Expiration of Enhanced ACA Premium Tax Credits Could Double Premium Costs in 2026

The enhanced premium tax credits under the Affordable Care Act (ACA), introduced in 2021 and extended through 2025 by the Inflation Reduction Act, are set to expire at the end of this year.

These enhanced credits have significantly increased financial assistance for ACA Marketplace enrollees, notably expanding eligibility to middle-income individuals above 400% of the federal poverty level (FPL). Since their introduction, ACA Marketplace enrollment has more than doubled, rising from approximately 11 million to over 24 million enrollees, most of whom benefit from the enhanced credits. 

Currently, the ACA caps health insurance premium payments for subsidized enrollees at a sliding scale percentage of income; enhanced tax credits lower these caps further, reducing premium burden. For example, an individual earning $28,000 pays about 1% of income ($325 annually) toward premiums under the enhanced credits, compared to nearly 6% ($1,562) if the credits expire, representing an increase of $1,238 annually. Early analyses indicate that enhanced tax credits reduced average annual premium payments from $1,593 to $888 in 2024, saving enrollees approximately $705.

Projections estimate that if the enhanced tax credits continue, subsidized enrollees would save an average of $1,016 on premiums in 2026; if not, average premium payments are expected to more than double to $1,904, a 114% increase from 2025. This projected rise exceeds earlier estimates due to methodological changes in tax credit calculations implemented in the ACA Marketplace Integrity and Affordability rule and an expected median rate increase of 18% by insurers in 2026, driven by rising healthcare costs and policy uncertainty. The loss of enhanced credits will particularly affect middle-income enrollees who currently pay no more than 8.5% of income but would lose subsidies entirely, having to absorb both premium increases and loss of assistance. For illustration, a 60-year-old couple earning $85,000 (402% FPL) could face a $22,600 rise in annual premium costs in 2026, increasing premiums to about 25% of their income, while a 45-year-old earning $20,000 (128% FPL) in a non-Medicaid expansion state might see premiums rise from zero to $420 annually.

Approximately 45% of ACA Marketplace enrollees have incomes between 100% and 150% FPL, 28% between 150% and 250% FPL, and 10% above 400% FPL. Methodologies for these estimates incorporate federal data, income inflation adjustments, and assumed constants in plan selections and demographics. While state-level subsidies may mitigate some premium increases, these are not included in the current analyses.

The impending expiration of enhanced premium tax credits poses significant implications for ACA Marketplace enrollees, market dynamics, and affordability, highlighting critical policy considerations for stakeholders.