Step into the breach

States step into the breach as Obamacare subsidies lapse

Even state governments that want to help can’t completely cover rising insurance premiums.

By Alice Miranda Ollstein and Natalie Fertig

At least a dozen states are working to shield people from soaring health insurance costs following Congress’ failure to extend Obamacare subsidies for tens of millions of Americans.

The efforts, which include actions taken by state leaders in California, Colorado and Maryland, in nearly every case come with a major caveat: They will only be able to help a portion of the people whose health insurance will be too expensive without the enhanced subsidies that Congress opted not to renew before leaving Washington for the year.

“We can carry the cost for a little bit, but at some point, we will need Congress to act,” said Javier Martínez, speaker of the House in New Mexico, the only state so far to cover all lapsed subsidies. “No state can withstand to plug in every single budget hole that the Trump administration leaves behind.”

The speed at which the mostly Democratic states have taken action underscores the mounting national anxiety about the medical and political impact the end of these subsidies will have. Millions of Americans will no longer be able to afford health insurance, straining the budgets of state welfare programs and hospitals that are already in the red, and threatening to erode access to care to a level not seen in years.

Responses have so far been uneven, reflecting political and economic realities across the country. Georgia and Washington, for instance, are not likely to cover the subsidies, though for very different reasons. Other states, like Connecticut and New Mexico, have already acted, allocating money in sessions earlier this year in preparation for the possibility, and may add more in the upcoming year.

California, predicting that the GOP-led Congress would allow the subsidies to lapse, was one of the first to experiment with ways to protect people from rising monthly premiums. The Golden State is allocating nearly $200 million to replace the expired federal subsidies for roughly 300,000 of its poorest residents, but the rest of the state’s 2 million residents enrolled on the Obamacare exchange could be hit hard.

The state’s Obamacare market program, Covered California, expects as many as 400,000 people to go uninsured. In Maryland, which has far fewer impacted people to take care of, the poorest will see a more generous subsidy but people at higher income levels will receive a partial boost as well.

A few lawmakers in Maine and other battlegrounds, meanwhile, worry their efforts could disincentivize Congress from coming up with a federal solution, but say that shouldn’t influence states’ decisions to cover the gap in the short term.

And while there is a partisan divide, with far more blue states than red adopting policies to prop up the Obamacare markets, a few GOP-led states are feeling public pressure and are quietly taking regulatory action behind the scenes.

Local media obtained documents through the Freedom of Information Act in September revealing that Arkansas recently joined deep-red Texas and Wyoming in enacting “premium alignment” — a health care market tactic that essentially shifts costs around in order to ensure the remaining federal subsidies get to as many people as possible and keep out-of-pocket costs down.

Most states have taken no action — including both conservative ones where leaders oppose the Affordable Care Act and states with progressive leaders who support the program.

In Minnesota, one of several states that may take up the issue when legislatures reconvene in January, the idea of replacing the subsidies has faced opposition from both parties.

State Sen. Matt Klein, who is running for the congressional seat vacated by Democratic Rep. Angie Craig, said he has struggled to convince some members of his party to allocate the funding because they see it as a boondoggle for private insurers.

“But once this sort of firestorm of, ‘I can’t afford my health care anymore’ ignites, it really creates a lot of political pressure for all lawmakers,” he said. “They may be more convinced that we need to do something.”

The main barrier to taking action, in many places, is the cost.

In Washington state, House Majority Leader Joe Fitzgibbon cited his state’s budget shortfall as the primary reason they cannot backfill the health subsidies. And in Minnesota, Klein stressed, “We don’t, at this point in our fiscal cycle, have a lot of extra money.”

But in other states that have a budget surplus, including Georgia, the barriers are political.

Georgia Democratic Rep. Sam Park is among the Democratic lawmakers pushing the state to use some of its billions in surplus funding to make up for the expired subsidies, which he estimates would cost the state $900 million per year. States such as his that never expanded Medicaid, he said, will see hundreds of thousands of people priced out of the individual insurance market with nowhere to turn for coverage.

Georgia Republicans, however, have definitively ruled out using state funding to backfill the disappearing federal aid.

“We’re not going to clean up any mess produced by Washington, D.C.,” Sen. Ben Watson, Republican chair of the state Senate’s Health and Human Services Committee, told POLITICO in November. “We’re not here to make up any shortfalls that the congressional maneuvers or compromises will create.”

New Mexico’s ability to cover the subsidies in full is rare, but it wasn’t the only state to anticipate their expiration. Colorado passed legislation in a special session earlier this year that significantly reduced the expected increase in 2026 premiums — legislation they will try to extend through 2027 when lawmakers return in the new year.

Colorado state Sen. Kyle Brown, who sits on the joint budget committee, said making sure as many Coloradans as possible remain on their commercial insurance plan is important to keep his state’s already-struggling rural hospitals afloat, since private Obamacare plans pay doctors more for health services than Medicaid does.

“The places where insurance costs are expected to go up the most … are in our rural areas,” Brown explained. He added that he and other state officials fear that as more people go uninsured due to rising rates, they will further burden those same cash-strapped hospitals’ emergency care units, threatening to drive them out of business. “That’s why keeping people insured, even more people insured, is really critical.”

Other states are still debating if and how to backfill. In Maine, House Speaker Ryan Fecteau acknowledged in an interview that one concern is that states creating their own subsidy programs could take the pressure off Congress to act when they return in January.

“Part of me wonders if that’s sort of the experiment that’s being had here with states,” he said.

Park, in Georgia, argued that even if that’s the case, states should still step into the breach, calling it “a matter of life or death.”

“We’re talking about people’s lives,” he said. “I personally am quite tired of hearing politicians simply blame another party or another politician or another level of government. We all have the responsibility to do what we can with what we have.”