Enhanced Affordable Care Act (ACA) subsidies lower premium payments for ACA Marketplace coverage by boosting existing ACA subsidies and making some people newly eligible. Enrollees across incomes benefit from these subsidies. For example, low-income enrollees (making up to 150% of the poverty level) became eligible for free or nearly free coverage. Those earning over four times poverty ($124,800 for a family of four), previously ineligible for subsidies, saw their premium payments newly capped at 8.5% of income, eliminating the “subsidy cliff.” Enhanced subsidies have reduced premium payments by an estimated $705 a year for enrollees receiving premium tax credits.
First enacted in 2021 under the American Rescue Plan Act, the enhanced subsidies were renewed through the end of 2025 by the Inflation Reduction Act. Since their implementation, ACA Marketplace enrollment has grown each year and hit record highs, reaching over 21 million in 2024. Southern states have seen the most growth in ACA Marketplace signups.
If these enhanced subsidies are not renewed by Congress and expire at the end of 2025, ACA enrollee premium payments are expected to increase by over 75%on average, with people in some states seeing their payments more than double. Without further extension, the Congressional Budget Office (CBO) estimates ACA enrollment will drop from 22.8 million in 2025 to 18.9 million in 2026 and fall to 15.4 million in 2030. While some may be able to find other sources of coverage, others will become uninsured.
The calculator below illustrates how the expiration of enhanced subsidies in 2025 might affect your premium payments, offering a preview of potential changes. For example, two 40 year-old parents with two 10 year-old children in Davis, West Virginia making $125,000 would go from paying $885 to $2,918 per month, an increase of $2,033 ($24,392 per year). A 30 year old in Dallas, Texas making just over poverty would go from paying $0 to $24 per month (and increase of $291 per year).
Enhanced Affordable Care Act (ACA) subsidies have significantly lowered premium payments for individuals and families enrolled in ACA Marketplace coverage. These subsidies work by boosting existing ACA subsidies and expanding eligibility, allowing more people to access affordable health insurance. The impact of these enhancements has been profound, benefiting enrollees across different income levels, with some paying far less for coverage, while others who were previously ineligible for subsidies have now gained access to financial assistance. However, these enhanced subsidies are set to expire in 2025 unless renewed by Congress. If they do expire, it is expected that millions of Americans will face much higher health insurance premiums, with some struggling to afford coverage at all.
Under the original Affordable Care Act, subsidies were available to help lower-income individuals and families purchase health insurance through the ACA Marketplace. These subsidies, which are known as premium tax credits, are designed to cap the amount a person or family has to pay for premiums relative to their income. However, before the enhanced subsidies were introduced, there was a "subsidy cliff" that made it difficult for those with incomes above 400% of the federal poverty level to afford coverage. Those who earned over this threshold did not receive any subsidies, which often led to exorbitantly high premiums for middle-class families.
The American Rescue Plan Act of 2021, passed in response to the COVID-19 pandemic, temporarily expanded these subsidies by eliminating the subsidy cliff and making more people eligible for premium tax credits. This expansion was further extended by the Inflation Reduction Act, which extended these enhanced subsidies through the end of 2025. With these changes, more individuals, including those earning more than four times the poverty level, became eligible for premium reductions, making coverage more affordable.
For example, low-income enrollees who earn up to 150% of the poverty level became eligible for free or nearly free coverage. Those earning between 150% and 400% of the poverty level received more substantial premium reductions, and for those earning over four times the poverty level—previously ineligible for subsidies—their premiums were capped at 8.5% of their income. This had a major impact on the affordability of coverage for middle- and upper-middle-class families who were previously priced out of the market.
If Congress does not extend these enhanced subsidies beyond 2025, millions of Americans will face significant premium increases. According to the Congressional Budget Office (CBO), the expiration of the enhanced subsidies would lead to an average premium increase of more than 75% for ACA enrollees. This means that for many families, their monthly premiums could more than double, potentially adding hundreds of dollars to their monthly healthcare costs.
The impact will vary by state, with residents in some states seeing even larger premium increases. In areas where healthcare costs are already high, the expiration of these subsidies could result in individuals and families paying thousands of dollars more per year for their insurance. This could have devastating effects on family budgets, particularly for those who are already struggling financially. The CBO estimates that without the enhanced subsidies, ACA enrollment would drop significantly. By 2026, enrollment is projected to fall from 22.8 million to 18.9 million, and by 2030, it could drop to just 15.4 million. This loss of coverage would leave millions of people uninsured and could lead to worse health outcomes for many individuals who are unable to afford the care they need.
The impact of the expiration of enhanced subsidies would not be felt equally across the country. Southern states, in particular, have seen the most growth in ACA Marketplace signups in recent years, largely due to the availability of these enhanced subsidies. For instance, in states like Texas, Florida, and Georgia, many people who were previously uninsured or underinsured gained coverage thanks to the expanded financial assistance. If these subsidies were to expire, these states could experience some of the largest increases in premiums and the highest rates of disenrollment.
In contrast, some states that have already expanded Medicaid under the ACA might experience less of a shock. However, even in those states, many individuals and families would still face significant increases in their premium payments. In states that have not expanded Medicaid, such as Texas and Florida, people with low incomes may be hit particularly hard, as they may not have access to other forms of assistance.
The financial burden of the expiration of these subsidies can be illustrated through examples of typical families. For instance, consider a family of four in Davis, West Virginia, with parents who are 40 years old and two children, aged 10. This family earns $125,000 a year, and under the current enhanced subsidies, their monthly premium is $885. If the subsidies expire, their monthly premium could increase to $2,918, a difference of $2,033 per month, or an additional $24,392 per year. For this family, this substantial increase could be unaffordable, forcing them to make difficult decisions about whether they can continue to pay for insurance or face going without coverage.
Another example is a 30-year-old individual in Dallas, Texas, who earns just above the federal poverty line. Under the enhanced subsidies, this person currently pays nothing for health insurance. However, if the subsidies expire, their premium could increase to $24 per month, an annual increase of $291. While this might seem like a modest increase compared to the example of the family in West Virginia, it still represents a significant financial burden for someone living on a low income.
The future of ACA subsidies will depend on the actions of Congress. While the expiration of the enhanced subsidies in 2025 will have a profound impact on the affordability of healthcare for millions of Americans, lawmakers still have the opportunity to extend these subsidies or find alternative ways to make health insurance more affordable. Without action, the number of uninsured Americans could rise, and millions of people could face higher premiums, leaving many vulnerable individuals unable to access the care they need.
In conclusion, the expiration of the enhanced ACA subsidies could have far-reaching consequences for individuals and families across the United States. While the current subsidies have made healthcare more affordable for many, without further action from Congress, premium costs could soar, leading to a sharp increase in the number of uninsured Americans and a growing healthcare crisis. The expiration of these subsidies is not just an issue of economics but one that has the potential to impact the health and wellbeing of millions of people.