As of now, individuals who purchase health insurance through the federal marketplace benefit from the premium tax credits, which help make their insurance more affordable. These credits can be used to lower premiums upfront or claimed as a tax break when filing taxes. The American Rescue Plan Act temporarily enhanced this credit during the COVID-19 pandemic, with the Inflation Reduction Act extending the benefits through 2025. However, if Congress does not take action to extend these benefits beyond 2025, premiums for marketplace insurance plans are expected to increase significantly.
Gideon Lukens, a senior fellow at the Center on Budget and Policy Priorities, warns that if the premium tax credits expire after 2025, virtually everybody enrolled in marketplace plans would face higher premiums. This could have a substantial impact on individuals and families across all income levels. According to a report from the Center on Budget and Policy Priorities, a typical family of four earning $60,000 could see their monthly premiums jump from $100 to $326, resulting in an additional cost of about $2,700 per year. Similarly, a family earning $125,000 could see their monthly premiums rise from $885 to $1,525, adding approximately $7,700 annually.
President Joe Biden has proposed making the premium tax credit expansion permanent to mitigate the impact of rising premiums. The White House reported record-high enrollment in marketplace plans for 2024, emphasizing the importance of these credits to make health insurance more accessible. However, making the program permanent would come at a cost, with projections suggesting it could increase the federal budget deficit by $335 billion from 2025 through 2034.
Andrew Lautz, associate director for the Bipartisan Policy Center’s economic policy program, highlights that the expiration of the premium tax credit expansion would affect nearly all Americans enrolled in marketplace plans. The tax credit has played a crucial role in reducing costs for enrollees, even those who are not eligible for the credit. The additional enrollment has also improved the risk pool in the nongroup market, benefiting all participants.
The expiration of the premium tax credit expansion after 2025 could have far-reaching consequences for individuals and families seeking affordable health insurance through the federal marketplace. It is essential for Congress to take action to extend these benefits to prevent a significant increase in premiums for enrollees. As discussions continue regarding the future of the premium tax credit program, policymakers must carefully consider the impact on healthcare affordability and accessibility for all Americans.