While the Tax Cuts and Jobs Act 2017, which increased federal estate and gift tax exemptions of over $13 million, is set to expire by 2025-end and revert to $7 million if Congress doesn't intervene, the enhanced premium tax credit (PTC) could also disappear if provisions aren't extended by the end of next year. Analysts believe PTC expiry could hike insurance premiums to the level where they could become unaffordable for almost every enrollee.
What Is PTC?
The enhanced premium tax credit (PTC) was expanded under President Joe Biden's administration under the American Rescue Plan Act in March 2021 to enable more Americans to afford health insurance on the Affordable Care Act Marketplace during the COVID-19 pandemic. Furthermore, the Inflation Reduction Act in 2022 extended these benefits through 2025.
Americans with incomes beyond 400% of the Federal Poverty Line (FPL) can access the credit, while those below 400% receive generous subsidies. The Affordable Care Act also ensured that health plan premiums aren't above 8.5% of an individual's income for those with incomes beyond 400% of the FPL. The Center on Budget and Policy Priorities (CPBB) estimated that the expanded PTC helped the average enrollee save $700 this year.
However, CPBB policy analyst Claire Heyison said that 21 million Marketplace enrollees would experience higher insurance premiums, compelling them to "grapple with impossible trade-offs or the prospect of dropping health insurance altogether." Heyison believes four million people would lose health coverage if PTC expires. The Urban Institute estimated that the expiry of enhanced PTC benefits next year could result in a decline in subsidised Marketplace enrollment by 7.2 million people.
Congress Must Act By the Spring Of 2025
Technically, Congress has until the end of next year to extend PTC provisions, given that's when they expire, but they might have to act much earlier. Health Affairs Journal stated that the actual deadline for Congress to prevent 2025 premium hikes and subsequent coverage losses is in the Spring of 2025. They explained that most consumers are set to make 2026 insurance decisions in the fall of the same year, "with their options determined by steps that come months earlier: insurance rate-setting, eligibility system updates, and Marketplace communications with enrollees."
Can Affected People Secure Medicaid?
Healthcare researcher KFF stated that US states like Alabama, Florida, Kansas, Mississippi, Tennessee, Texas, Georgia, South Carolina, Wyoming, and Wisconsin have expanded Medicaid. If the Marketplace insurance plans undergo a premium hike in 2026 that makes them unaffordable for millions of Americans, people in these states could secure Medicaid healthcare coverage through that program. Those living in other states could fall into the Medicaid gap, meaning their incomes are too high for Medicaid and too low for availing marketplace subsidies. KFF projected that over 1.6 million were in the Medicaid gap in April 2024.
