Impact of Expiring Premium Tax Credits on ACA Enrollment Trends
In recent developments within the U.S. insurance industry, the expiration of enhanced premium tax credits for the Affordable Care Act (ACA) marketplaces is influencing enrollment trends. According to a new analysis by the Kaiser Family Foundation (KFF), by 2026, the ACA marketplaces could see up to five million fewer individuals maintaining their health insurance coverage.
This projection relies on data from multiple sources, including proprietary payment numbers from Wakely Consulting Group, state exchange reports, and information from the Centers for Medicare & Medicaid Services. During the recent open enrollment period, there was a notable decrease, with enrollment dropping by over one million to 23.1 million—a significant annual decline for the marketplaces.
A key metric for the insurance industry is effectuated enrollment, which tracks the number of individuals who pay their premiums and retain their plans. KFF estimates indicate that this number could decrease from 22.3 million in 2025 to about 17.5 million this year, with possibilities as low as 16.5 million.
The expiration of enhanced subsidies, initially introduced by the American Rescue Plan in 2021 and extended by the Inflation Reduction Act until 2025, has resulted in increased premiums. With the cessation of these credits, average monthly premium payments have risen from $113 to $178—a 58% hike. Many individuals have responded by leaving the marketplaces or switching to more affordable plans with higher deductibles.
The rise in deductibles is particularly noteworthy, with the average ACA marketplace deductible reaching $3,786, marking a 37% increase. This shift is largely due to enrollees moving from silver plans with cost-sharing reductions to bronze plans, which offer lower premiums but higher out-of-pocket costs.
Congress nearly extended the enhanced credits last year, but negotiations stalled, creating uncertainty about future developments in this sector. State-based exchanges, particularly in states that offer their own subsidy programs and allocate resources toward consumer outreach, are more successfully retaining enrollees compared to the federal HealthCare.gov system. This trend may lead to a widening disparity in coverage among different states over time.
As the insurance industry continues to navigate these changes, the resilience of the ACA, despite numerous challenges, will likely be tested further. Market participants and consumers will need to adapt to the new landscape shaped by these financial shifts.