ACA Marketplace Premium Payments Would More than Double on Average Next Year if Enhanced Premium Tax Credits Expire

[douglas9]

Affordable Care Act (ACA) enhanced premium tax credits are set to expire at the end of this year. Enhanced premium tax credits were introduced in 2021 and later extended through the end of 2025 by the Inflation Reduction Act. The enhanced tax credits both increased the amount of financial assistance already eligible ACA Marketplace enrollees received as well as made middle-income enrollees with income above 400% of federal poverty guidelines newly eligible for premium tax credits.

Since the introduction of the enhanced premium tax credits, enrollment in the Marketplace has more than doubled from about 11 to over 24 million people, the vast majority of whom receive an enhanced premium tax credit. If enhanced tax credits expire, many Marketplace enrollees will continue to qualify for a smaller tax credit, while others will lose eligibility altogether and be hit by a “double whammy” of losing their entire tax credit and being on the hook for rising premiums.

Since 2014, the ACA has capped how much subsidized enrollees pay for their health insurance premiums at a certain percent of their income, on a sliding scale, with the federal government covering the remainder in the form of a tax credit. Enhanced tax credits work by further lowering the share of income ACA Marketplace enrollees pay for a plan. For example, with the enhanced tax credits in place, an individual making $28,000 will pay no more than around 1% ($325) of their annual income towards a benchmark plan. If the enhanced tax credits expire, this same individual would pay nearly 6% of their income ($1,562 annually) towards a benchmark plan in 2026. In other words, if the enhanced tax credits expire, this individual would experience an increase of $1,238 in their annual premium payments net of the tax credit.

https://www.kff.org/affordable-care-act/aca-marketplace-premium-payments-would-more-than-double-on-average-next-year-if-enhanced-premium-tax-credits-expire/