Household Spending on Premiums Would Surge if Enhanced Premium Tax Credits Expire

The Issue

Congress approved enhanced premium tax credits in 2021 to help people maintain their healthcare coverage. The credits were renewed by federal lawmakers in 2022 but are set to expire at the end of 2025.

Key Findings

• Out-of-pocket spending across all income groups will increase if the credits expire. 
• Premiums will rise for consumers in all 50 states but there will be variation from state to state. For example:
  • For people with incomes below 250% of the federal poverty level (FPL) (approximately $37,000 in annual income), the average annual increase in premiums will range from $193 in New Mexico to $924 in Alaska.
  • For people who earn more than roughly $37,000 in annual income, premiums will increase from $119 per year in West Virginia to $1,434 in California. 
  • On average across all states, premiums will increase by $587 for people earning below roughly $37,000 a year and by $727 for people above that amount, if they maintain their same health plan.
• People with incomes above 400% FPL (roughly $60,000 for an individual or $125,000 for a family or four) will lose all subsidies if the enhanced PTCs expire, resulting in premiums rising by more than $2,900 per person annually. 

Conclusion

Researchers conclude that if the enhanced premium tax credits expire in 2025, household spending on healthcare premiums would surge and enrollment in Affordable Care Act marketplace plans would measurably shrink. 

About the Author/Grantee

The nonprofit Urban Institute is dedicated to elevating the debate on social and economic policy. For nearly five decades, Urban scholars have conducted research and offered evidence-based solutions that improve lives and strengthen communities across a rapidly urbanizing world. Their objective research helps expand opportunities for all, reduce hardship among the most vulnerable, and strengthen the effectiveness of the public sector. Visit the Urban Institute’s Health Policy Center for more information specific to its staff and its recent research.