The recent tax reform package, deemed the “big beautiful bill” by President Donald Trump, grants roughly $4 trillion in tax reductions to Americans, including extensions for several tax provisions set to expire next year.
Health policy experts, however, have pointed out a significant exclusion: the lack of an extension for enhanced premium tax credits.
The enhanced tax credits, implemented in 2021, have played a critical role in reducing health insurance premiums for individuals purchasing coverage through the Affordable Care Act (ACA) marketplace. These credits allow enrollees to either apply them to their premiums upfront or claim them during tax season. They are expected to expire after 2025.
According to the Kaiser Family Foundation (KFF), more than 22 million people, approximately 92% of ACA enrollees, benefited from federal subsidies this year to help lower their insurance costs.
Cynthia Cox, KFF’s ACA program director, indicated during a recent webinar that these recipients will face a “sharp premium increase” beginning January 1.
Projected Premium Increases of 75%
The average savings for marketplace enrollees in 2024 was $705, representing a 44% decrease in premium costs due to the enhanced tax credits, as revealed in a November analysis by the Center on Budget and Policy Priorities.
If these credits are not continued, average premiums could surge by more than 75% in 2026, KFF’s executive vice president for health policy, Larry Levitt, cautioned during the webinar.
Furthermore, an estimated 4.2 million Americans could lose their health coverage over the next decade if the enhanced subsidies are allowed to expire, according to projections from the Congressional Budget Office.
This increase in the uninsured population comes in addition to nearly 12 million people anticipated to lose their health coverage due to over $1 trillion in cuts to health programs like Medicaid and the ACA, enacted by Republicans to offset the costs of the legislation.
Levitt characterized these spending reductions as the most extensive rollback of federal healthcare support to date.
“The scale of the change to the healthcare system is staggering,” he stated.
Origins of the Enhanced Premium Tax Credits
Initially designed for individuals earning between 100% and 400% of the federal poverty level, premium tax credits were established by the ACA. The enhanced credits were introduced following former President Joe Biden’s signing of the American Rescue Plan in 2021.
This legislation temporarily increased the premium tax credit amounts and broadened eligibility to households earning more than 400% of the federal poverty limit. Specific caps were also placed on out-of-pocket premiums, ensuring they did not exceed 8.5% of income.
In 2022, the Inflation Reduction Act extended those policies through 2025.
Disproportionate Effects of Subsidy Expiration
The availability of enhanced subsidies effectively made health insurance more affordable, significantly increasing the number of insured Americans, according to experts.
Enrollment in the ACA has more than doubled, rising from around 11 million in 2020 to roughly 24 million in 2025, as per data tracked by The Peterson Center on Healthcare and KFF.
The expiration of these enhanced subsidies would not only affect all premium tax credit recipients but would disproportionately impact specific demographic groups. Health experts pointed out that the enhancements have been particularly essential for boosting enrollment among Black and Latino populations, as well as among lower-income households, self-employed individuals, and small business owners.
