While much of the focus has been on the end of the Tax Cuts and Jobs Act scheduled for December 2025, another important seismic shift in the tax system is on the way: the enhanced premium tax credit (PTC). This credit was introduced alongside many other factors when President Joe Biden took office. It is due to expire, unless Congress intervenes. The impact of such an expiration would be dire for millions of Americans because it will either push health insurance costs up or out of reach for many people.
The enhanced PTC serves to make Marketplace health insurance coverage under the Affordable Care Act (ACA) cheap. Before the expansion, this credit in the form of a tax subsidy was only available for individuals whose income was below or equal to 400% of the Federal Poverty Line. However, this ceiling was removed by the Biden administration which opened up the credit to persons earning in excess of this amount and offered even more generous subsidies to individuals within that amount. Moreover, the administration also modified the ACA’s provision requiring that health insurance premiums should not be more than 8.5% of an individual’s income which was previously available to those below 400% of FPL. These changes came along with The Inflation Reduction Act, which was signed into law in 2022, that set an end date for the enhanced credit, that will come to an end at the end of 2025.
The consequences of the failure to extend the enhanced PTC by Congress would be significant. As per the experts’ views, almost all of the 21 million individuals who signed up for the ACA Marketplace will experience increased premiums. For some, these elevated expenses may create hard decisions or compel them to forego their health insurance altogether. Claire Heyison, a senior policy analyst at the Center on Budget and Policy Priorities (CBPP), estimates health insurance loss of around 4 million people causing them to be uninsured. On average, enrollees lost around $700 in 2024 courtesy of the aforementioned expanded PTC, the organization CBPP noted.
For individuals who are unable to afford Marketplace plans, the alternatives for obtaining insurance are quite a few. Individuals residing in states which have opted for Medicaid expansion may be eligible for that benefit, in contrast, states which have not adopted the expansion are likely vulnerable to the ‘Medicaid gap’. This implies that they earn above the qualifying amount for Medicaid but below the level that would allow them to receive Marketplace assistance. With fifty-one Medicaid expansion states as of May, including Alabama, Florida, Georgia and Texas, ten states had still not adopted expansion. Even though. Even though Wisconsin has a complete Medicaid program without a gap, which extends to every person with an income below the poverty line, numerous states have left millions of residents with no alternative for health coverage. In April KFF reported that more than 1.6 million individuals were already in the Medicaid gap.
While the enhanced PTC is set to expire at the end of 2025, the real deadline for Congress to act is in the spring of 2025. As noted by the peer-reviewed journal Health Affairs, most consumers will make decisions about their 2026 coverage in the fall of 2025, and those decisions are influenced by factors that must be determined months earlier, including insurance rate-setting, eligibility updates, and communications from the Marketplace to enrollees.
For the moment, it is up to Congress to bring about change in the situation. Many factors may alter the course of politics after the forthcoming elections, but no one can tell how exactly Congress will go. Nevertheless, the solutions are already on the table. In September Senator Jeanne Shaw in (D-NH) and Senator Tammy Baldwin (D-WI) sponsored the Health Care Affordability Act, that proposes to extend the enhanced PTC without a time limit. U.S. Congresswoman Lauren Underwood (D-IL) introduced the same bill in the House of Representatives. Although, Vice President Kamala Harris has also come in support of extending the enhanced PTC permanently, we have no information from the other side of the aisle – from former President Donald Trump.
Should the enhanced PTC come to an end and if the health insurance premiums increase, it is possible that some people will look for other means of health coverage outside the conventional health insurance. According to Rob Burnette, an investment adviser with Outlook Financial Center in Troy, Ohio, in cases where individuals cannot afford the premiums recommended Medi-Share. Medi-Share transformed this into, however, is not traditional health insurance, rather it is a ‘healthcare sharing program,’ which means members help each other in paying for healthcare seeked by members. Every month, a member pays a certain amount of money which will be added into a pool of money used to pay for the healthcare of other members. There is an Annual Household Portion (AHP) for each household frozen account, being akin to a deductible, that has to be reached for the medical expenses of a household to be eligible for redistribution. Even though Medi-Share cannot be viewed as the ideal answer, it may provide some relief to those, who are held captive by the rising costs of health insurance.
