The Looming Increase in Marketplace Premium Costs as enhanced Tax Credits Face Expiration
Millions of Americans rely on premium tax credits to make health insurance purchased through the Affordable Care Act (ACA) Marketplaces affordable. However, the future of these credits, specifically the enhanced premium tax credits (ePTCs) enacted through the Inflation reduction act, is uncertain, and their expiration could lead to significant increases in healthcare costs for many. This analysis examines the potential impact of letting the ePTCs lapse, focusing on how premium payments could change and the role of recent regulatory adjustments.
The Current Landscape of Premium Assistance
Currently, individuals and families with incomes above 400% of the federal poverty level are eligible for Marketplace premium tax credits. Without the continuation of enhanced premium tax credits,these individuals would lose all financial assistance,bearing the full cost of their health insurance plans.
The impact is significant. Such as, a 55-year-old couple with an income of $85,000 currently receives an average of $13,567 annually in premium tax credits, covering 65% of the cost of a benchmark plan. This translates to an out-of-pocket premium of $7,225 per year for a total plan cost of $20,792.
Projected Increases Without ePTCs
If the ePTCs expire, this same couple would be responsible for the full $20,792 annual cost of the benchmark plan, assuming premiums remain constant. However, health insurance premiums are not static. If premiums increase by an estimated 18% into 2026, the couple’s net premium payments could more than triple, increasing by $17,310 (a 240% increase) – from $7,225 to $24,535 annually.
Changes to Required Contribution Calculations
The maximum amount a household is required to contribute towards a benchmark ACA Marketplace plan is typically indexed annually to account for premium growth relative to income. The introduction of enhanced premium tax credits led to the implementation of new, more generous required contribution levels without annual adjustments.
With the ePTCs set to expire, the IRS has released the required contributions for 2026. Earlier this year, the Trump administration introduced changes to the calculation of these required contributions through the Marketplace Integrity and Affordability rule. These changes resulted in an increase in the maximum out-of-pocket contribution for benchmark premiums, expressed as a share of income, compared to the indexing methodology previously in place.
The Magnitude of Potential Increases
Prior estimates indicated that without the enhanced tax credits, out-of-pocket premium payments for subsidized enrollees would have been over 75% higher in 2024.Enrollees can anticipate even higher costs in 2026, driven by both annual premium increases and the IRS changes to contribution requirements.
Data and Methodology
The analysis utilizes premium data from 2025, as 2026 rates have not yet been finalized. This data was sourced from the Centers for Medicare and Medicaid Services (CMS), insurer rate filings, and data collected by KFF researchers from state exchanges and insurance departments.To isolate the impact of expiring ePTCs, the maximum required contribution was calculated using the 2025 federal poverty threshold, comparing the applicable percentage under the Inflation reduction Act to the expected percentage for 2026. The 2026 scenario incorporates 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
