This Is the Key Sticking Point as a Government Shutdown Looms

Democrats and Republicans show few signs of reaching an agreement ahead of the Sept. 30 deadline. (Moneymaker/Getty Images))

Key Points

• A potential government shutdown looms on October 1 due to a dispute over extending Obamacare health insurance subsidies.
• Without congressional action, premiums for marketplace health plans are projected to increase by 75% in 2026.
• The Office of Management and Budget has instructed agencies to consider permanent layoffs if funding lapses.

Congressional lawmakers are at loggerheads over one very specific issue: extending subsidies that make health insurance affordable for the 24 million Americans enrolled in so-called Obamacare health plans. Democrats want the subsidies extended, Republicans don’t.

If the two parties can’t work out a compromise, the government is set to shut down at 12:01 a.m. on Wednesday, Oct. 1. That typically leads to a halt in services considered nonessential, furloughs of government workers, and the closing of national parks.

Those stakes rose considerably on Wednesday, when the Office of Management and Budget instructed agencies to consider permanent layoffs if there is a lapse in funding. Those most at risk of losing their jobs include anyone in programs, projects, or activities that are “not consistent with the President’s priorities.”

Democrats were quick to denounce the new proposal. ‘We will not be intimidated by these threats coming from the most extreme parts of the administration,” House Minority Leader Hakeem Jeffries, D-N.Y., said Thursday.

Jeffries has accused President Donald Trump—who supports a GOP-backed bill that would extend funding the government through Nov. 21 without extending the subsidies—of “gutting healthcare for everyday Americans,” calling it “immoral.” In addition to enacting stricter eligibility requirements for Medicaid, the GOP-backed tax and spending bill that passed over the summer eliminated most of the subsidies for marketplace health plans. As a result, premiums for those plans will increase by 75% in 2026 unless Congress takes action. Enrollment begins on Nov. 1.

Republicans argue that discussions on extending the subsidies should not be tied to the stopgap bill, although they haven’t ruled out a temporary extension to be negotiated later this year. House Majority Leader Mike Johnson, R-La., has called such negotiations “a December policy debate and decision, not a September funding matter.”

Johnson and Trump have both said that extending the breaks will benefit “illegal aliens.” Undocumented immigrants aren’t eligible for the plans. However, some noncitizens, including those who have been granted asylum, have temporary protected status, or are temporary workers, are currently eligible for the subsidies through 2026.

Republicans need at least some Democrats to vote for their stopgap funding bill in order for it to pass in the Senate. They need 60 votes, and there are only 53 Republicans. The bill passed last week in the House, where it only needed a simple majority to move to the Senate.

Write to Anita Hamilton at anita.hamilton@barrons.com