The newly passed tax act extended many key expiring provisions – but one thing it didn’t address is enhanced health care premium tax credits slated to sunset at the end of 2025.
The Affordable Care Act (ACA) established the premium tax credit under IRC § 36B to benefit certain individuals and families enrolling in ACA Marketplace plans. The credit is refundable and is equal to a sliding-scale “applicable percentage” – based on household income relative to the federal poverty line – of the amount a taxpayer pays for qualified health coverage for themself and their spouse and dependents.
While the credit was originally available to lower-income taxpayers who were not eligible for health insurance through their employers, an expanded form of the credit has been available since 2021 for higher income taxpayers purchasing Marketplace plans. Under that enhanced credit, taxpayers with household income above 400% of the federal poverty line have been able to claim a credit for the 2021 – 2025 tax years.
According to a Congressional Research Service report, the enhanced credit “allowed more households to become eligible for the credit and provided larger subsidies to all eligible households, compared with ACA-only rules.” It also increased the number of subsidized exchange enrollees from 9.2 million in 2020 (before the enhancement) to 19.3 million in 2024, says the CRS.
The IRS has already published an applicable percentage table for 2026 reflecting an end to the enhanced premium tax credit. (See Rev Proc 2025-25, 2025-32 IRB)
Allowing the enhanced credit to expire “will result in an over 75% increase in enrollee premium payments” says Peterson-KFF Health System Tracker, though the exact impact “will vary depending on income and family composition.” Meanwhile, 4.2 million people will lose Marketplace coverage without an extension of the enhanced credit, the Center on Budget and Policy Priorities contends.
But the enhanced credit has come at a cost – and extending it will too. The Congressional Budget Office and Joint Committee on Taxation estimated last year that permanently extending the enhanced credit would increase direct spending by $275 billion over 10 years. And a permanent extension would increase the budget deficit by $335 billion over the same period – accounting for increased credit costs offset by increases in revenue the CBO and JCT attribute to declines in employment-based health care offers.
Legislative Efforts Continue
While the new tax act (P.L. 119-21) does not contain a provision to extend the enhanced credit, Democrats are still pushing for legislation by year-end.
Senator Jeanne Shaheen (D-NH) and Representative Lauren Underwood (D-IL) headed up the introduction of the Health Care Affordability Act (S. 46/H.R. 247) to permanently extend the enhanced credit. As of press time, the Senate bill had 44 co-sponsors while the House bill had 73. And a plethora of health care and patient advocacy groups are backing the legislation.
According to Underwood, “[t]he cost of health care coverage for working families is about to explode as a direct result of Republicans’ refusal to extend these popular tax credits.”
“In just a few months, millions of Americans will be notified that the cost of their coverage has skyrocketed and is no longer affordable,” she said in a July 23 press release. “Republicans’ refusal to extend these savings is cruel and the consequences will be devastating.”
“Affordable Care Act premium tax credits have made a huge difference for families across the country – substantially lowering costs and increasing access to health insurance,” Shaheen told Checkpoint.
“If these tax credits were to expire, we know that 20 million of Americans will have to pay 75% more on average for health coverage while 4.2 million more will lose their coverage altogether,” Shaheen explained. “That would be a disaster,” she added, “so I’m going to keep pressing colleagues on both sides of the aisle to act.”
Republican Pushback
But the effort to extend the enhanced credit could be an uphill battle. House Ways and Means Committee Chair Jason Smith (R-MO) has spoken out about continuing the enhanced credit.
During a July 26 committee field hearing in Simi Valley, California, Smith faulted the enhanced credit for providing an “untargeted” benefit, including to those at over 400% of the federal poverty line. “So a family in Arizona making as much as $600,000 a year will receive subsidies under the Democrats’ expansion proposal,” said Smith.
According to Smith, the Democrat proposal to extend the enhanced credit would cost $400 billion. Meanwhile, he noted a CBO analysis he said shows the newly passed tax act’s “anti-fraud provisions, in fact, lower Obamacare premiums by 0.6%.”
Speaking at the same hearing, Representative David Schweikert (R-AZ) contended that, in terms of health care spending, we “have to deal with some math reality – and it’s not Republican or Democrats, it’s demographics.” He noted that “in seven years, Medicare doubles its spend.”
Schweikert said what the country really needs is to “unleash the technology” for a “health care revolution.” That can “change what we pay, not how we finance and ask for subsidies,” he explained.
For more on the premium tax credit, see Checkpoint’s Federal Tax Coordinator 2d ¶ A-4240 et seq.
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