4 million could lose health insurance if ACA tax credits expire

In the coming weeks, Congress will seek to cut federal spending to pay for tax cuts President-elect Trump promised. Lawmakers could cut Medicaid, as we explained in part one last week, and they could let the Affordable Care Act’s enhanced premium tax credits (PTCs) expire at the end of 2025.

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Congress could also repeal the Affordable Care Act (known as Obamacare or the ACA), as it did in 2017 during Trump’s first term, but that attempt failed. As Noah Weiland reported for The New York Times, the prospects for repeal in a second Trump administration are unknown.

What is known is that cutting both Medicaid and letting the enhanced PTCs expire would help Congress extend the provisions in the Tax Cuts and Jobs Act of 2017 that the Republicans passed and Trump signed during his first administration. Since the tax cuts in that law will expire at the end of 2025, extending them could increase the federal deficit by $5 trillion, as Emily Wilkins reported for CNBC.

For journalists covering ACA open enrollment, next year could be the last year the enhanced PTCs remain in place. In most states (but not all), open enrollment for ACA coverage runs through Jan. 15, according to this page on healthinsurance.org.

Why Obamacare tax credits matter

Under current law, Congress does not need to act because the enhanced PTCs are scheduled to expire at the end of next year. If the credits end, 4 million Americans could lose their ACA health insurance and 7.2 million could lose their subsidies, according to The Urban Institute, a nonprofit research group in Washington, D.C. Also, hospitals, physicians and other professionals who deliver health care could see a rise in uncompensated care. And health insurance costs would rise sharply in each state, particularly in states that have not expanded Medicaid, the institute predicted.

During open enrollment last year, the enhanced tax credits attracted a record 21.4 million Americans to sign up for ACA plans this year, making those enhanced tax credits a significant pocketbook issue in every state.

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The enhanced premium tax credits were among the reasons 21.4 million consumers enrolled in ACA plans this year, nearly double the 11.4 million enrolled in 2020, according to this Health Affairs article. The enhanced tax credits also led to record-high annual ACA enrollment levels in 2022 and 2023, the Health Affairs researchers added.

For journalists seeking detailed information about those 21.4 million Americans, CMS reported that almost all enrollees (92%) got enhanced PTCs. This 25-page CMS report has detailed information on enrollment in each state, whether enrollees were new or returning, that 50% got cost-sharing reductions to help them pay out-of-pocket costs and that the PTCs saved the average consumer 48% in premium costs.

Since the ACA became effective in 2014, premium tax credits have made health insurance more affordable for enrollees when they buy ACA coverage through the marketplace (at www.healthcare.gov) or through the ACA state-based marketplaces in 19 states and the District of Columbia, as the federal Centers for Medicare and Medicaid says here.

But before 2021, those credits were available on a sliding scale only to those whose annual income was between 100% of the federal poverty level (FPL, or $12,880 for an individual in 2021) and 400% ($51,520 for a single person). In 2021 and 2022, Congress improved the premium tax credits in 2021 and in 2022 so that now they are often called enhanced premium tax credits. Since 2022, the enhanced PTCs have been available to those earning more than 800% of FPL (more than $120,400).

Big savings for consumers

“The tax credits resulted in annual premium savings of $380 to $2,900, depending on people’s income,” Sara R. Collins said during a presentation on the ACA last month. Collins is a vice president for health care coverage and access at The Commonwealth Fund.

Using the enhanced PTCs, the average enrollee saved an estimated $705 annually (or about 44%) in health insurance premium costs this year, according to this KFF report.

The enhanced PTCs also helped health insurers grow their business, the Health Affairs researchers explained. In 28 states, the number of insurers rose by 25% from 2021 to 2023, and many insurers already in the ACA marketplaces expanded into new areas, they wrote. Increased competition among insurers drove down premiums and gave consumers more choice, the researchers explained.

Looming health insurance losses

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For members of Congress, however, the enhanced subsidies carry a steep price. Extending them permanently would cost $335 billion over the next 10 years, according to the nonpartisan Congressional Budget Office.

If Congress lets the enhanced PTCs end next year, the 4 million who will become uninsured and 7.2 million who will lose their subsidies will find health care to be unaffordable and inaccessible, according to this Urban Institute report.

The loss of the enhanced PTCs could ripple across states and affect different communities in various ways. To show these effects in each state, the Urban Institute produced an interactive data tool showing insurance coverage in each state by age, income, race and ethnicity.

Adverse effects on Black and Hispanic people

The interactive data tool shows, for example, that Black and Hispanic people used the enhanced PTCs this year at much higher rates than White people, particularly in the 10 states (Alabama, Florida, Georgia, Kansas, Mississippi, South Carolina, Tennessee, Texas, Wisconsin, and Wyoming) that have not expanded Medicaid. Black and Hispanic people are more likely than white people to be low-income, making the PTCs especially useful in non-expansion states where access to Medicaid is limited for adults, the researchers added.

Among the 4 million who would become uninsured, more than half (2.5 million) are in the 10 non-expansion states, including 600,000 Black people, 700,000 Hispanic people, 1.1 million white people and 100,000 other people, the data show. In the 40 expansion states and the District of Columbia, 1.5 million would become uninsured: more than 200,000 Black people, 200,000 Hispanic people, 900,000 white people and 100,000 other people, the Urban Institute data tool shows.

Of the 7.2 million who would lose their enhanced PTCs, the numbers are higher in the non-expansion states. In those 10 states, 4.5 million would lose their enhanced PTCs: 800,000 Black people, 1 million Hispanic people, 2.5 million white people, and 200,000 other people, the Urban Institute data tool shows. In the expansion states, 2.7 million would lose the enhanced PTCs including 300,000 Black people, 300,000 Hispanic people, 1.8 million white people, and 200,000 other people.

In addition to the effect on ACA enrollees, there are two other significant trends worth reporting if the enhanced PTCs end. First, hospitals, physicians and other providers would likely see a rise in uncompensated care, according to this Urban Institute report, and, second, household spending on health insurance premiums would rise sharply in each state, the institute explained in this report.

Resources

• Four Million People Will Lose Health Insurance If Premium Tax Credit Enhancements Expire in 2025, Urban Institute, Nov. 14, 2024.
• Who would lose coverage if Enhanced Premium Tax Credits Expire, data tool, Urban Institute, Nov. 14, 2024.
• Hospitals, Physicians, and Other Stakeholders Face Billions of Dollars in Uncompensated Care Costs and Lost Revenue if Enhanced ACA Tax Credits Expire, Urban Institute, December 2024.
• Household Spending on Premiums Would Surge if Enhanced Premium Tax Credits Expire, results by state, Urban Institute, December 2024.
• Health Insurance Marketplaces 2024 Open Enrollment Report, CMS, March 27, 2024.
• Marketplace 2025 Open Enrollment Period Report: National Snapshot, CMS, Nov. 22, 2024.
• Inflation Reduction Act Health Insurance Subsidies: What is Their Impact and What Would Happen if They Expire?, KFF, July 26, 2024.
• Four Million People Will Lose Health Insurance If Premium Tax Credit Enhancements Expire in 2025, Urban Institute, Nov. 14, 2024.