Republicans recently passed a new tax bill that provided Americans with a $4 trillion tax cut, extending several tax provisions until 2026. However, health policy experts have pointed out a significant omission in the bill: the extension of a tax break that has been lowering health insurance premiums for millions of people.
The enhanced premium tax credits, which have been in place since 2021, have been instrumental in reducing the cost of health insurance premiums for individuals who purchase coverage through the Affordable Care Act marketplace. These tax credits can be used to lower premium costs upfront or claimed at tax time. Unfortunately, these credits are set to expire after 2025.
According to KFF, a nonpartisan health policy research group, more than 22 million people — approximately 92% of ACA enrollees — received a federal subsidy this year that helped reduce their insurance premiums. Without an extension of these tax credits, these recipients would face a significant premium increase starting on January 1.
On average, marketplace enrollees saved $705 in 2024, resulting in a 44% reduction in premium costs, thanks to the enhanced tax credits. If these credits were to expire, average out-of-pocket premiums in 2026 would increase by over 75%, according to Larry Levitt, KFF’s executive vice president for health policy.
Furthermore, if the enhanced subsidies were to lapse, an estimated 4.2 million Americans would become uninsured over the next decade, as reported by the Congressional Budget Office. This increase in the uninsured population would add to the nearly 12 million people expected to lose health coverage due to over $1 trillion in spending cuts to health programs like Medicaid and the ACA.
The expiration of the enhanced premium tax credits would have a significant impact on various groups, particularly Black and Latino individuals, lower-income households, self-employed workers, and small business owners. These groups have seen a substantial increase in enrollment due to the enhanced subsidies, making insurance more affordable for them.
In conclusion, the expiration of the enhanced premium tax credits would have far-reaching consequences for millions of Americans, leading to higher premium costs, increased uninsured rates, and significant changes to the health care system. It is essential for policymakers to address this issue to ensure that individuals can continue to access affordable health insurance coverage.
