Trump-linked think tank has plan to transform ACA premium subsidies

Instead, he is suggesting that Congress could send some subsidy cash aimed at low-income people into accounts resembling health savings accounts established for those people.

The recipients could use debit cards to spend the money on their own doctor's office copayments, prescription drug purchases and other health care expenses, Blase wrote in the commentary.

"By giving patients more control to shop for care, the HSA option would bring greater consumer involvement to the market, making health care more affordable and higher quality," Blase said.

What it means: If the Paragon proposal has momentum, any bill that pulls it through Congress could also serve as a tugboat for provisions that would affect employer plans, such as commercial HSA and health reimbursement arrangement changes.

Paragon: Paragon is a nonprofit, nonpartisan research center with close ties to Trump.

Brian Blase, the institute's president, worked for the White House National Economic Council during Donald Trump's first term in the White House.

Theo Merkel, a former institute analyst, also worked in the White House during Trump's first term, and he returned to the White House to be a special assistant to the president at the White House Domestic Policy Council.

Paragon posted a paper about the ACA health subsidy HSA concept in 2022.

The institute included the proposal in a set of federal health policy recommendations it posted in November 2024.

The backdrop: Congress originally made ACA premium tax credit subsidies available only to people with income under 400% of the federal poverty level, but Congress later provided more subsidies in response to the COVID pandemic.

Most Democrats, some Republicans and health insurance groups like America's Health Insurance Plans want to keep the current high subsidy levels in place.

Recently, Republicans have been talking more about moving in a different direction.

President Donald Trump talked about the idea of replacing the Obamacare subsidies with cash for coverage in a Truth Social post Saturday, during an interview that aired on Fox News Monday, and during the event in the Oval Office that the White House held for the signing of the bill that is ending the partial federal government shutdown that started Oct. 1.

"I'm calling today for insurance companies not to be paid, but for the money to be paid directly to the people of our country, so that they can buy their own health care, which will be far better and far less expensive than the disaster known as Obamacare," Trump said at the bill signing event.

Related: Trump calls for direct cash health payments to consumers while signing anti-shutdown bill

Trump's remarks have raised questions about how a new cash-for-coverage approach to health insurance subsidies might work.

Paragon cash-for-coverage proposal details: The Affordable Care Act provides "cost-sharing reduction" subsidies, or subsidies that are supposed to help low-income people who buy health coverage through HealthCare.gov or another ACA public exchange pay their deductibles, copayments and coinsurance bills.

Congress funded the CSR subsidies starting in 2014, when HealthCare.gov and the rest of the Obamacare program came to life.

Republicans in Congress who opposed the ACA later blocked CSR subsidy funding. Eliminating the CSR subsidies ended up increasing federal spending on ACA health insurance premium subsidies.

If Congress stored CSR subsidy funding, that would cut the impact of the ACA on the federal budget by $30 billion, according to Blase.

Low-income consumers could then choose whether to have the flow to their health insurers or into their own HSAs, Blaise said.

"The average HSA contribution would likely exceed $2,000 a year," Blase said.

Putting the subsidies in the hands of the low-income consumers could make them more conscious of the cost of care, Blase said.

If physicians and hospitals knew that they had to please cost-conscious patients, rather than giant health insurers with deep pockets, they might work harder to lower their prices, Blase added.

Actuaries at Milliman who looked at the proposal found that 70% of enrollees with income below 200% of the federal poverty level would benefit from choosing the HSA cash payment option and that the average gain for the low-income enrollees who benefited would be $1,500, Blase said.