Recent/upcoming developments… President Trump has continued to signal shifting positions on the soon-to-expire ACA enhanced subsidies (eAPTCs).  Earlier last week, the White House backed away from releasing its plan for addressing this issue (which, reportedly, would have included a temporary and nearly as-is extension of the subsidies and a framework for a more fulsome HSA-style overhaul of them).  But, then later in the week, Trump signaled that while he does not want to extend the subsidies, an extension may nonetheless be “necessary to get something else done.”

* As we previously noted, Speaker Johnson reportedly communicated to the White House last week that House Republicans do not support an ACA subsidy extension.   This likely reflects the lack of strong majority support among House Republicans, though many do support an extension (with 85+ moderates signing a letter last week supporting an extension).  The dynamic remains similar among Senate Republicans, with some supportive of an extension, but no consensus about how to move forward.  Key Republican health policy leaders in both the House and Senate are actively working on broader health care legislation (related to HSAs) that would serve as an alternative to an ACA extension.

Our outlook… Trump is clearly conflicted about the path forward and appears to be trying to reconcile Republicans’ ideological animosity toward the ACA against the near-term political imperative to avoid coverage losses/premium increases.  Given the White House’s pullback on its proposal, it appeared that the former was winning the day.  However, Trump directly commenting for the first time on the necessity of extending the subsidies is a notable development which requires a modest increase in the probability of an extension being enacted.  But to overcome entrenched resistance among many Republicans (particularly in the House), Trump will need to go beyond passively commenting on the situation to being more actively involved in supporting a subsidy extension.  If a subsidy extension is not enacted this year, there will be some ongoing effort to enact an one on a bipartisan basis in the new year, with the 1/31 expiration of government funding (which was established at the end of the recent shutdown) serving as somewhat of a catalyst for resolving the ACA situation.  The following is an updated set of scenarios that could unfold.

* For 2025…

     – 45+% probability (up very marginally from our prior 45%)… ACA subsidies extended on a bipartisan basis for ~two years in a form that is limited by income and other parameters.

     – <55% probability (down very marginally from our prior 55%)… ACA subsidies expire given the increasingly partisan nature of talks over this issue and the fact that Republicans are increasing focused on alternative (HSA-based) reforms.

* For 2026…

     – 35% probability (up from our prior 20%)… ACA subsidies retroactively extended for ~two years in a form that is limited by income and other parameters.

     – 40% probability (down from our prior 45%)… Partisan (Republican) reconciliation bill is enacted that includes some HSA-based alternative to the expired ACA subsidies.  Such a bill would allow Republicans to counter the Democratic narrative around ACA price spikes and coverage losses ahead of the midterms.  However, Republicans’ slim margins will make getting intra-party consensus difficult.

     – 25% probability (down from our prior 35%)… No health care legislation enacted (i.e., no ACA subsidy extension, nor a HSA-based alternative).

Watch for these developments… President Trump’s posture regarding an extension remains the most important variable to watch.  If he actively embraces an extension, its probability of enactment will rise.