Premium Tax Credit Improvements Must Be Extended to Prevent Steep Rise in Health Care Costs

Improvements to premium tax credits, enacted in the American Rescue Plan and extended by the Inflation Reduction Act, have helped nearly 20 million people afford health coverage in the Affordable Care Act (ACA) marketplaces. The enhanced premium tax credits spurred record enrollment in ACA marketplace insurance and contributed to record low uninsured rates. Black and Latino people and families with lower incomes experienced the greatest health coverage gains because of the improved tax credits.

But the enhanced premium tax credits are set to expire after 2025 and, due to the timeline necessary for insurers and regulators to update premium rates, Congress must extend the tax credits by the spring of 2025 to avoid negatively impacting marketplace enrollment. If Congress allows the improved tax credits to expire, nearly all marketplace enrollees, in every state, will face significantly higher premium costs. An estimated 4 million people will become uninsured, almost half of whom are Black or Latino.^[1] Ultimately, Congress should make the improved premium tax credits permanent so that families have stability and predictability when it comes to their access to affordable health insurance.

Premium Tax Credit Improvements Save $700 on Average

A record 93 percent of marketplace enrollees, or 19.3 million people, receive premium tax credits (PTCs).^[2] These tax credits provide upfront financial assistance to help people afford the individual or family health insurance plans offered in their state through the ACA marketplaces.^[3]

The PTC enhancements help these enrollees by:

• lowering the caps on premium contributions for people of all income levels;
• allowing people with incomes between 100 and 150 percent of the poverty level to pay $0 in premiums for “benchmark” silver-level plans; and
• extending eligibility for PTCs to people with incomes above 400 percent of the poverty level if their benchmark premiums would exceed 8.5 percent of household income.

The average enrollee will save an estimated $705 in 2024 because of the PTC enhancements, equivalent to a 44 percent reduction in premium costs.^[4]

Improvements Spurred Record Coverage, Especially Among Black and Latino People and Families With Lower Incomes

By making health insurance more affordable, the PTC enhancements helped drive 20.8 million people to enroll in marketplace coverage in February 2024, up from 11.2 million in February 2021, prior to the enhancements. Of the 20.8 million enrollees, 19.3 million receive tax credits to help pay for their coverage, double the 9.7 million who received tax credits in February 2021.^[5] (See Figure 1.) Thanks in large part to these marketplace enrollment gains, the uninsured rate in 2023 reached an all-time low.^[6]

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The PTC enhancements have been especially critical for increasing enrollment among Black and Latino people. People of color made up 54 percent of marketplace enrollees in 2024, up from 46 percent in 2021. Between 2021 and 2024, marketplace enrollment among Black and Latino people grew by 186 percent and 158 percent, respectively, compared to 63 percent for other racial and ethnic groups.^[7] Marketplace enrollment rates of Asian American people have long been higher than other racial and ethnic groups, potentially due to robust and language-specific enrollment assistance among nonprofits and insurance brokers.^[8]

The enhancements also helped spur enrollment among people with lower incomes — those just above the minimum income level for PTC eligibility. Between 2021 and 2024, marketplace enrollment among people with incomes between 100 and 200 percent of the federal poverty level more than doubled, with enrollment growing by 109 percent compared to 46 percent among those with other incomes.^[9]

Finally, the PTC enhancements have been crucial for self-employed workers and small business owners who, prior to the ACA, had limited options for affordable coverage and disproportionately benefit from the ACA marketplace.^[10] According to recent U.S. Treasury Department estimates, self-employed workers and small business owners made up 28 percent of all marketplace enrollees in 2022.^[11]

Many of these coverage gains will be lost if PTC enhancements are allowed to lapse. Without the enhancements, the Urban Institute projects that 4 million more people will be uninsured, an estimate roughly in line with Congressional Budget Office projections.^[12] Black and Latino enrollees would make up a disproportionate share, together comprising 1.8 million of the 4 million who would become uninsured.^[13]

Recent interviews conducted by CBPP in collaboration with PerryUndem show the real-world impacts that PTC enhancements have had on people’s lives — and the repercussions if the PTC enhancements expire.^[14] Ana, a 40-year-old Latina woman with two young children, who works as a delivery driver in Texas, said, “Lowering the amount of the monthly premiums makes it possible to have insurance.” Losing the PTC enhancements would force tough decisions, including for people with chronic conditions. Lisa, a 55-year-old white woman in Ohio with diabetes and kidney disease, said, “It’s a hard choice because what condition do I stop treating?”

If Improvements Expire, Premiums Will Rise in Every State for People of All Ages and Income Levels

If PTC enhancements expire, premium costs will increase for people across states, ages, and income levels. The initial impact would occur in the spring of 2025, as insurers begin submitting proposed rates to regulators, and would intensify in September as marketplaces send renewal notices to enrollees, with spiking premiums prompting “rate shock.” By late October, premium rates will be locked in, with open enrollment for 2026 plans generally beginning November 1, 2025.^[15]

People with lower incomes would tend to face the largest percentage increases in premium costs if the PTC enhancements expire. Among those with lower incomes who would see their subsidies reduced:

• A single individual making $22,000 (146 percent of the poverty level) would no longer be eligible for a zero-premium plan and would see their monthly marketplace premium rise from $0 to $63 — an annual increase of $754.
• A single individual making $32,000 (212 percent of the poverty level) would see their monthly marketplace premium more than double, from $66 to $163 — an annual increase of $1,162.
• A couple making $42,000 (205 percent of the poverty level) would see their monthly marketplace premium increase from $77 to $206 — an annual increase of $1,550.
• A family of four making $65,000 (208 percent of the poverty level) would see their monthly marketplace premium increase from $126 to $324 — an annual increase of about $2,400. (See Figure 2 for a family of four at different income levels; Appendix Table 1 for premium increases among people of various family sizes, ages, and incomes; and Appendix Table 2 for premium increases at the state level.)

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As a result of the enhancements, people with incomes above 400 percent of the poverty level became newly eligible for PTCs if their marketplace premiums would exceed 8.5 percent of household income. This was especially beneficial for some people earning just over 400 percent of the poverty level, whose premiums would have otherwise comprised a large share of their income. The Urban Institute estimates that, in 2025, PTC enrollees in the 400 to 500 percent income range will make up half of all PTC enrollees with incomes above 400 percent of the poverty level.^[16] If the PTC enhancements are not extended, people in this group would face dramatic premium increases:

• A typical 60-year-old couple making $82,000 (401 percent of the poverty level) would see monthly marketplace premiums more than triple, from $581 to $2,111 — an annual increase of roughly $18,400.
• A typical family of four making $126,000 (403 percent of the poverty level) would see their monthly marketplace premium increase from $893 to $1,589 — an annual increase of about $8,400.

Instances of dramatic premium spikes are most likely to occur:

• in states with high underlying marketplace premiums, such as West Virginia and Wyoming;
• for older enrollees, who pay higher premiums under ACA rules than younger people; and
• for people with incomes above 400 percent of the poverty level, who would lose subsidies entirely if the enhancements expired.

For example, a 60-year-old West Virginia couple making $82,000 would see annual premiums for a benchmark silver plan increase more than sixfold, from $6,970 to over $46,000. (See Figure 3 and Appendix Table 2).

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Premiums Will Rise Across Congressional Districts if Improvements Expire

Expiration of the improved tax credits would mean much higher premiums for marketplace enrollees in every congressional district, according to estimates from the 32 states that used the federal enrollment platform in 2024.^[17] The average annual premium increase would range from $360 to $1,860, with an increase of $684 in the median district. In percentage terms, premium increases would range from 41 to 218 percent across districts, with a median increase of 91 percent.

For example, in Texas’ 19th District, roughly 73,000 people signed up for marketplace coverage with PTCs. If the PTC enhancements expire, premiums would increase for these enrollees by 165 percent on average, or $456 annually.

Appendix