PTC Enhancements Expire in 2026, Risking Coverage Loss for Millions

The Health Premium Tax Credit (PTC), established under the Affordable Care Act (Obamacare), helps eligible individuals purchase health insurance through the marketplace by reducing monthly premiums.

Traditionally, the PTC was available only to those with modified adjusted gross incomes (AGI) between 100% and 400% of the federal poverty level. Modified AGI includes adjusted gross income plus certain untaxed incomes, such as tax-free interest and nontaxable Social Security benefits. During the COVID-19 pandemic, Congress temporarily expanded the PTC eligibility and increased subsidy amounts for 2021 and 2022, extending these enhancements through 2025.

This expansion allowed individuals with incomes exceeding 400% of the federal poverty level to qualify for PTC when marketplace plan costs exceeded 8.5% of their income. However, these temporary rules are set to expire in 2026, reverting to pre-pandemic standards which will narrow eligibility and reduce subsidy amounts for many. This change is projected to cause significant affordability issues in the marketplace, potentially resulting in 3.7 million people losing coverage annually due to higher premiums.

The legislative environment shows little indication that Congress will extend these easings, with major tax proposals and bills not addressing the PTC enhancements. Health insurance marketplace applicants estimate their 2026 PTC based on expected income, requiring accurate income forecasting and reconciliation during tax filing.

Advanced PTC payments are commonly made directly to insurers, reducing monthly premiums, but must be reconciled on IRS tax forms to avoid repayment or penalties. The IRS cross-checks PTC claims with marketplace data to ensure compliance. Marketplace enrollees are advised to report income changes promptly for subsidy adjustments, which can help prevent unexpected tax liabilities. This situation underscores the importance for insurance professionals and stakeholders to monitor legislative developments and advise clients on potential market and regulatory shifts affecting health coverage affordability.