies the federal budget, tax policy, and federal antipoverty programs. During the 2016 presidential campaign, he served as economic policy adviser to former Florida governor Jeb Bush.