Setting the Record Straight on Premium Tax Credit Enhancements

Enhancements to premium tax credits (PTCs) cut out-of-pocket premiums by more than half, on average, for over 20 million Affordable Care Act (ACA) marketplace enrollees, making health care more affordable and doubling enrollment. Yet Congress allowed the enhancements to expire on January 1. With 2026 open enrollment closing after Thursday for most states, premiums are spiking and 4 million people are projected to ultimately lose coverage and become uninsured. But the question of whether to extend the enhancements is ongoing: last week the House passed a three-year extension, and the issue is currently in the Senate’s hands.

PTC opponents have pushed false claims to advocate against extending the enhancements. But as policymakers continue to negotiate an extension to help the millions of people who are seeing their premium costs spike, they should keep the realities of PTCs in mind.

Increasing the cost of coverage isn’t a program integrity measure. Recent Republican proposals would require minimum premiums for all enrollees or refuse to extend premium tax credit enhancements altogether. But $0 premium plans have been a lifeline for approximately 8 million enrollees in 2025. Requiring people to make even small premium payments could cause roughly 1 million people to lose marketplace coverage due to additional red tape. The number losing coverage could be over 2 million under the substantial minimum premiums some proposals would require, based on estimates of how much enrollment falls when premiums rise.

These proposals have rested on wildly inflated estimates of fraud that have been thoroughly debunked. While there are credible allegations of fraud among insurance brokers concentrated in certain locations, targeted and direct solutions — not cutting coverage — are how to curtail bad actors and protect consumers. These may include steps the Centers for Medicare & Medicaid Services (CMS) has already taken and congressional proposals that crack down on predatory brokers, like the Insurance Fraud Accountability Act, sponsored by Senator Ron Wyden and Reps. Deborah Ross and Kathy Castor.

Marketplace costs are growing at similar rates to employer coverage. Growing health care costs are a major issue. Factors including health system consolidation, adoption of expensive medical treatments, and labor shortages are driving cost increases in both marketplace and employer coverage. Since 2017, after temporary ACA programs that helped establish the marketplaces were phased out, premium levels and growth rates have been similar for employer and marketplace coverage.

The debate over premium tax credit enhancements is not about underlying cost drivers, but instead about who bears the costs. Allowing PTC enhancements to expire dramatically shifts costs onto marketplace enrollees, more than doubling what the average marketplace enrollee pays out of pocket in premiums.

PTCs help enrollees cover the cost of premiums needed to access essential coverage. PTCs cover premium amounts that people would otherwise be required to pay out of pocket to keep their coverage. As the 310 million people in the U.S. who have health insurance can attest, coverage protects people against the health and financial risks of accidents or unexpected illnesses, and it helps people with chronic health needs afford care.

As in all insurance markets, some enrollees are fortunate enough to end up not needing to make claims. A federal metric of “no-claims” enrollment increased in recent years, which some critics blamed on fraud related to PTC enhancements. But measurement nuances largely explain the increase, actuarial analysis shows. For example, federal data counts a person enrolled for two months the same as a person enrolled for 12 months, even though a person enrolled for a shorter duration is less likely to make claims during a given year. CMS also double-counts people who switch plans. Both short duration enrollment and plan switching increased markedly due to policies unrelated to PTCs.

In any case, insurance companies wouldn’t profit from higher enrollment without medical claims because per-enrollee premiums — and federal payments — would go down. Additionally, the ACA includes a backstop: if insurers take in too much in premiums compared to what they pay out for health care services, the ACA requires that the money goes back to consumers through rebates.