Shutdown showdown: Can New York's Essential Plan absorb the costs of expiring tax credits?

ALBANY, N.Y. (NEXSTAR) — Health insurance costs for millions of New Yorkers are at the center of the federal government shutdown that began on October 1 after Congress failed to pass a spending bill. Democrats in the shutdown fight say expiring subsidies for the Affordable Care Act represent a health care crisis for 20 million Americans, while Republicans blame Democrats for wanting undocumented immigrants to have free health.

Democratic Governor Kathy Hochul warned that New Yorkers would see their premiums skyrocket. In contrast, Republican Congressmember Elise Stefanik called the shutdown concocted and said ACA funding was unrelated.

The ACA’s premium tax credits help people with lower incomes buy insurance through an insurance exchange like New York State of Health. The original credits were for the working poor making too much to qualify for Medicaid but unable to get health insurance through work. The law established a percentage of income that New Yorkers pay toward their coverage on a sliding scale from 100% to 400% of the poverty level.

In 2021, Congress temporarily enhanced these credits as part of pandemic relief. Enhanced credits lowered how much workers had to pay toward their coverage to as low as zero for incomes up to 150% of the poverty level and capped it at no more than 8.5% for higher incomes. The enhancement also eliminated the benefit cliff at 400% of the poverty line, offering coverage at any income threshold.

A family of four with an income at 900% of the federal poverty level—or $289,000—could claim a credit of more than $2,000, cutting their net costs in half. Still, most who receive ACA credits have incomes below 400%. New York State of Health reported 146,000 New Yorkers benefiting from the enhanced credits in all, with 29%—about 43,000 people—having incomes over 400% of the poverty level as of September 2024.

Two opposing analyses of the ACA tax credits lay out the stakes. Senator Kirsten Gillibrand, a Democrat from New York, said low- and middle-income New Yorkers can’t afford what amounts to cuts to the ACA. Without an extension from Congress, credits expire at the end of 2025, which Gillibrand’s office said will cause an average spike of $1,360 in annual premiums nationally, affecting least 1.6 million New Yorkers.

Starting in 2026, according to a county-by-county breakdown released by Gillibrand’s office on Wednesday, premiums will be hiked by double- or triple-digit percentages in all 62 counties. Insurance enrollees in New York are already receiving notices of premium hikes. Open enrollment starts November 1.

The data, calculated from the New York State of Health website, shows likely increases for the cheapest ACA plans without federal subsidies. For a single individual making $65,000 annually, the highest increases by percentage are:

• Tompkins County, with a roughly 314% increase costing about $612 more per month
• Otsego County, with a roughly 290% increase, costing about $561 more per month
• Herkimer County, with a roughly 246% increase, costing about $536 more per month
• Clinton County, with a roughly 241% increase, costing about $533 more per month

For a family of four making $130,000 a year, the highest increases are:

• Tompkins County, with a roughly 128% increase costing about $1,291 more per month
• Otsego County, with a roughly 124% increase costing about $1,190 more per month
• Herkimer County, with a 113% increase costing about $1,141 more per month
• Clinton County, with a roughly 112% increase costing about $1,135 more per month

Below this story you’ll find Gillibrand’s numbers for every county in the state.

The core conflict depends on whether the expiration of federal credits represents a secondary concern for the state. A different analysis from Bill Hammond, senior fellow for health policy at the Empire Center for Public Policy—an independent, non-partisan, non-profit think tank—argues that our unique Essential Plan offers a financial cushion.

The analyses agree that premiums will rise, but they disagree on the scale, with Hammond suggesting that the state has little to gain or lose from the fight. That’s because, at about 0.6% of the population—119,000 people—New York has the lowest portion of residents using those premium ACA tax credits of any state but Washington, D.C. The national average is 6%, compared to 19% of Floridians, for example.

In New York, the Essential Plan drives that lower coverage rate for low- and middle-income residents. The plan offers zero-premium, government-funded coverage to New Yorkers making up to 250% of the federal poverty level, absorbing most who would otherwise need the ACA tax credits. Federal money that otherwise would have paid for ACA tax credits covers the Essential Plan’s entire $14 billion budget.

Enhanced credits were initially estimated to boost the Essential Plan’s federal revenue by about $1 billion per year. But for the Empire Center, the expiring enhanced credit revenue is not an immediate crisis. Estimates from the state Health Department, cited by Hammond, indicate that revenues would exceed costs by $1.4 billion even if they expire.

Reports cited by the Empire Center from the state comptroller’s office showed that the Essential Plan trust fund held $8.9 billion in May, having raked in excess revenue over the past nine years. Before the enhancements, the program was already unable to spend all of its funding.

Since the plan’s expansion took effect in April 2024, records show that the trust fund stopped growing, since New York now only collects the federal revenue needed to cover expenses. Hammond said this “raises the possibility that some available revenues, including proceeds from enhanced tax credits, could be going unused.”

And while New York is shielded from the worst effects because of the Essential Plan’s cushion, Hammond added that the real threat is a $7.6 billion cut that scaled back that plan. According to the office of Governor Kathy Hochul, the had to kick off about 450,000 enrollees in the state who made over 200% of the poverty level without health insurance from an employer.

The Empire Center said the Hochul administration should “do more to clarify how the money is being used now” and how it might be used going forward.

Take a look at the county breakdown of premium increases, courtesy of Gillibrand’s office, below: