WASHINGTON, DC – Today, the Joint Economic Committee released an issue brief entitled, Long Overdue: Enhanced Premium Tax Credits Should Expire, which finds that the Biden COVID premium subsidies (enhanced premium tax credits) have not only outlived their intended temporary purpose, but evidence indicates that their design, focused on maximizing coverage regardless of cost, reduces pressure on insurers to contain costs. As a result, the Biden COVID premium subsidies perform poorly as permanent policy: they do more to improve the financial outcomes of large health insurers than to reduce health care costs for Americans.  

“Originally designed as a temporary response to a public health crisis, these subsidies are increasing profits for large insurance companies while doing little to contain costs for American families,” said Chairman David Schweikert. “The government is paying billions to cover people who aren’t receiving care and to subsidize insurers who face little pressure to control costs. This is not a sustainable policy, and Congress should allow these temporary subsidies to expire as scheduled and begin a serious conversation about how to make health care markets more competitive, efficient, and consumer driven. As our nation faces record high debt, we must ensure every federal dollar delivers real value.”

Democrats in Congress created these temporary COVID enhanced premium tax credits (PTCs) in the American Rescue Plan Act of 2021 and later extended them in the Inflation Reduction Act of 2022. According to JEC findings, federal spending on these subsidies has skyrocketed since their introduction. Even if the enhanced credits expire at the end of this year as scheduled, total PTC spending in 2026 will remain more than double what was projected before these changes took effect in 2021.

The Biden COVID premium subsidies have allowed insurers to push premiums even higher by masking rising prices, with many consumers enrolling in plans for $0 per month. The inherent inefficiency of the PTCs drives their increased costs: only one-dollar benefits consumers for every two that are wasted or benefits insurers and intermediaries. As the share of consumers paying little to nothing in premiums has increased to 42 percent, pressure to compete on price has weakened, allowing insurers to benefit from rising gross premiums. The enhanced subsidies result in a larger share of each subsidy dollar benefiting insurers or being wasted, instead of reducing premiums for consumers.

The number of zero-claim enrollees—people whose insurance companies receive a PTC payment on their behalf but who do not use their coverage or file any medical claims in a given year—has risen substantially. Since the government increased PTCs with Biden’s COVID premium subsidies, the number of people not using their coverage has nearly quadrupled, reaching 35 percent of all enrollees. In these cases, insurers still get full payments for each enrollee, costing tax-payers money without providing any real health benefits. This is supported by other research estimating 6.4 million potentially improper enrollees, some of whom are “phantom” enrollees who were signed up without their knowledge by unscrupulous brokers.

The brief also finds that a permanent extension will burden American taxpayers by maintaining an unsustainable subsidy bubble, which perpetuates a broken incentive system that deepens market distortions, erodes competition, and directs taxpayer dollars to insurers and intermediaries.

Read the full brief here.

Download the fact sheet here.