Who will pay if ACA tax credits expire?

It’s been a week since the end of the nation’s longest-ever government shutdown, but millions of Americans still don’t know if they’ll be able to afford their health coverage next year.

The shutdown finally ended on November 12 when a funding bill was signed into law. Notably absent from the law was the expansion of the Affordable Care Act’s (ACA) enhanced subsidies that 24 million Americans rely on to keep their premiums relatively affordable.

Enhanced ACA tax credits were introduced during the pandemic to increase health care affordability, and they are set to expire at the end of this year if Congress does not act.

This year, 93% of ACA Marketplace enrollees received tax credits. For many, these increased subsidies have made the difference between affording routine care for themselves and their loved ones and skipping those visits altogether.

Experts say the expiration of these subsidies would not only put coverage out of reach for millions of Americans — it could also create significant challenges for hospitals already struggling with financial pressures, and potentially harm the economy as a whole.

Overall, health care executives worry about what could happen if Congress doesn’t renew the expanded tax credits: Premiums could rise, a larger share of Americans could become uninsured, hospitals could be forced into more bad debt and uncompensated care, and most worryingly, America’s public health would deteriorate further.

A surge in premiums could be on the horizon

When the ACA health insurance marketplaces launched in 2014, tax credits took effect to make coverage more affordable for individuals and families. These tax credits – which are based on ACA buyers’ income and household size – were then temporarily extended under the American Rescue Plan Act in 2021, and then extended again through the Inflation Reduction Act in 2022. As a result, people received ILarger grants and eligibility criteria have been expanded.

When the marketplaces were first created, the government provided subsidies to people earning 100 to 400 percent of the federal poverty level, and individual premium contributions ranged from 2.07 to 9.83 percent of their income.

The American Rescue Plan Act and its expansion under the Inflation Reduction Act increased these subsidies by lowering contributions to 0-8.5% of income and approved $0 bonuses for people earning 100-150% of the federal poverty level. Changes introduced during the pandemic also allowed Americans earning more than 400% of the federal poverty level to qualify for subsidies if premiums exceeded 8.5% of their income.

These credits have played a key role in reducing the nation’s uninsured rate: last year, the national uninsured rate hit an all-time low of 7.9 percent.

Expiring the enhanced tax credits would turn a $460/month premium into a $700/month premium for a family of four, ACA Marketplace enrollee Shana Verstegen said during a media call hosted by the nonprofit advocacy group Keep Americans Covered.

She works with her husband in a small business at a gym in Madison, Wisconsin. They rely on ACA Marketplace coverage for themselves and their two children.

“Seven hundred dollars a month in 2026 may seem like a small number, but that’s more than $2,500 a year. Right now, our family would really struggle with that – losing this tax credit would create a real crisis for us,” Verstegen noted.

She said she and her husband discussed the possibility of him leaving the job he’s loved for decades to get employer coverage. Not only is this a difficult and emotionally painful decision, but it must also be made under very tight deadlines, Verstegen noted.

Open enrollment for 2026 ACA coverage is already underway, and deadlines are approaching. Enrollment must be completed by mid-December for coverage to begin Jan. 1, leaving families like the Verstegens little time to adjust.

She described this period as a “really difficult and, frankly, scary” time for her family.

“It’s not about politics and polls, or winners and losers in Congress, or red, blue or purple states. It’s about real families and real children, real people who need health care. Marketplace coverage and premium tax credits are essential for entrepreneurs and small business employees like me to be able to afford health care,” Verstegen said.

Could hospitals face another financial hurdle?

About 22 of the 24 million people with ACA insurance will see their premiums double if the tax credits expire, and 5 million are expected to lose coverage altogether, said Charlene MacDonald, executive vice president of public affairs at the Federation of American Hospitals.

When coverage erodes, levels of uncompensated care in hospitals increase.

MacDonald said hospitals are bracing for a significant increase in uncompensated care, particularly in states that have not expanded Medicaid coverage, because private market plans are a particularly critical source of coverage in these areas.

“Hospitals treat every patient who walks through their doors, regardless of insurance or ability to pay, but these costs don’t go away. They accrue to hospitals, employers and taxpayers,” she said.

This pressure will affect all healthcare providers, but rural hospitals and hospitals benefiting from the social protection system will be most affected. These providers tend to have lower patient volumes and a greater proportion of patients on Medicaid and Medicare, both of which reimburse hospitals at lower rates and often fail to cover the full costs of providing care, MacDonald added.

For many of these vulnerable hospitals, the loss of ACA tax credits isn’t just another financial hurdle: It’s a threat to service lines and, in some cases, to their long-term viability, she said.

“When coverage declines, the impact translates into reduced access for patients and reduced health system capacity. Hospitals facing higher levels of uncompensated care are forced to make difficult choices to maintain a community’s access to 24/7 care, whether that means reducing services or delaying investments that improve quality and access for patients,” MacDonald noted.

She also noted that higher rates or uncompensated care can reduce hospitals’ ability to offer competitive wages, worsening the healthcare workforce crisis.

The economy as a whole could also be affected

The expiration of the ACA’s enhanced subsidies could also have a negative effect on the economy as a whole.

Julio Fuentes, CEO of the Florida Hispanic Chamber of Commerce, warned that additional health care costs from expiring credit could force small business owners to make “decisions that no one really wants to make” — like delaying hiring, raising customer prices and reducing work hours.

Even if these small business owners do not sponsor their employees’ insurance, they often cannot afford to absorb sudden increases in personal health care costs without reducing hours or staffing.

“This is a major crisis. It’s certainly not a Wall Street problem, by any means. The first people who feel this pain are the ones who keep our communities running – you’re talking about the landscapers with five employees, the woman who runs a small cleaning business, the contractor who relies on a handful of subcontractors,” he explained.

Economists estimate that the expiration of ACA tax credits would result in about 286,000 job losses and reduce the nation’s GDP by $34 billion.

These estimates come from the Commonwealth Fund and the George Washington University Milken Institute School of Public Health. Their teams first calculated how much federal spending on enhanced tax credits for the ACA would disappear if the subsidies expired — about $26 billion next year alone.

This reduction in spending affects not only households, but also providers and payers, who would see their income decline due to fewer people being able to afford coverage. About 10% of Americans are employed in the healthcare sector. Putting financial pressure on the industry will therefore inevitably lead to a wave of job losses, the researchers explain.

The researchers used an input-output model to estimate the broader effects on the economy – taking into account direct impacts, such as loss of recipient income and layoffs, and indirect effects, such as reduced lifestyle spending by families.

Time is running out

Some lawmakers, including Sen. Bill Cassidy (R-Louisiana), have floated the idea of ​​replacing ACA premium tax credits with other mechanisms, such as pre-funding health savings accounts (HSAs). They question whether directing funds directly to individuals could increase efficiency and reduce overhead costs.

“Is there anyone who wouldn’t want to take a lot of this money, which we use to help Americans buy health care, and give it directly to the individual, so that 100 percent of that money is used to buy health care, instead of giving that money to the insurance company, 20 percent of which goes to profits and overhead? Cassidy, who chairs the Senate Health, Education, Labor and Pensions Committee, as at a hearing Monday.

This approach would not be practical, according to Lauren Aronson, executive director of Keep Americans Covered.

She stressed that it could cost the federal government more than just extending the tax credits, and that there isn’t enough time to implement an entirely new system.

“If you were to theoretically pre-fund an HSA, it would most likely cost more federal dollars than the cost of extending the tax credits themselves. You would have to pre-fund between $1,500 and $6,000 per year. Then thinking about it operationally, plans would then have to refile their rates and bring new high-deductible health plan offerings to market for 2026 – we don’t have time to do that by the January 1,” Aronson said.

She said the ACA’s current design — applying credits directly to monthly premiums — is essential to maintaining affordable, real-time coverage for middle-class families.

Senators from both parties are forming working groups to address the issue, but there has yet to be a public hearing or vote on expanding the ACA premium tax credits, despite the looming health care affordability crisis.

Aronson stressed that immediate action is needed to prevent the crisis from occurring.

Photo: Krisanapong Detraphiphat, Getty Images