At the heart of what is now the longest U.S. government shutdown in history are the federal subsidies that millions of Americans use to buy health insurance on government-run marketplaces.
The shutdown began as Democrats worked to prevent those grants from expiring. And now, members of Congress face growing pressure to end the shutdown — not only because of its effects on airports and federal programs like nutrition assistance, but also because of public concerns about rising insurance premiums.
These subsidies were significantly expanded in 2021 by Democrats who then controlled Congress. This has led to increased enrollment in these marketplaces, created in 2010 as part of the Affordable Care Act (ACA), also known as Obamacare.
Why we wrote this
The idea of federal subsidies to help more people afford health insurance was built into the Affordable Care Act from the start. But they have increased – as has the pressure that overall health care spending is putting on federal budgets.
The expanded subsidies are set to expire next month, leading to higher premiums for many individuals and families who purchase health insurance on the Obamacare exchanges. For weeks, Democrats have been calling on Republicans to agree to extend the subsidies as a condition of reopening the government. Republicans have criticized the subsidies as wasteful and open to abuse, while arguing that the government must first reopen before Congress can discuss health insurance.
Open market enrollment for 2026 plans began on November 1. Published prices show a sharp increase in the cost of many plans, reflecting uncertainty about the future of expanded subsidies. The majority of enrollees receive some level of support intended to make Obamacare more affordable and increase the insured pool. The overall cost of insurance has increased, largely because health care in the United States is much more expensive than in comparable countries.
Dawn Schmidt doesn’t yet know how much her premiums will increase next year, but she’s worried about not being able to afford her insurance plan. She retired from her job at Boeing in 2020 and lives in Pennsylvania, which administers its own ACA marketplace, known as Pennie. Administrators warned her that bonuses could increase by 82%. “It’s a lot. It adds up,” she said.
What are expanded grants and why are they expiring?
From the beginning, subsidies were built into Obamacare. The idea was to help people who had neither employee-provided plans nor access to Medicaid or Medicare, but who could not afford the market price of private insurance. Low-income people had to pay between 2 and 10 percent of their income, with the rest paid by the government.
The expanded subsidies were introduced by Democrats in 2021 during the COVID-19 pandemic, when access to health care was a pressing concern. Financial support was provided to Americans whose income is more than four times the federal poverty level, now above $60,000 per enrollee, while those with the lowest incomes no longer have to pay premiums. Registrations more than doubled, from around 12 million in 2021 to 24 million in 2024.
“We have more people in the system than ever before, and that’s a good thing,” says Elena Marks, a health policy expert at Rice University’s Baker Institute for Public Policy. But, she adds, “underlying costs continue to rise… which is a bad thing.”
To pass the legislation, Democrats had to set an expiration date to comply with Congress’ budget rules. That created an enrollment cliff that was already causing concern before the government spending impasse that led to the Oct. 1 shutdown.
Tom Williams/CQ Roll Call/AP
Republican Rep. Mike Lawler (R) confronts House Minority Leader (and fellow New Yorker) Hakeem Jeffries over his signing of a bill that would extend the Affordable Care Act tax credits, at the Capitol Visitor Center, October 8, 2025.
How are Democrats and Republicans reacting?
Democrats tried to use the registration cliff as leverage to force an extension. Citing higher premiums in New York, Sen. Chuck Schumer accused Republicans of ignoring a “health care crisis” that could see millions lose coverage if subsidies are cut. “These devastating price hikes are entirely avoidable, but if Republicans persist[ing] “With our heads in the sand, New York families will pay the price,” he said in a statement.
Most Republicans have a different opinion. They point to the fiscal burden of extending the subsidies, which, if made permanent, would cost about $350 billion over 10 years, according to Congressional Budget Office estimates. They question the design of Obamacare and its failure to curb rising health care costs, as well as the risk of waste and fraud. Some want to scrap the Affordable Care Act and replace it with an alternative approach.
But an Obamacare overhaul is politically fraught. A Republican-led effort to repeal it in 2017 failed to pass the Senate due to infighting over what exactly would replace it. Some Republicans would prefer to extend expiring grants and work on marketplace reforms, given that open enrollment for 2026 is already underway. Rep. Mike Lawler, a Republican who represents a swing district in New York, co-sponsored a bipartisan bill to extend the appropriations for another year.
Polls suggest that increasing subsidies is popular and that cutting them could embitter Republican voters. A September poll by KFF Health, a nonprofit research group, found that 3 in 4 respondents want the subsidies extended. In July, Tony Fabrizio, a pollster who worked on President Donald Trump’s campaigns, warned that “solid majorities of Trump and Swing voters” supported the subsidies and that their expiration could penalize Republicans in competitive districts in the 2026 midterms. Republican-led states, such as Georgia and Florida, have seen some of the biggest increases in Obamacare sign-ups in recent years.
What are the possible consequences of reducing Obamacare subsidies?
Higher premiums could deter millions of Americans from enrolling in the 2026 program, which would mean more uninsured people. Middle-income people who did not benefit from the initial subsidy program may decide to pay more out of pocket. Experts say attrition is likely far greater among lower-income groups whose costs have been almost entirely subsidized.
While critics question why taxpayers support middle-aged couples who have retired early, these people remain in the minority. Only 7 percent of marketplace enrollees had incomes four times the federal poverty rate and, therefore, were eligible for the expanded subsidies. Of them, about half were between 50 and 64 years old.
Ms. Schmidt falls into this category: She retired early because her husband is older and they wanted to make the most of their retirement. He now benefits from Medicare, while she is too young to qualify and takes out Obamacare insurance. She paid $211 a month this year for her plan, which has a $6,000 deductible, and is preparing to pay more if the subsidies are eliminated.
“We’re probably going to have to cut back on things like holidays. We’ve already cut back on spending on our grandchildren for Christmas and birthdays,” she says.
Pre-retiree participation in Obamacare was built into its design, says Rice’s Ms. Marks. “Part of the reason behind the ACA deal was to allow people not to keep jobs they didn’t want to keep, but to get health insurance,” she says.
Yet they are not the main beneficiaries of federal aid, she adds. “Most subsidies go to people with the lowest incomes. »
Even with subsidies, the rising cost of premiums puts a strain on wallets. Young people are generally more likely to forgo health insurance and risk having to pay out-of-pocket for medical care. This creates a dilemma for insurers and regulators, as younger people tend to use health care less than older people; insurance pools are based on a demographic mix.
This has long been the challenge facing Obamacare: If not enough young people pay into the system and the resulting pool becomes less healthy, it will ultimately become unviable for private insurers. The individual mandate to purchase health insurance was supposed to solve this problem. Congress deactivated it during Mr. Trump’s first term.
Behind this difficulty lies a harsh reality: Americans pay far more for health care than other countries, and most of the provisions of Obamacare, designed to curb rising costs, have been rolled back or are stalled. Tens of millions of people remain uninsured. And although policy experts have proposed various solutions, neither political party has so far been willing to significantly reduce growing spending on health insurance programs for an aging population.
