End of Enhanced Premium Tax Credit Would Drive Health Insurance Costs Higher

The words "Affordable Care Act" with hundred dollar bills in the background.

(Image credit: Getty Images)

Open enrollment for 2025 is underway for many, but there’s a key tax break that could expire in the new year and its repeal could mean higher health insurance costs for taxpayers like you.

Congress temporarily enhanced the premium tax credit through the American Rescue Plan, and extended the measure via the Inflation Reduction Act (IRA), helping nearly 20 million people afford health insurance from the federal marketplace.

But the provision is set to expire after 2025, and given President-elect Donald Trump’s conflicting statements regarding the future of the Affordable Care Act (ACA), it’s uncertain if it will be extended under the Republican-led 119th Congress.

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In a last-ditch effort, President Biden is urging Congress to extend the expanded premium tax credit during this lame-duck session and before his term is over. Lawmakers have until Dec. 20 to come up with a solution.

Here’s what you need to know about the premium tax credit and how its sunset could impact your access to healthcare.

What is the enhanced premium tax credit?

The premium tax credit is a refundable tax break that helps individuals afford premiums for health insurance purchased through the federal marketplace. It’s otherwise known as the online health insurance network available through the Affordable Care Act (ACA) or “Obamacare.”

The Biden administration improved the premium tax credit by expanding its eligibility:

American Rescue Plan: The eligibility for the premium tax credit was temporarily expanded for tax years 2021 and 2022, by eliminating a rule that taxpayers with household incomes above 400% of the federal poverty line could not qualify for the credit. The provision also lowered the contribution cap for every income level.
Inflation Reduction Act: The enhancements to the premium tax credit were extended through the end of 2025.

The improvement led to a record 93% or 19.3 million ACA enrollees, receiving premium tax credits. For instance, in 2025 the PTC enhancement will:

Reduce the maximum household contribution limit for people of all income levels
Allow individuals with incomes up to 150% of the poverty line to pay $0 in premiums for benchmark silver-level plans
Extend eligibility for premium tax credits to people with incomes above 400% of the poverty level if their benchmark premiums surpass 8.5% of their household income

Before the premium tax credit enhancement, the required contribution percentages ranged from about 2% to nearly 10% for people with household income within 400% of the federal poverty level. Those with incomes above 400% of the poverty line were not eligible for the credit.

Nearly four million people could lose health insurance

Failing to expand the premium tax credit will inflate health insurance premium costs and cause the population of uninsured individuals to spike, according to the Congressional Budget Office (CBO).

The agency expects that without an extension of the premium tax credit through 2026, the number of people without insurance will rise by 2.2 million that year. If Congress fails to permanently extend the credit, even more people will lose access to health insurance.

The rate of people exiting health insurance will worsen over time. By 2027, the CBO estimates that 3.7 million people will become uninsured due inability to afford health insurance premiums without the premium tax credit. That figure will increase to 3.8 million, on average, each year until 2034.

Why won’t the exodus of people from ACA coverage be immediate? CBO assumes that some enrollees will need time to fully respond to the expiration of the credit due to automatic renewal policies.

In other words, some people may be stuck paying for premiums they cannot afford without the premium tax credit.

How high could health insurance premiums spike?

Without the financial safety net of the enhanced premium tax credit, the cost of health insurance premiums will spike substantially.

The gross benchmark premiums are expected to increase by 4.3% in 2026, according to the CBO. That figure increases by 7.7% in 2027, and 7.9%, on average, over the period 2026 to 2034.

Put it another way: once PTC enhancements expire, premium costs will increase for people across every state, age, and income level.

People with the lowest incomes would see the largest percentage increase in premium costs. Calculations by the Center for Budget and Policy Priorities (CBPP) show that:

A 45-year-old earning $62,000 is currently at 411% of the federal poverty level. On average, this enrollee currently pays $5,270 annually in marketplace coverage with the premium tax credit. Without the enhancement, they will pay $6,739 per year for coverage, representing an increase of $1,469 a year.
A 60-year-old couple, earning $82,000 is at 401% of the federal poverty level. Currently, with enhancements, they pay an average of $6,970 annually for ACA coverage. Without the PTC enhancements, they’ll pay $25,331 a year, that’s an increase of $18,361.

Swipe to scroll horizontally

National Average Premium Increase if PTC Enhancements Expire
60-year old couple	With enhancement (current)	Without enhancements	Premium increase without enhancement	Percentage premium increase
$30,000(147% FPL)	$0	$1,028	$1,028	0%
$42,000 (205% FPL)	$924	$2,474	$1,550	168%
$62,000(303% FPL)	$3,767	$5,363	$1,595	42%
$82,000(401% FPL)	$6,970	$25,331	$18,361	363%

Source: Center for Budget and Policy Priority calculations and Congressional Budget Office estimates of applicable percentages without premium tax credit enhancements in 2025.

What’s next for the premium tax credit?

Whether the premium tax credit is extended is still up for debate as the temporary provisions are scheduled to expire at the end of 2025.

President Biden is pushing Congress to extend the enhancement of the PTC before his term is over, but the clock is ticking and lawmakers have until Dec. 20 to make changes.

If Congress fails now, it’s uncertain whether President-elect Trump will address the premium tax credit based on his controversial views on the Affordable Care Act.

What is certain for now is that the potential sunset of the expanded premium tax credit will mean that millions of people could become uninsured due to the rising costs of health insurance. So, keep that in mind as you scroll for coverage plans during 2025 open enrollment.

Gabriella Cruz-Martínez is a finance journalist with 8 years of experience covering consumer debt, economic policy, and tax.

Gabriella’s work has also appeared in Yahoo Finance, Money Magazine, The Hyde Park Herald, and the Journal Gazette & Times-Courier.

As a reporter and journalist, she enjoys writing stories that empower people from diverse backgrounds about their finances, no matter their stage in life.