ACA Credits v. HSA Funding
The COVID-era "enhanced" premium tax credits officially expired at the end of the 2025 tax year. Multiple proposals have been floated regarding how to provide assistance to taxpayers who are struggling with affordability and health insurance premiums. One such proposal would leave the original premium tax credit system in place, but would make up for the expired "enhanced" portion of the credit system by depositing the additional amounts into health savings accounts for taxpayers who qualified for the enhanced amounts (instead of applying the amounts directly to the taxpayer's monthly health insurance premium amounts).
We asked two professors and authors of Tax Facts with opposing political viewpoints to share their opinions about proposals to replace the existing ACA premium tax credits with direct-to-consumer HSA contributions.
Below is a summary of the debate that ensued between the two professors.
Their Votes:
Their Reasons:
Byrnes: Insurance companies are making trillions of dollars off the current Obamacare system and its premium tax credit structure. We should be more focused on creating a system that puts healthcare benefits directly in the hands of the taxpayers themselves. Giving the funds directly to taxpayers gives them the power to choose their own health coverage and negotiate the fair rates they deserve—and to therefore control their own healthcare spending.
Bloink: Creating an entirely new system where the federal government directly funds individual HSAs would be pure chaos. The administrative burden alone would mean this system would likely not be able to be implemented for years--leaving millions of Americans to continue struggling with skyrocketing health insurance premiums because the enhanced ACA subsidies have already been allowed to expire.
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Byrnes: We have to stop pretending that the Obama-era ACA system is working. The fraud, waste and abuse created within the system is completely unacceptable and we should be looking for wholesale strategies to revamp the health insurance marketplace in this country going forward.
Bloink: We do already have a system that works, despite the fact that the GOP has done everything they can to gut critical ACA protections in the last decade. We can't say that the ACA subsidies are primarily benefiting insurance companies--the GOP is overlooking the fact that ACA premium subsidies actually do directly benefit taxpayers by allowing them to access comprehensive health insurance that they can only afford given the subsidy system.
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Byrnes: When a system isn't working, we should be directing all of our efforts to change it--not simply extend the Obama/Biden-era problems that we currently are faced with. Simply handing over subsidies to corrupt insurance companies isn't working. Putting government healthcare assistance directly into the hands of consumers is a much better way to accomplish key health spending goals within this country.
Bloink: Taxpayers already have a choice--they can claim advance premium tax credits based on their expected income to currently offset their premium costs or they can wait and claim the direct benefit on their tax returns. The GOP proposal would in no way reduce the overall cost of insurance premiums--so we can't say that the taxpayer versus insurance company benefits would change in any way under a direct-HSA funding proposal. Insurance companies aren't going to lower their premium costs because they aren't receiving direct government subsidies—the likely outcome may be that many Americans choose to forgo comprehensive health coverage and using the government HSA deposits for other purposes.