As part of the Inflation Reduction Act (IRA), signed into law in August 2022, Congress passed a three-year extension of enhanced subsidies for individuals purchasing their own health coverage on the Affordable Care Act (ACA) Marketplaces. These temporary subsidies, now expiring at the end of 2025, were first passed as part of the American Rescue Plan Act (ARPA) in March 2021, and were originally slated to last two years. The enhanced Advance Premium Tax Credits (eAPTCs) increase the amount of financial assistance available to those who are already eligible (households with an income of at least 100% of the federal poverty level (FPL) or above 138% in states that have expanded Medicaid), and also newly expand subsidies to middle-class Americans (households with an income above 400% FPL), thereby temporarily preventing steep increases in marketplace premium payments for subsidized enrollees—so long as the extension is in place.
The size of the premium increase individual enrollees would have seen without the IRA would have depended on the enrollee’s income, age and premiums where they live, but the average enrollee saved an estimated $700 in 2024 because of the eAPTCs. Without a further extension in 2025, it is anticipated virtually all of the 19.7 million subsidized enrollees[1] will see some increase in their out-of-pocket premium payments. Furthermore, the Congressional Budget Office (CBO) has estimated marketplace enrollment would drop from an estimated 22.8 million in 2025 to 18.9 million the following year, reaching as low as 15.4 million in 2030 if the eAPTCs expire.[2] Additionally, KFF estimates that middle-income enrollees with incomes just above four times the FPL—or $60,240 in 2024—would in many cases be priced out of health insurance coverage.[3]
Democratic Strategy
In an effort to bring attention to the forthcoming expiration and impact on low- and middle-income marketplace enrollees, Sens. Jeanne Shaheen (D-NH) and Tammy Baldwin (D-WI) and Rep. Lauren Underwood (D-IL) introduced legislation[4] last month that would make the eAPTCs permanent. This follows letters[5] sent by the legislators earlier in the month, both of which were signed by the majority of Senate and House Democrats, to congressional leadership, warning of the impacts of the eAPTCs’ expiration. The legislators highlight that many of the individuals who have benefitted the most from the expansion live in red states that have not expanded Medicaid.
These letters and bills represent the opening salvo on what is expected to be the next major fight over the ACA, which will likely continue through next year.
Republican Opposition
A permanent, or even short-term, expansion of the eAPTCs faces strong opposition from Republicans, in large part due to the CBO’s projection that it would increase the federal deficit by $355 billion over 10 years.[6] Furthermore, Republicans have argued that eAPTCs incentivize fraud, and a report from the Paragon Institute estimated millions of Americans might be misstating their incomes to get larger subsidies, costing upwards of $15 to $20 billion this year alone.[7] In addition, some lawmakers are concerned about reports that consumers are being enrolled in ACA plans or their coverage is being switched without their consent by a subset of brokers seeking to gain commissions.
In May, House Ways and Means Committee Chairman Jason Smith (R-MO) and House Budget Committee Chairman Jodey Arrington (R-TX) sent a letter[8] to CBO Director Phillip Swagel and Joint Committee on Taxation (JCT) Chief of Staff Thomas Barthold requesting a comprehensive analysis of the budgetary effects of making the eAPTCs permanent, which they say have gone to some of the nation’s highest earners, including those making as much as $599,000 a year. They expressed concerns about the growing cost of these credits and argue they have driven up the cost of insurance for all Americans.
Along with the projected deficit increase, however, the CBO and JCT responded to the lawmakers’ letter stating that 3.4 million more people annually would have health insurance as a result of an eAPTC expansion, further complicating the dispute.
Potential Legislative Action
The expansion of eAPTCs is expected to be a major topic of discussion in the health care space throughout the next year. While the subsidies do not expire until the end of 2025, Democrats are urging Congress to move as quickly as possible. Insurance commissioners have also called on Congress to extend the subsidies, or at the very least to act quickly so they know whether they will need to calculate plan rates without them and can begin the process of setting those rates for 2026 as early as possible. Individuals start signing up for plans each October, so if an extension is not in place by next October, there are concerns that people will not sign up for health insurance for fear of increased rates, which may then require an extension of the open enrollment period.
Sen. Shaheen called on Congress to act this year and suggested her legislation could be included in a year-end spending and tax extender bill. This is unlikely, but a possible extension is expected to be part of next year’s broader tax debate as Congress considers what to do about the expiration of the 2017 Tax Cuts and Jobs Act (TCJA). Whichever party controls Congress next session will likely be able to decide whether to let the subsidies expire, seek to extend them permanently or pursue a short-term extension, which becomes more likely under a divided government, where Democrats will be forced to give concessions in order for Republicans to concede on some sort of extension.
An extension of the eAPTCs has not risen to the broader level of prominence that efforts to repeal the ACA have in past election years, but Vice President Kamala Harris is campaigning on making the subsidies permanent. While former President Donald Trump has not taken a direct stance on the eAPTCs, he has historically opposed the ACA and will likely oppose additional efforts to fund these subsidies.
[1] https://www.healthinsurance.org/obamacare/will-you-receive-an-aca-premium-subsidy/#:~:text=More%20than%2021.4%20million%20people%20enrolled%20in%20Marketplace,million%20of%20them%20were%20receiving%20premium%20subsidies.%202.
[2] https://www.cbo.gov/system/files/2024-07/60523-2024-07-premium-tax-credit.pdf.
[3] 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/.
[4] https://www.shaheen.senate.gov/shaheen-baldwin-introduce-legislation-to-make-affordable-care-act-premium-tax-credits-permanent-lowering-costs-for-millions-of-americans.
[5] https://underwood.house.gov/media/press-releases/underwood-shaheen-lead-bicameral-letters-urging-congressional-leaders-make.
[6] https://www.cbo.gov/system/files/2024-06/60437-Arrington-Smith-Letter.pdf.
[7] https://paragoninstitute.org/private-health/the-great-obamacare-enrollment-fraud/.
[8] https://budget.house.gov/imo/media/doc/cbo_joint_committee_on_taxation_letter.pdf.
