With the midterm elections within sight, I’m going to temporarily adopt the “Election 20XX” branding that I’ve used previously, and I will endeavor to blog more frequently over the next several weeks.
In my last post I commented that I believed primary season was at long last over. Turns out I was wrong: two days ago New Hampshire had its primary, and yesterday it was Rhode Island’s turn. In Rhode Island, the incumbent Democratic governor lost his primary, in a rematch between the two leading candidates from the 2022 primary.
Yesterday and today, the GOP have been holding a so-called “midterm convention,” in Dallas. I’d never heard of such a thing before, but apparently the Democrats had tried it in June 1982. However, the timing of the event is slightly odd in that the first 2 NFL games of the new season took place yesterday evening and this evening, opposite the event. Trump spoke for 105 minutes last night, and both Trump and Vance are scheduled to speak tonight. Unexpectedly, Sen. Fetterman (D?!?-PA) made an appearance by video at the conference last night.
The big news from last night is that during his speech Trump vowed that if the Republicans win the mid-term elections, then every adult American will get $5,000. Given that such a promise would cost over $1 trillion, and given that Trump had previously talked about $5,000 “DOGE dividends” and $2,000 “tariff dividends”, I’m not sure Trump is to be taken seriously in this instance. Still, that’s quite a campaign promise for a (checks notes) Republican President to make.
However this morning there was also news about an upcoming $500 payment to a subset of Americans, and this news actually appears to be for real. Moreover, it relates to one of my areas of professional expertise, the individual health insurance policies offered on the federal exchange (Healthcare.gov) as a result of the Affordable Care Act.
What the White House fact sheet says is that “nearly a million” Americans who purchased policies from the federal exchange will each receive a $500 rebate in October, to compensate for the fact that they were “overcharged” by the Biden Administration with respect to exchange user fees.
As background: When insurers offer products on the exchange, the premium build-up includes a %-of-premium fee that the insurer needs to pay to the federal government, as a so-called “user fee” to cover the government’s costs of maintaining the exchange. That fee is set by the federal government, many months in advance of the start of the calendar year. In the waning days of the Biden Administration, in mid-January 2025, a final regulation came out indicating that the exchange user fee for calendar year 2026 would be 2.5% of premiums.
Apparently, the Trump Administration has concluded that the level of user fees collected from 2026 premiums turned out to be more than what is actually needed to run the exchange. In May 2026, the Trump Administration set the exchange user fee level for calendar year 2027 at 1.9% of premiums, instead of 2.5%. As such, when the Trump Administration talks about “overcharges” by the Biden Administration, I think what they’re saying is that 2026 premiums were, roughly, 2.5% – 1.9% = 0.6% higher than they really needed to be, because the exchange user fees collected via those 2026 premiums were more than what was needed.
What should the government do here? Door 1: Just keep the excess money, and perhaps use it to subsidize lower exchange user fees charged for years beyond 2027. Door 2: Return it to the insurers, since they’re the parties that actually remitted the exchange user fees to the government. Door 3: Return it not to the insurers, but to the parties who actually paid the premiums to the insurers. (The reader can analogize to the recent situation with refunds of illegally imposed tariffs.)
So, the government chose Door 3, right? Well, sort of…
One unusual but important feature of the health insurance policies sold on the exchange is that most of the people buying these policies qualify for a government subsidy of part, or in many cases all, of the cost of the premiums. These premium subsidies are administered through what are called Advance Premium Tax Credits (APTC), through which the individual buying the policy doesn’t need to pay the premiums to the insurer and subsequently seek reimbursement from the federal government — instead, the federal government directly pays part or all of the premiums to the insurer.
What that means is that if 2026 premiums really were too high by 0.6%, then the vast majority of that excess cost was borne by taxpayers at large, via higher APTC payments funded out of general government revenues! Only a small portion of the purported excess cost was actually borne by the people covered by the insurance.
Moreover, the math doesn’t really line up here. First, there are vastly more than 1 million people who bought coverage from the federal exchange, although most did so with the assistance of APTCs. Second, if you assume that the monthly premium for an exchange product is $700 per month (a number I admittedly pulled out of the ether, but it’s approximately right and it makes the resulting math pretty) then 0.6% of premium is $50 per year, not $500.
As such, here’s what I suspect is actually going on. I think the government has taken a pot of money equal to roughly 0.6% of all the 2026 exchange premiums, spanning both people with APTCs and people who fully fund their own premiums; and then I think the government is using that pot to make $500 payments to only the people who fully fund their own premiums. And that set of people — working-age individuals who don’t have access to employer-sponsored health insurance but make too much money to qualify for APTCs — consists largely of the self-employed upper-middle-class, who I’ve always thought of as a core Republican constituency.
This is my original analysis, and I certainly could be wrong. But assuming I’m right, then politically it’s a clever albeit disingenuous move: Identify a way in which your predecessor’s policies arguably brought harm to a portion of the population largely lying within your party’s base, and provide those people with payments that vastly exceed the harm they experienced (i.e., the $500 versus the $50), a month before an election, while blaming your predecessor.