Consumers make health decisions as Congress mulls tax credit expiration

The deadline is approaching for Congress to extend the Affordable Care Act's enhanced premium tax credits and failing to do so is expected to cost about 4 million people their coverage over the next decade.

U.S. Congress has until Dec. 31, to extend the Affordable Care Act's enhanced premium tax credits, though it remains unclear if the framework plans circulating on Capitol Hill will garner enough support to pass.

The U.S. Senate is slated to vote on a Democratic proposal that would extend the tax credits for three years.

Senate Minority Leader Chuck Schumer, D-N.Y., said on the floor last week that the bill backed by Senate Democrats is the "last chance" Republicans will have to address the expiration of premium tax credits before the end of year deadline.

More than 20 million people pay lower costs for health coverage due to enhanced premium tax credits.

In Congress

Lawmakers in both parties have made several proposals to extend, amend or replace the Affordable Care Act in recent weeks. There is also a bipartisan plan, announced in November, called the Fix It Act. It would extend premium tax credits for two years and add work requirements for most adults.

As it stands, the enhanced premium tax credits, which consumers under 400% of the federal poverty level can use to make health insurance coverage more affordable, will expire at the end of the month without congressional action.

The federal poverty level for an individual in 2025 is $15,650.

The Congressional Budget Office estimates that permanently extending the premium tax credits that were enhanced under the American Rescue Plan in 2021 would increase the federal deficit by $350 billion and increase the number of people with coverage by 3.8 million by 2035.

The Centers for Medicare and Medicaid Services' final rule, announced in June, will shorten the open enrollment window, bringing the deadline up from Jan. 15 to Dec. 31, beginning in 2026. Open enrollment will still begin on Nov. 1.

The final rule also raises the requirements for verifying information such as income and household size, removes automatic extensions and increases the annual out-of-pocket expenses for consumers through a different cost-sharing formula.

The 2025 Budget Reconciliation Act, passed by Republican lawmakers, follows suit by making key changes to U.S. healthcare coverage beginning on Jan. 1, including cuts to tax credits and adding work requirements.

On Monday, U.S. Sen. Mike Crapo, R-Idaho and Sen. Bill Cassidy, R-La., announced the Health Care Freedom for Patients Act. The bill directs tax funds into Health Savings Accounts and bans the funding of abortion services and gender-affirming care.

Under this plan, the Department of Health and Human Services would be directed to deposit $1,000 to $1,500 payments into HSAs for eligible individuals who earn less than 700% of the federal poverty level.

The federal government introduced HSAs with the passage of the Medicare Modernization Act in 2003. They are designed for people with high-deductible plans to put money toward qualified medical expenses before taxes.

Critics of HSAs say they allow the wealthy to shield themselves from taxes.

The Government Accountability Office conducted a study on HSAs, published in September, that found higher income groups were most likely to have these accounts. People in the highest income group were twice as likely to have a HSA than those in the lowest income group.

The result of this was about 7% of HSAs having balances over $10,000 while about 21% had balances of $0. A majority of people with HSAs had less than $1,000 in their accounts.

Low-income strain

Cheryl Fish-Parcham, director of private coverage for nonprofit consumer healthcare advocacy organization Families USA, told UPI that the lowest income individuals and families will be acutely impacted by the loss of premium tax credits.

The Centers for Medicaid Services estimated average premiums, with tax credits, is projected to be about $13 more beginning next year.

Some consumers may qualify for financial assistance to lower premiums from their increased list prices but even enrollees at the federal poverty level are expected to incur monthly expenses.

Fish-Parcham said people who had no-cost plans in 2025 are likely to pay around $27 per month if the tax credits expire. For people living at the federal poverty level, this can create "a real strain."

"Many people in that situation will look at a bronze plan rather than a silver plan but they're also going to face much higher costs when they go to get healthcare," she said. "You look at a typical bronze plan in Baton Rouge, Louisiana, those plans are going to have a very high deductible, $7,500. If they need something like hospital care they need to pay that full $7,500 before their plan begins to pay any of the costs."

Despite the uncertainty around extending the Affordable Care Act, Families USA continues to encourage people to enroll in a health coverage plan and hope the tax credits are extended.

"We still have a divided Congress and we hope that these really heart-wrenching situations will move this Congress, hopefully by Thursday," Fish-Parcham said.

Health impact of high-deductible plans

More than 4 million Floridians enroll in the Health Insurance Marketplace, the most of any state.

The Family Healthcare Foundation provides free enrollment assistance in the greater Tampa Bay area. Executive Director Katie Roders Turner told UPI that the premium increases have raised questions about affordability as consumers make decisions about their 2026 plans.

"People are seeing, depending on their household size and household income, their premiums may be going up a few hundred dollars to many hundreds of dollars," she said. "We're hearing a lot from small business owners and also those who are pre-Medicare. The pre-Medicare typically have higher costs because of their age but they also may have real medical needs that they're very concerned about getting access to affordable care for."

Roders Turner adds that the rising premiums only add to the squeeze that people are feeling from the economy. This does not only apply to those in low-income households but also with "moderate" incomes.

"They're the ones who are really feeling the pinch with the hundreds of dollars of increases," she said. "They're very sensitive to it because these costs equate to other costs like rent or car payments or childcare costs. It's a burden for their households."

With premiums up for many, Roders Turner and her team have observed people waiting to make decisions about their insurance plans or selecting lower tier plans than what they usually enroll in. More are choosing to terminate their coverage than in past years.

Choosing a lower-tier plan lowers the monthly premium costs for consumers but increases the out-of-pocket cost for the consumer with a higher deductible that must be met before the health insurance provider begins paying a larger share.

Those enrolled in low-tier, high-deductible plans tend to put off seeking care until medical issues become more acute, Roders Turner said.

"What is the likelihood of that person actually going to see care for services until it's an emergency or until it's a really acute need?" she said. "Granted all of the qualified health plans are going to have access to preventative services for free. But the cost to go to get an MRI or additional diagnostic testing, that's when that deductible comes into play and those costs can be significant for people enough to make them perhaps delay getting the care they need."

Maryland prepares for tax credit expiration

The impending expiration of ACA enhanced premium tax credits is being decided at the federal level but it falls to states to implement the ACA or any replacement that may come in the future.

Some states have not sat idly by in anticipation of the enhanced premium tax credits expiring.

In May, the Maryland General Assembly passed a law to establish a state-based health insurance premium assistance program to soften the blow of losing federal tax credits through 2028.

Without the program, the Maryland Health Benefit Exchange anticipated about 190,000 people would lose some or all financial support. Premiums were estimated to increase by an average of 68% for those who would have been eligible for tax credits.

Michele Eberle, executive director of the Maryland Health Benefit Exchange, told UPI that the program is not a sustainable solution but does "buy us some time" while waiting for Congress to act. The law approved funding through 2028 but Eberle said it will not assist at the same level beyond 2026.

"We're using this through our reinsurance program funding so we will not be able to sustain it for 2027 at the same measure as we're doing it today," she said.

Eberle added that the expiration of enhanced premium tax credits will reverberate throughout the healthcare industry and the health of the population.

"This is not just people buying health insurance. This is the whole health ecosphere," she said. "It's people not being able to go to their primary care providers. So now the primary care provider is not getting paid to see patients. It's people waiting until they get so sick they go to the emergency department. Now we see longer wait times at the emergency departments."

In August, the Colorado legislature passed a measure to transfer state funds into its Health Insurance Affordability Enterprise. About $50 million of that funding will be directed toward the state's reinsurance program and $50 million will be used to reduce premiums for those who rely on enhanced premium tax credits.