How Well-Targeted are the American Rescue Plan Act’s Premium Tax Credits?

Premium tax credits included in the American Rescue Plan Act (ARPA) made health coverage more affordable for millions during the pandemic.

The Issue

Extending the American Rescue Plan Act’s (ARPA) enhanced premium tax credits would primarily benefit those living at or below 400 percent of the federal poverty level. Over three million more people with incomes at or below 400 percent of the FPL would see reduced monthly marketplace premiums in 2023 if the credits are extended into 2023. Currently, the credits are set to expire at the end of the year.

Key Findings

• About 75 percent of the increased federal spending on premium tax credits—$21 billion would go to people with incomes at or below 400 percent of the federal poverty level.
• Extending premium tax credits to people with incomes beyond 400 percent of the federal poverty level primarily helps older people, large families, and residents of high-premium states. 
• Nearly 45 percent of those gaining premium tax credits would be aged 55 to 64.     
  • Older people facing higher Marketplace premiums are more likely to lose coverage if ARPA tax credits expire.

Conclusion

Researchers determine that the enhanced premium tax credits are well-targeted, primarily assisting those with incomes under 400 perecent of the federal poverty level and higher-income earners with significant financial burdens. Allowing the tax credits to expire would likely increase the number of people in the United States living without access to affordable, comprehensive health insurance.

About the Urban Institute

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.