Improvements to premium tax credits, enacted in the American Rescue Plan and extended by the Inflation Reduction Act, have helped nearly 20 million people afford health coverage in the Affordable Care Act (ACA) marketplaces. The enhanced premium tax credits spurred record enrollment in ACA marketplace insurance and contributed to record low uninsured rates. Black and Latino people and families with lower incomes experienced the greatest health coverage gains because of the improved tax credits.If Congress allows the improved tax credits to expire, nearly all marketplace enrollees, in every state, will face significantly higher premium costs.
But the enhanced premium tax credits are set to expire after 2025 and, due to the timeline necessary for insurers and regulators to update premium rates, Congress must extend the tax credits by the spring of 2025 to avoid negatively impacting marketplace enrollment. If Congress allows the improved tax credits to expire, nearly all marketplace enrollees, in every state, will face significantly higher premium costs. An estimated 4 million people will become uninsured, almost half of whom are Black or Latino.[1] Ultimately, Congress should make the improved premium tax credits permanent so that families have stability and predictability when it comes to their access to affordable health insurance.
Premium Tax Credit Improvements Save $700 on Average
A record 93 percent of marketplace enrollees, or 19.3 million people, receive premium tax credits (PTCs).[2] These tax credits provide upfront financial assistance to help people afford the individual or family health insurance plans offered in their state through the ACA marketplaces.[3]
The PTC enhancements help these enrollees by:
- lowering the caps on premium contributions for people of all income levels;
- allowing people with incomes between 100 and 150 percent of the poverty level to pay $0 in premiums for “benchmark” silver-level plans; and
- extending eligibility for PTCs to people with incomes above 400 percent of the poverty level if their benchmark premiums would exceed 8.5 percent of household income.
The average enrollee will save an estimated $705 in 2024 because of the PTC enhancements, equivalent to a 44 percent reduction in premium costs.[4]
Improvements Spurred Record Coverage, Especially Among Black and Latino People and Families With Lower Incomes
By making health insurance more affordable, the PTC enhancements helped drive 20.8 million people to enroll in marketplace coverage in February 2024, up from 11.2 million in February 2021, prior to the enhancements. Of the 20.8 million enrollees, 19.3 million receive tax credits to help pay for their coverage, double the 9.7 million who received tax credits in February 2021.[5] (See Figure 1.) Thanks in large part to these marketplace enrollment gains, the uninsured rate in 2023 reached an all-time low.[6]