Enhanced Tax Credits Keep ACA Marketplace Coverage Affordable for 2025

Open enrollment for Affordable Care Act (ACA) marketplace coverage for 2025 began November 1 and runs through January 15, 2025 in every state except Idaho (where the deadline is December 16), Kentucky (January 16), Massachusetts (January 23), and California, the District of Columbia, New Jersey, New York, and Rhode Island (January 31). This is the annual opportunity for people who have marketplace coverage to change plans if they want to, and for people who need coverage but aren’t currently enrolled to sign up.

The ACA marketplaces are a critical source of health coverage for people who don’t qualify for Medicaid or Medicare and don’t have an affordable offer of coverage from an employer. Thanks to enhancements made by the 2021 American Rescue Plan and sustained by the 2022 Inflation Reduction Act, premium tax credits (PTCs) cover a larger share of enrollees’ premiums than they did in prior years. In fact, PTCs cover the full cost of a silver “benchmark” plan for people with income at or below 150 percent of the federal poverty level ($22,590 for an individual in 2025).

Those enhancements also made PTCs available to people with income greater than four times the federal poverty level (about $60,000 for an individual in 2025) if their premium would otherwise cost more than 8.5 percent of their income. This provides important relief to people who previously faced an eligibility “cliff” if their household income tipped over that limit.

The PTC changes have made premiums much more affordable for all enrollees while targeting the most relief to people with the lowest incomes, who need it most. More than 20 million people had active ACA marketplace coverage as of February 2024. Nearly all enrollees (93 percent) receive PTCs, which lower an enrollee’s premiums by $536 per month, on average. Nearly two-thirds of enrollees (63 percent) have household income at or below two times the poverty level.

  

The enhanced PTCs remain available through the 2025 coverage year, but the enhancements will expire at the end of December 2025 unless Congress acts. If Congress fails to act, people in every state will face sharp premium increases for 2026 coverage, and millions of people (3.8 million, the Congressional Budget Office estimates) will lose coverage because they will no longer be able to afford it. During this year’s open enrollment, though, it’s important to understand that the enhanced PTCs will continue through 2025.

Here are a few key facts to keep in mind when it comes to marketplace coverage for 2025:

Because of the enhanced PTCs, premiums are quite affordable. In states that use HealthCare.gov, nearly 3 in 4 people shopping for a marketplace plan can find one for less than $10 per month. (See graphic.)

For the first time, people with Deferred Action for Childhood Arrivals (DACA) are eligible for marketplace coverage. Major efforts are underway to reach the estimated 100,000 people who are newly eligible for marketplace coverage because of this change.

People with DACA who submit a 2024 application and choose a plan before the end of November can get coverage that begins December 1. This could be very important for people with immediate health care needs. Alternatively, they can forgo a 2024 application and simply submit a 2025 application.

Although most people applying for 2025 marketplace coverage must choose a plan by December 15 for coverage effective January 1, people with DACA have until December 31 to select a plan and have coverage effective January 1.

Starting this year, people who have not filed federal taxes and “reconciled” their advance premium tax credits (APTCs) for two consecutive years will not be able to get APTCs for the next year until they file federal taxes, reconcile their past APTCs, and notify the marketplace. People who buy marketplace coverage can receive advance payments of their premium tax credit to lower their monthly premium costs instead of waiting and claiming the credit on their tax return. But APTC recipients must file tax returns so they can “reconcile” the amount of tax credit they received, based on their projected income, against the amount they were entitled to receive, based on their actual income. If they don’t file a return and reconcile the credit, they can be prevented from receiving financial assistance when they re-enroll in coverage.

This “failure to reconcile” process was paused for the past three years due to the pandemic and IRS backlogs. It has resumed for 2025 coverage but only applies if people have failed to reconcile for two consecutive years. (Under the previous rules, it applied if a person failed to reconcile for just one year.) Now, for example, people who have not filed and reconciled their 2022 and 2023 APTCs must take action before they can receive APTCs for 2025.

People in every state can get free, non-biased help from Navigators and other enrollment assisters. These assisters can help people with the application and the plan comparison and enrollment process. People can schedule an appointment with an assister in their state using the Get Covered Connector.

For more information about marketplace eligibility and enrollment policies, see http://www.healthreformbeyondthebasics.org.