Introduction to the Crisis
California’s health insurance marketplace is bracing for chaos as the shutdown persists, with the nation’s uninsured population expected to rise significantly if federal lawmakers do not agree to renew COVID-era tax credits. The tax credits, which were authorized in 2021 to supplement Affordable Care Act (ACA) subsidies, have lowered premiums and helped millions of Americans afford the cost of ACA insurance. According to a KFF poll, more than three-quarters of adults, including 59% of Republicans, want Congress to extend the enhanced tax credits for people with low and moderate incomes.
The Impact of the Shutdown
The shutdown stems primarily from a disagreement between Democratic lawmakers, who want to extend the tax credits, and Republicans opposed to the cost and, in many cases, to the landmark health care law itself. One estimate puts the price tag at $350 billion over 10 years. If the supplemental subsidies are not extended beyond this year, the amount subsidized consumers pay for their ACA health plans is expected to more than double on average. This would be a painful cost-of-living increase for most of the country’s more than 24 million marketplace enrollees, including almost 90% of the nearly 2 million people in Covered California, the largest state-run health insurance marketplace.
The Human Cost
Analysts say the loss of enhanced credits would lead millions to drop their coverage nationally, including hundreds of thousands in California. Rural residents, especially in the northern and eastern counties, and along the Monterey Coast, will see disproportionately large cost increases, according to projections from Covered California. Enrollees with incomes over $62,600 will lose financial aid altogether, leaving some who are ages 55-64 with premium bills as high as 30% of their income. Without the enhanced subsidies, "we’re going to see more people experiencing medical debt, more people being either uninsured or underinsured," says Cary Sanders, senior policy director at the nonprofit California Pan-Ethnic Health Network.
The Proportional Impact
The proportional impact in California will be smaller than in some Republican-led states such as Florida, Texas, and Georgia. Since those states did not embrace the ACA’s Medicaid expansion, millions of residents thronged to Obamacare marketplace plans, particularly after the enhanced tax credits made coverage eminently more affordable. From 2020 to 2025, ACA marketplace enrollment grew nearly 2.5 times in Florida to 4.7 million — more than double California’s marketplace enrollment. In Texas, it more than tripled to just under 4 million. Georgia’s tripled, too, to 1.5 million.
The State’s Response
California has about $190 million for 2026 in state funds to help offset the loss of the enhanced premium subsidies. But that money is currently used to help offset enrollee deductibles, coinsurance payments, and other out-of-pocket expenses. And it’s a drop in the bucket compared with the $2.5 billion annually in financial aid Covered California enrollees currently receive from the expiring tax credits. "A lot of people are going to be shocked at what they’re facing," says Rachel Linn Gish, a spokesperson for the nonprofit advocacy group Health Access California. "They’re going to have to make super hard choices of, ‘Do I cut back on my groceries, or my rent, or do I go uninsured?’"
The Uncertain Future
Very soon, Covered California and other ACA marketplaces will have to send out formal open enrollment letters, notifying enrollees precisely what to expect for 2026 coverage. Covered California typically sends those letters out Oct. 1 but has delayed them to around Oct. 15 in the hope that Washington will provide clarity. For now, Covered California has two versions of the letter on ice, one with tax credit extensions and one without.
Jessica Altman, executive director of Covered California, says she is hoping for congressional action before sending the one with whopping premium increases. But she may have no choice. "That’s the default here, as in the thing that will happen if nothing changes," Altman says. "It is also the worst-case scenario, unfortunately." She fears that if Covered California informs enrollees that their rates will likely rise sharply, it will scare many away, even if Congress later agrees to extend the credits.
Conclusion
In conclusion, the ongoing shutdown and the uncertainty surrounding the tax credits have created a sense of chaos in California’s health insurance marketplace. The potential loss of enhanced subsidies would have a devastating impact on millions of Americans, leading to increased medical debt, uninsured rates, and stress on the healthcare system. It is essential for Congress to take immediate action to extend the tax credits and provide clarity on the future of the ACA.
FAQs
Q: What is the current situation with the tax credits for the Affordable Care Act (ACA)?
A: The tax credits, which were authorized in 2021 to supplement ACA subsidies, are set to expire this year unless Congress extends them.
Q: What would happen if the tax credits are not extended?
A: The amount subsidized consumers pay for their ACA health plans is expected to more than double on average, leading to a significant increase in medical debt, uninsured rates, and stress on the healthcare system.
Q: How many people would be affected by the loss of enhanced subsidies?
A: Millions of Americans, including hundreds of thousands in California, would be affected by the loss of enhanced subsidies.
Q: What is the state of California doing to offset the loss of the enhanced premium subsidies?
A: California has about $190 million for 2026 in state funds to help offset the loss of the enhanced premium subsidies, but it is a drop in the bucket compared with the $2.5 billion annually in financial aid Covered California enrollees currently receive from the expiring tax credits.
Q: When will Covered California send out formal open enrollment letters?
A: Covered California will send out formal open enrollment letters around Oct. 15, notifying enrollees precisely what to expect for 2026 coverage.
