(Daily Caller News Foundation) – A new report reveals how much Obamacare subsidies at the heart of Democrat shutdown demands have distorted the healthcare market — and warns the effects would continue if Democrats get their way.
For over a month, Democrats have repeatedly blocked Republicans’ funding measure to reopen the government, demanding the extension of COVID-era Obamacare premium subsidies set to expire at the end of 2025. They warn that allowing the subsidies to lapse would cause a catastrophic increase in healthcare costs, accusing Republicans of trying to “gut the healthcare of everyday Americans.”
However, a new report from the conservative Paragon Health Institute argues that these enhanced Obamacare subsidies punish work, disadvantage those with employer-provided insurance, and push employers to drop coverage altogether.
Obamacare, formally known as the Affordable Care Act, established premium tax credits to help people purchase insurance on public exchanges if they lacked other coverage. Initially, these subsidies were limited to households earning 100% to 400% of the federal poverty level.
However, former President Joe Biden expanded these subsidies through the American Rescue Plan and the Inflation Reduction Act, eliminating the income cap and increasing government contributions, and in some cases, reducing certain households’ premiums to zero. Democrats passed the subsidy expansions without a single Republican vote, setting them to expire at the end of 2025. Now, they blame Republicans for the impending premium hikes tied to the expiration schedule Democrats themselves enacted.
Critics argue that far from making healthcare more affordable, the ACA’s structure has created perverse incentives. According to Paragon, because the law ties subsidies to the absence of employer-based coverage, it discourages people from working for employers who offer insurance — and even pushes some small businesses to drop coverage altogether.
“Lower- and lower-middle-income enrollees obtain much greater benefit if they do not receive coverage at work and instead enroll in exchange coverage. In other words, workers face a large penalty if they receive health insurance through their employers rather than through the exchanges,” Paragon wrote.
“This design distorts labor market decisions, encouraging people to opt for jobs or work arrangements that do not provide coverage simply to qualify for larger subsidies,” the institute continued.
The report also notes that the subsidies discourage work and income growth, since each additional dollar earned slightly reduces the credit amount.
Moreover, the report showed a sharp decline in healthcare coverage offered to employees of small businesses since the ACA’s passage. In 2010, 76% of firms with 10 to 24 employees and 92% with 25 to 49 employees offered insurance. By 2020, those figures had fallen to 59% and 70%, and by 2025, those numbers had fallen further to 51% and 64%, respectively.
House Minority Leader Hakeem Jeffries has consistently claimed that Republicans are raising Americans’ healthcare premiums by thousands of dollars per year by allowing the subsidies to expire.
ACA premiums are expected to increase by 20% on average in 2026, but Paragon’s earlier analysis found that the expiring subsidy accounts for just 3.3% of projected 2026 premiums.
More than a month into the shutdown, there is still no clear path forward to fund the government.
Speaker Mike Johnson has maintained that he will not commit to bringing a vote to extend the enhanced ACA subsidies as part of a deal to reopen the government. Meanwhile, Democrats, emboldened by Tuesday’s election results, insist they will continue to keep the government shuttered, arguing their electoral sweep validates their shutdown strategy.
