Impact of Enhanced Premium Tax Credits Expiration on ACA Marketplace Premiums
Enhanced premium tax credits (ePTCs), initially implemented through the American Rescue Plan Act of 2021 and extended by the Inflation Reduction Act until the end of 2025, have significantly improved affordability for ACA Marketplace enrollees.
These credits have reduced the out-of-pocket premium costs for many individuals, especially benefiting those with incomes up to 400% of the federal poverty level by increasing subsidy amounts and expanding eligibility. If ePTCs expire, out-of-pocket premiums for subsidized enrollees will rise sharply. For example, a 27-year-old earning $35,000 could see annual premium payments increase by over 150%, rising from $1,033 to $2,615. Moreover, low-income enrollees currently eligible for fully subsidized benchmark plans may have to resume premium payments, pushing a 35-year-old couple earning $30,000 to pay approximately $1,107 annually for coverage.
The ACA Marketplace net premium—what enrollees pay after tax credits—would increase directly due to reduced subsidies, while gross premiums—the total insurance charges—are also impacted indirectly. Insurers for the 2026 plan year are proposing a median gross premium hike of 18%, attributing part of this to anticipated adverse selection if healthier enrollees opt out following ePTC expiration. While enrollees between 100% and 400% of the poverty level will still receive some financial assistance if ePTCs lapse, the reduced credits will increase their premium costs substantially. Those above 400% of poverty will lose eligibility for subsidies entirely, exposing them fully to premium increases. A 55-year-old couple with $85,000 income currently receiving substantial tax credits would face premium costs that more than triple if ePTCs expire, factoring in a projected 18% premium increase. Additionally, the IRS has announced revised required household contributions for 2026 with increased income share percentages compared to prior indexing methods. These changes compound increases in expected out-of-pocket premiums.
The data underlying these analyses derive from CMS, insurer filings, and state exchange data, using 2025 premiums as a baseline with projected increments for 2026. This dynamic illustrates the complex interplay between subsidy policies, insurer pricing strategies, and federal regulatory adjustments shaping Marketplace affordability and enrollee costs. For stakeholders in health insurance markets, tracking the legislative and regulatory status of ePTC extensions is critical for anticipating premium pricing trends, enrollee behavior, and insurer risk pools moving forward.