The Affordable Care Act introduced the premium tax credit (PTC), a federally funded subsidy to help individuals and families with lower incomes afford health insurance through the Exchange. During the COVID-19 pandemic, Congress expanded the PTC by removing income limits and increasing subsidy amounts, which led to Exchange enrollment with subsidies rising from 9.2 million in 2020 to 19.3 million in 2024.
The enhanced PTC is set to end after 2025. When it does, individuals and families earning over 400% of the federal poverty level will lose eligibility for premium tax credits. For those who remain eligible, the credit amount will decrease. This change is likely to increase federal savings but may lead to higher premiums and more people without health coverage.
Subsidy Eligibility
To qualify for the PTC, individuals must enroll in health insurance through an Exchange and:
- Have a household income between 100% and 400% of the federal poverty level (FPL) for your family size*;
- Not be eligible for coverage through a government-sponsored program; and
- Not be eligible for employer-sponsored health coverage that is affordable and provides minimum value.
*The subsidy enhancements temporarily removed this income cap.
Future of Enhanced Subsidies
- Unless extended by Congress, the subsidy enhancements will expire at the end of 2025.
- The spending bill enacted by Congress to end the government shutdown did not extend the enhancements.
- Although the Senate has agreed to vote on the enhanced PTC in December, its future remains uncertain.
Potential Impact
As enhanced PTC provisions expire, employers may notice rising premiums in the individual insurance market, which could lead more employees to enroll in employer-sponsored coverage. Employees without affordable coverage at their current workplace may consider changing jobs to access better benefits. A reduction in PTC eligibility may lower an employer’s potential risk for ACA pay-or-play penalties. However, employers offering ICHRAs may need to increase contributions to help employees keep coverage affordable. Download the bulletin for more details.
