Texas could bear the brunt of expiring ACA tax credits. Is the GOP delegation willing to make a deal?

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In 2018, on the heels of Republican efforts to repeal the Affordable Care Act, Democrats made enormous midterm gains, flipping 41 House seats — including two in Texas.

Seven years later, Democrats see another opportunity to win back the House during a Trump-era midterm by centering their message on health care. Enhanced premium tax credits — a policy change that has driven down average ACA premium prices and tripled enrollment in the marketplace — are set to expire at the end of the year, a cutoff that has thrust the issue into the center of the federal funding battle that led to this week’s government shutdown.

Hours before the deadline, Democrats voted against funding the government, saying that with November open enrollment fast approaching, the time to address the ACA subsidy issue is now. Republicans have argued that any negotiations on health care policy should occur later in the year and remain separate from government funding negotiations.

There is no end in sight to the impasse. If the subsidies expire, the impact will be felt disproportionately in Texas, where insurers have already requested premium hikes and health policy organizations project hundreds of thousands of people, if not over a million, will end up dropping their insurance coverage because premiums will rise.

Those stakes put Texas Republicans — many of whom are prominent fiscal hawks — in a bind, caught between the political reality of representing a state with high tax credit uptake and their conservative convictions driving them to oppose a policy that ties together Obamacare and COVID-era federal spending.

Some have expressed openness to a deal with Democrats that would preserve the subsidies in some form, though they have insisted it would have to wait until the funding impasse is resolved, when it would be easier to overhaul the credits.

“I’m more than happy to talk about it before they expire,” said Sen. John Cornyn, R-Texas, who is running for reelection this cycle. “I think in all likelihood, they need to be reformed. But this is an overreach to try to do this on a permanent basis.”

But Democrats believe that focusing on the tax credits is a winning message in Texas. If the subsidies expire and the cost of health insurance shoots up next year, the issue is sure to play a starring role in Democratic midterm campaigns across the state.

“If I get 113,000 people in my congressional district that have their insurance go up, I want them to come and tell [Republicans] what the pain is,” said Rep. Henry Cuellar, D-Laredo, who is facing reelection in a district that voted for President Donald Trump by a 10% margin in 2024 and has over 100,000 ACA enrollees.

Texas’ ACA population

The premium tax credits at issue in the shutdown fight have been around since 2014, operating under a system where the federal government pays insurers to lower out-of-pocket costs for those who receive coverage through the ACA market. In 2021, Democrats expanded the size of the tax credits and made more people eligible, including middle-income earners making over 400% of the federal poverty level — the previous cutoff to qualify for the subsidies — in a bid to eliminate the so-called subsidy cliff for those barely above the cutoff. Lawmakers also capped premium payments based on income, so that lower-income people would pay less — and in many cases pay nothing — toward their monthly premium.

ACA enrollment has subsequently skyrocketed in Texas, rising from 1.3 million in 2021 to 3.9 million this year as Texans have flocked to take advantage of the more affordable coverage. Texas continues to have one of the highest uninsured rates in the nation, but it fell to 16.3% in 2023, down from 23% in 2012, before the ACA marketplace opened.

The average annual premium for a family of four enrolled in ACA coverage dropped from $3,744 in 2021 to $1,632 in 2025, according to estimates from health policy organization KFF. But if the tax credits are allowed to expire, that figure would jump back up to $3,408.

Advocates for the credits have tried to bring Texas lawmakers around by noting that an expiration would be far more painful in Texas than elsewhere. KFF projects that 3.98 million Americans will drop coverage if the enhanced tax credits expire — and of those, 1.04 million, or 26%, will come from Texas.

KFF calculated that the state gets $24 billion in federal funding from the enhanced premium tax credits through payments to insurers for Texas enrollees. California, by comparison, only receives about $12 billion. But the trend is reversed for Medicaid; California gets $81 billion per year from Medicaid payments to providers; Texas only gets $37 billion.

“Texas is a large state with lots of people that are self-employed or work for small businesses that don't offer coverage,” said Jamie Dudensing, the CEO of TAHP. “[The ACA marketplace] is where they have to go to buy coverage. Our state has decided to have a private market approach to coverage and tax credits make it affordable. So any loss of tax credits hits non-expansion states the hardest.”

An analysis from KFF found that the average premium payment for subsidized enrollees would double in nearly every congressional district in Texas, with the biggest hikes in districts represented by Rep. Vicente Gonzalez, D-McAllen (194%), Rep. Nathaniel Moran, R-Tyler (183%), Rep. Henry Cuellar, D-Laredo (175%), Rep. Jodey Arrington, R-Lubbock (165%) and Rep. Ronny Jackson, R-Amarillo (161%).

Beyond putting enrollees on the hook for a larger share of their premiums, an expiration of the tax credits would also increase the gross prices of premiums. Pricing in the expiration, among other trends, Texas insurers in the ACA marketplace have requested an average rate hike of 24% to the underlying premium in 2026.

If the credits are allowed to expire, middle-income people, often older or small-business owners, could be subject to the reinstatement of the cliff and become ineligible for any credit. Lower-income people — the vast majority of Texas enrollees — will likely continue to qualify, but the size of their credit for a benchmark plan could shrink, making health insurance unaffordable or no longer worthwhile for some — particularly younger, healthier people.

What Republicans think

In public comments and interviews with the Tribune, Texas Republicans said their opposition to the ACA tax credits is rooted in several factors, including that the subsidies are used to pay off insurers rather than addressing the underlying cost of health care. Others said higher-income people should not be allowed to use the subsidies, nor should they be used to help some low-income recipients pay $0 premiums.

Fiscal hawks also have balked at the cost — $385 billion over the next 10 years for a permanent extension, according to the Congressional Budget Office — and claimed the program is rife with fraud.

“As a fiscal conservative, I’d like to see massive reform to these [credits],” said Rep. August Pfluger, R-San Angelo, the chair of the Republican Study Committee, when asked what his ideal outcome would be for handling the expiration. “They’ve been abused … When you think about the rising cost of health care, this has led to the expenditures that have gotten out of control.”

Arrington, who chairs the House Budget Committee, said Democrats used the credits to expand the Affordable Care Act “with the intent of total government-run health care masquerading as a temporary COVID measure.”

Extending the subsidies without reform would largely benefit insurers, Cornyn argued.

“My main concern is we’re paying a bunch of insurance companies for something people aren’t using,” Cornyn said, citing a rise in the number of enrollees who made no medical claims since the expansion of the tax credits.

Rep. Chip Roy, R-Austin, said that is only worsening the underlying cost of care. He proposed expanding health savings accounts and opening up direct primary care as potential alternatives, while Arrington floated the idea of site-neutral payment reforms, expanding tools for small businesses to offer coverage and regulating pharmacy benefit managers — the intermediaries between insurers, pharmacies and drugmakers.

Republicans have balked at tying any such solutions to the funding debate — including Speaker Mike Johnson, R-Louisiana, who called it a “December policy issue.”

“These are completely unrelated issues, and [to] use this to hold the country hostage so that Democrats can have more political leverage, so to speak — that really is grotesque,” said Rep. Brandon Gill, R-Flower Mound.

For many Republicans, the idea of maintaining the enhanced subsidies is a nonstarter, despite the projected premium increases. Pfluger said he wants the subsidies to revert to their pre-2021 eligibility and cost rules. Arrington said the tax credits are so fundamentally broken that reforms would be equivalent to putting “makeup on a dog.”

“I don't see how you can make this or sell this, fix it or clean it up, in a way that doesn't add to an already bad Obamacare program and a broken health care system,” he said.

And while a handful of Republicans, mainly in swing districts, are proposing a one-year extension of the subsidies, only one Texan, Rep. Monica De La Cruz, R-Edinburg, has joined that push. Prominent Republicans on the far-right flank of the conference — like Roy — have made clear that they would not support any extension.

“The idea that we’d extend COVID subsidies to enrich insurance companies is too stupid for words,” Roy said in a statement.

Also at issue is the cost of waiting. Insurers sent in their proposed 2026 rates in August, and while they could request to refile if a deal is reached, it becomes increasingly difficult to make changes as the Nov. 1 start of open enrollment approaches.

Even if a last-minute deal gets worked out at the end of the year, Democrats contend, many enrollees may have already written off the idea of renewing by then, having received their insurer’s initial notice about premium hikes that assumed the credits would expire.

“What we have happening right now is skyrocketing health care costs that we can prevent if we extend the tax credits,” Rep. Veronica Escobar, D-El Paso, said. “We’ve not made this a secret to Republicans. We’ve been telling them we need to fix this.”

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