The Looming Increase in Marketplace Premium โฃCosts as enhanced Tax Credits Face Expiration
Millionsโค of Americans rely on premium tax credits to make health insurance purchasedโฃ through the Affordable Care Act (ACA) Marketplaces affordable. However, theโ future of โthese credits, specifically the enhanced premium tax credits (ePTCs) โenacted through the Inflation reduction act, is uncertain, and their expiration could lead to โขsignificant increases in โขhealthcare costs for many. This analysis examines the potential impact of letting the ePTCs lapse,โค focusing โคon how premium payments could change and โขthe role of recent regulatory adjustments.
The Current Landscape of Premium Assistance
Currently, individuals and families with incomesโข above 400% of the federal poverty โlevel areโข eligibleโ for Marketplace premium tax credits. Without the continuation of enhanced premium tax credits,these individuals would lose โขall financialโฃ assistance,bearing the full cost โขof their health insurance โplans.
The impact is significant. Suchโฃ as, a 55-year-old couple with an โincome of $85,000 currently receives an average of $13,567 annually in premium tax credits, covering 65% of the costโ of a benchmark plan.โข This translates to an out-of-pocket premiumโข of $7,225 โper year for a โtotal plan โคcost ofโข $20,792.
Projected Increases โWithout ePTCs
If the ePTCs expire, this sameโ couple would be responsible for the full $20,792 annual cost of the benchmark plan, assumingโ premiums remain constant. โขHowever,โข health insuranceโข premiums are โnot โstatic. If premiums โincrease โby an estimated โฃ18% into 2026, the couple’sโ net premium โpayments could more than triple, โฃincreasing by $17,310 (a 240% increase) – fromโฃ $7,225 to โ$24,535โฃ annually.
Changes to Required Contribution Calculations
The maximum amount a household is required to contribute towards a benchmark ACA Marketplace โคplan is typically indexed annually to account for premium growth relativeโ to income. The introduction ofโ enhanced premium tax credits led to the โคimplementation of new, more generousโ required contribution โlevels without annual adjustments.
With the ePTCs set โคto expire, the IRS has released the required contributions โขfor 2026. โ Earlier this year, the โTrump administration introducedโ changesโ to the calculation of these required contributions through the Marketplace Integrity and Affordability rule. These changes resulted โin an increase in the maximum โout-of-pocket contribution for benchmark premiums, expressed as a share of โincome, compared to the indexingโ methodology previously in place.
The Magnitude of Potential Increases
Prior estimates indicated thatโฃ without the โenhanced tax credits, out-of-pocket premium payments for subsidized enrollees wouldโข have been over 75% higher in โ2024.Enrollees can anticipate even higher costs in 2026, driven by both annual premium โฃincreases and the IRS changes to contribution โrequirements.
Data and โMethodology
The analysis utilizes premium data โคfrom 2025, as 2026 rates have not yet been finalized. This data was sourced from the Centers for Medicare and Medicaid โServices (CMS), insurer rate filings, and data collected by KFF researchers from โstate exchanges andโฃ insurance departments.To isolate the impact โof expiring ePTCs, the maximum required contribution was calculated using the 2025 federal poverty threshold, comparing the applicable percentage under the Inflation reduction โAct toโ the expected percentage for 2026. The 2026 scenario incorporatesโ an additional 18% increase to model anticipated premium growth.
Source: https://www.kff.org/affordable-care-act/issue-brief/inflation-reduction-act-health-insurance-subsidies-what-is-their-impact-and-what-would-happen-if-they-expire/ and https://www.irs.gov/pub/irs-drop/rp-25-25.pdf