Republicans in Congress are facing mounting pressure from both sides of the aisle about whether to extend additional Obamacare premium tax credit subsidies as part of legislation to avoid a government shutdown this fall. 

The popularity of the added Obamacare marketplace subsidies, which former President Joe Biden and Democrats passed during the height of the COVID-19 pandemic as a temporary measure, could make it difficult for Republicans to let them expire by January without facing blowback during the 2026 midterm elections. 

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But conservatives argued that there is systemic fraud in the Obamacare insurance marketplace through the extended subsidies and are calling on President Donald Trump and the GOP to let the credits expire back to pre-pandemic levels.

The legislation passed by Democrats in 2021 and 2022 sweetened existing subsidies within the original Obamacare framework. It eliminated premiums for subsidized Obamacare plans for those between 100% and 150% of the federal poverty line and significantly lowered premiums for everyone else under 400% of the poverty line.

Coverage under subsidized Obamacare plans nearly doubled from 12 million before the subsidies were enacted to 24 million this year. 

Brian Blase, head of the Trump-aligned Paragon Health Institute, told reporters Thursday that bad actors, mainly insurance brokers, abuse these zero-premium plans by enrolling ineligible people and taking the payout from federal reimbursement. 

“What we are saying is happening is not a small-scale fraud activity; it is a nationwide massive amount of fraud and improper enrollment that has been perpetuated because of bad government policy, and that harms the legitimate enrollees and harms taxpayers that are funding all of this money,” said Blase.

Paragon estimates that as many as 6.4 million enrollees did not actually have income between 100% and 150% of the FPL and thus were improperly collecting premium subsidies, to the tune of $27 billion annually. 

Maria Ghazal, head of the industry interest group Healthcare Leadership Council, told the Washington Examiner that letting the tax credits expire to pre-pandemic levels “seems quite extreme,” considering the millions of people who depend on them to afford coverage. 

“Not to diminish the concern about fraud or waste or anything like that, but I think the No. 1 goal should be, ‘How do we preserve and extend these so that we can get coverage to the right people?’” Ghazal said.

Fraud baked into the system

Blase and his team at Paragon argue that the advanced premium tax credit system for Obamacare exchange subsidies incentivizes cheating the system because they are based on estimated income at the time of the open enrollment window before the coverage year starts. 

For example, an enrollee signing up for Obamacare coverage in the open enrollment period for 2025 will have to predict their income for 2026 to determine what subsidy they are eligible for to lower their insurance premium costs for the coverage year. Come tax season in 2027, they will have to reconcile the amount they estimated with how much they actually earned. 

If they earned more than predicted and, therefore, received more in subsidies than they should have, there is a limit on the amount that the Centers for Medicare and Medicaid Services can recapture from them, depending on their income in relation to the poverty line. 

Paragon’s estimates from CMS data found that improper exchange enrollment increased significantly from 2024 to 20205, from 5 million to 6.4 million enrollees collecting subsidies based on false income reporting. 

That means those individuals got to keep at least some, if not all, of their subsidy despite misreporting income.

In states that have expanded Medicaid coverage under Obamacare to slightly higher income levels, only people above 138% of the poverty line are eligible for subsidized exchange plans. 

Blase said that makes the math harder, but Paragon estimates that roughly 1.32 million enrollees in expansion states were improperly enrolled in a fully subsidized category. 

Paragon’s report also argues that it is easier for people to be enrolled in both Medicaid and an Obamacare exchange plan in states with Medicaid expansion. In July, CMS found that nearly 3 million people were improperly enrolled in both coverage options, accounting for $14 billion.

Opponents of extending the premium tax credits argue that insurance companies gain the most from misestimating enrollee income because of the larger subsidies at stake. 

“The larger subsidies mean that consumers are less sensitive to prices of plans and are more likely to enroll,” reads Paragon’s report on the topic. “It is also much easier for insurers to collect subsidies from the U.S. Treasury than from customers. In many cases, enrollees are actually unaware of their enrollment in these plans.”

More conservative estimates show a similar pattern

A Congressional Budget Office report from Aug. 25 found a similar pattern of overreporting income in states that did not expand Medicaid coverage, but its numbers are significantly lower than Paragon’s estimates. 

The CBO estimates that 1.3 million marketplace enrollees intentionally overinflated their incomes in 2023 to receive the premium tax credit, and that number ballooned to 2.3 million in 2025.

CBO’s analysis of HealthCare.gov data found that a disproportionate number of enrollees from states that did not expand Medicaid reported income between 100% and 105% of the FPL, outnumbering the percentage of the population in that income range who did not have an employment-based plan or Medicaid. 

In other words, more people claimed to make between 100% and 105% of the FPL than actually existed, according to the CBO. 

Larry Levitt, vice president of health policy at the organization KFF, which supports extending the tax credits, told the Washington Examiner before the CBO’s report was released that “there isn’t compelling evidence that fraud is the primary driver of the rapid enrollment growth in recent years.”

“The enhanced tax credits have made available coverage with no premium to the lowest-income enrollees, which has proven to be a powerful incentive to get insurance, especially for healthier people who may not think they need coverage,” said Levitt. “The enhanced premium subsidies have also made coverage more affordable for middle-income people who were eligible for no financial help before.”

Racing against the clock

Ghazal told the Washington Examiner that industry leaders are pressuring Congress to include extending the premium subsidies in the government funding legislation that must be passed before Sept. 30 to avoid a shutdown in October.

This is especially important considering that open enrollment for insurance plans starts Nov. 1. Trump’s One Big Beautiful Bill Act also shortened the Obamacare open enrollment deadline by a month, from Jan. 15 to Dec. 15, narrowing the window even further for Congress to act should it decide to extend the subsidies.

Ghazal said that conversations on Capitol Hill are “not quite bipartisan” at this point, but she hopes they will be before the Sept. 30 spending deadline.

“I think that having conversations about how to move forward, that’s the most important thing right now, to get people to the table,” said Ghazal.

Without the subsidies, healthcare costs are expected to increase dramatically on Jan. 1.

If the additional tax credits are not extended by the end of the year, Obamacare enrollees could see as much as a 75% increase in their premiums, depending on their plan.

The CBO estimated that more than 4 million people will be priced out of Obamacare coverage if subsidies expire, raising the uninsured rate.

Political liability for the GOP

Not extending the premium tax credits could be a liability for Republicans heading into the 2026 midterm elections. 

Chris Pope, health policy expert for the Manhattan Institute, told the Washington Examiner that the issue of expiring subsidies is “politically a much bigger deal” even than the changes to Medicaid policy passed in the One Big Beautiful Bill Act this summer, which caused significant hesitation on the part of vulnerable Republicans in Congress.

Pope said there’s merit to the evidence that suggests system-wide fraud because of the Biden-era subsidies, but he also said the consequences of not extending them could be too much for Republicans seeking reelection.

“These subsidies are very big, and they would have an immediate impact, and so I think there’s going to be a real desire to not get caught on the wrong side of it, politically, from Republicans,” said Pope. 

A July poll from Tony Fabrizio and Bob Ward, GOP pollsters praised by Trump in the past, found that Republicans in swing districts for House seats could benefit from supporting the extended tax credits. 

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The poll found that Republicans who supported the tax credits could gain a 6-point advantage over Democrats overall and a 4-point lead among most likely voters. 

A handful of Senate Republicans expressed interest in extending the tax credits during and immediately after the passage of Trump’s reconciliation package. Those include Sens. Lisa Murkowski (R-AK), Susan Collins (R-ME), Thom Tillis (R-NC), and Josh Hawley (R-MO).