Recent/upcoming developments… Legislative activity around the soon-to-expire ACA enhanced subsidies (eAPTCs) accelerated this week but remains highly partisan.  The Senate yesterday failed to pass separate Democratic and Republican bills on the issue.  And, House Republicans are moving towards a vote next week on what is likely to be a partisan approach to addressing the issue.

* Both Republican and Democratic bills failed to garner the requisite 60-votes for passage in the Senate yesterday.  Sen. Paul (R-KY) was the only Republican to vote against the Republican proposal.  Four Republicans (Sens. Collins (R-ME), Murkowski (R-AK), Sullivan (R-AK), and Hawley (R-MO)) voted in favor of the Democratic proposal.

* The Senate Democratic proposal would provide for an as-is extension of the ACA subsidies for three years (through 2028).  The Senate Republican proposal, developed by Senate Finance Chair Crapo (R-ID) and Senate HELP Chair Cassidy (R-LA), would allow the eAPTCs to expire.  However, it would attempt to blunt the impact of the expiration (and address general Republican concerns regarding the ACA) by providing HSA funding (between $1k-$1.5k/year) to enrollees in bronze or catastrophic plans and that have income <700% of the federal poverty level (FPL), appropriating cost-sharing reductions (CSRs) for silver plan enrollees, and allowing anyone (not just those under 30 or facing financial hardship) to purchase catastrophic plans.

* Separately, House Republican leaders are in discussions with their members to develop a proposal relating to ACA-reforms that can be voted on next week.  During House Republican caucus meetings this week, leadership presented a list of proposals to members, including proposals which match what Senate Republicans put forward as well as other broader reforms around HSA contribution limits generally and potential pay-fors like PBM and site neutral payment reforms.

* House Republican leaders are not designing their bill to include an extension of the ACA subsidies, despite pressure from moderates to do so.  However, in order to accommodate moderates, it appears that House Republican leaders are considering allowing a vote on the subsidy extension as part of their broader legislation.  This amendment will presumably fail to pass.  Many Republicans will likely vote against it, given their opposition to extending the ACA subsidies.  Many Democrats will likely oppose it as well, given that their opposition to the broader Republican bill that it would amend.

* Rep. Fitzpatrick (R-PA) and 16 other moderate Republicans are separately pushing legislation to extend the ACA subsidies for two years (with new eligibility restrictions) alongside other healthcare reforms (i.e., HSAs, PBMs).  They are pursuing a so-called discharge petition that would force a vote on the legislation over the objections of House Republican leaders.  Getting to a vote via a discharge petition requires numerous weeks of lead-time, so this process would not have an impact by the end of the year.

* For its part, the White House clearly remains conflicted about the best path forward and whether to meaningful weigh in.  We still do not have a firm proposal from the White House as to whether or how it wants to address this issue (i.e., subsidy extension on bipartisan basis vs. allowing the ACA subsidies to lapse and directing Republicans to pursue ACA reforms through reconciliation, the former being the direction the White House seemed to be leaning a few weeks ago).  In recent days, President Trump suggested that he did not see the need for Republicans to pursue a partisan reconciliation bill – the vehicle for the party to enact their preferred ACA and other healthcare reforms – next year.  However, Deputy Chief of Staff Blair subsequently indicated the administration “would love to do” another reconciliation bill.

Our outlook… It appears that both Republicans and Democrats, with some modest exceptions, are maintaining a partisan posture in their approach to the expiring ACA subsidies and there is not an effort to reach a bipartisan compromise in the coming week before Congress finishes business for the year.  The situation could rapidly change if party leaders and the White House were to shift to trying to find a bipartisan compromise, but it does not appear that either side is preparing to do so, and it is thus unlikely the enhanced ACA subsidies will be extended.  There will be another window for addressing the issue in January, with the government funding deadline on 1/31 serving as a catalyst.  However, post-expiration, Republicans will already have endured the most significant pressure to act and their willingness to extend the ACA subsidies will likely diminish.  The more likely scenario at that stage will be for Republicans to pursue a partisan reconciliation bill, but President Trump appears to be questioning that approach, thus reducing its likelihood.

* For 2025…

     – 30% probability (down 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.

     – 70% probability (up from our prior 55%)… ACA subsidies expire given the highly partisan nature of talks over this issue and the fact that Republicans are increasing focused on alternative (HSA-based and other) reforms.

* For 2026…

     – 30% probability (down from our prior 35%)… ACA subsidies retroactively extended for ~two years in a form that is limited by income and other parameters.

     – 40% probability (probability remains the same)… Partisan (Republican) reconciliation bill is enacted that includes alternative ACA and general healthcare reforms but does not address the expired ACA subsidies.  Such a bill would allow Republicans to counter the Democratic narrative around ACA price spikes and coverage losses.  However, Republicans’ slim margins will make getting intra-party consensus difficult.

     – 30% probability (up from our prior 25%)… No health care legislation enacted (i.e., no ACA subsidy extension, nor an HSA-based alternative).

Watch for these developments… It remains the case that if/when President Trump expresses firm support for a policy framework here and (importantly) actively pushes Republican support for that framework, the probability of some sort of action will materially increase (be it an eAPTC extension or a Republican reconciliation bill that pursues healthcare reforms in lieu of the eAPTCs).  As such, we are continuing to watch for definitive statements from the White House on healthcare generally and the degree to which it wants to spend political capital to achieve that outcome.  Thus far, however, it has seemed as though the White House is inclined to allow things to play out further and avoid the political risk of taking one side of the other.