Vt. grapples with the potential end of Covid-era federal subsidies for health insurance

Almost 30,000 Vermonters are covered by health insurance purchased on the individual market of the state's Affordable Care Act marketplace. Many can afford that coverage because of federal subsidies offered through the Affordable Care Act, which were then expanded during the COVID-19 pandemic.

But those enhanced subsidies are set to expire at the end of this year, and with it, those insured Vermonters stand to lose a collective $65 million if Congress does not extend those expanded tax credits soon.

"There would be the immediate and devastating impact on the families who rely on the Affordable Care Act, (and) there would be a ripple impact of higher rates with the cost shift on the rest of the insurance market," Vermont Sen. Peter Welch said in an interview with VTDigger. "And it would come at a time when we in Vermont are absolutely overwhelmed with the price spikes in the cost of health care. It couldn't come at a worse time."

In Washington, Welch is sounding the alarm on the end of these credits: As he and his fellow Senate Democrats negotiate over a bill that would continue to fund the federal government past Sept. 30, the potential extension of the tax credits has taken a central role. Republicans need seven additional "yes" votes to push the budget measure through and avert a government shutdown. Welch and his fellow Senate Democrats have positioned a permanent extension of expiring federal tax credits for health insurance as a central bargaining chip in these negotiations. Its passage could preserve access to health insurance for thousands of Vermonters.

When the Affordable Care Act was passed in 2010, it included tax credits to subsidize the costs for people who earn up to 400% of the federal poverty limit, when they purchased individual health insurance plans on the health care marketplace. In Vermont, that's Vermont Health Connect, where Blue Cross Blue Shield and MVP sell plans.

In 2021, as part of the American Rescue Plan, Congress expanded these tax credits. The so-called enhanced credits both increased the amount subsidized for people already eligible and also expanded the population of people eligible to those making more than 400% of the federal poverty line. Under that expansion, the purpose was to cap a household's health care premium expense at 8.5% of its income. Both expansions of the tax credits were extended as part of the Inflation Reduction Act in 2022.

Now, these enhanced tax credits are set to expire at the end of 2025 thanks to the budget reduction law, which President Trump dubbed "The Big Beautiful Bill."

More than 24 million people across the U.S. are enrolled in the marketplace, a participation that exploded from the 11.4 million participants in 2020 after the enhanced credits' passage. Nearly all of those 24.3 million participants (92%) receive some amount of premium tax credit.

Vermont is no exception to those trends: The broadened credits made marketplace insurance affordable for thousands more Vermonters, and led to a boom in enrollment in the plans. As of this January, 95% of Vermonters who buy their insurance on the marketplace receive federal premium tax credits, according to data from the Department of Vermont Health Access.

Consultants working for the department estimated that expanded subsidies equaled roughly $65 million in support for Vermont individuals and families, according to a 2024 report submitted to the Legislature. The amount that households in the state receive in enhanced subsidies is roughly one-fifth of the overall amount received through the federal Affordable Care Act premium tax credits.

Open enrollment for 2026 health insurance plans begins on Nov. 1, which is when all of the purchasers who have been benefiting from the enhanced tax credits will face the prospect of higher out-of-pocket premiums next year for the same coverage they've been receiving.

On average, that net premium for the entire subsidized population will more than double, said Adaline Strumolo, the department's deputy commissioner overseeing Vermont Health Connect.

ESTIMATING THE IMPACT

Beyond an average, it's hard to generalize the impact of the enhanced tax credits' end, since each subsidy is individualized, based on household size and income. Households making less than 200% of the federal poverty level and those making more than 400% will see the biggest impact from the loss of the credits; they can expect to see the largest percentage of their income go toward their insurance.

KFF, a nonprofit that provides health policy analysis and news, has created a calculator to help people determine how much they can expect their premiums to increase. VTDigger tried out some scenarios that illustrate what the loss might look like for Vermont families who buy insurance on the marketplace:

A single person in Windsor County who makes 150% the federal poverty limit ($23,475 annually) would go from paying nothing for a silver plan each month to $82 a month, or $984 per year.

A family of four who earn $112,525 a year — 350% above the federal poverty limit — would go from paying $680 per month in premiums for all four members to get insurance on the marketplace, to $934 each month in premiums. That's an increase of $3,048 for the year.

But the people who stand to lose the most support are those whose income is just above the line of 400% of the federal poverty limit — that is the population who will lose eligibility for the federal subsidies entirely, when the enhanced tax credits end. A single person making $63,000 a year (403% above the federal poverty line) would go from paying $446 a month for a silver plan's premium on the marketplace to $1,277 a month; for a bronze plan, they would go from paying nothing each month to $808. For either plan, the expense totals almost an additional $10,000 annually.

For a family plan, the change becomes even more extreme: a household with two parents and two children earning 403% of the federal poverty limit would go from paying $918 a month to $3,587 a month in premiums for the silver plan. That is an increase from $11,013 per year in cost to $43,045 a year. That $32,000 increase amounts to a shift from 8.5% of their income to 33.2%.

There are about 6,000 Vermonters who make above 400% of the federal poverty limit and receive these enhanced ACA subsidies, according to Strumolo. This population can expect to see the most drastic loss of federal support in total dollars.

"There is a practical reality that the price pressure is going to cause some people to go without coverage. That's the thing we're really concerned about," she said.

When people forgo health insurance entirely, it's usually younger, healthier people, who make the financial gamble that being uninsured represents. When that happens, insurers generally raise premium prices for those remaining in the insurance pool — who are generally older or less healthy. In August, Vermont's state regulator approved low premium increases for plans sold on the individual and small group marketplaces in the coming year, which included a price increase to account for the anticipated shift in behavior.

Strumolo stressed that while the end of the enhanced tax credits stands to be a massive loss for all those who benefit from it, the original subsidies will still exist for those making less than 400% of the federal poverty level — albeit in smaller amounts. She expects that the loss of the enhanced credits may also mean many people opt for a lower-tier plan.

"For the people who are still under 400%, there are a lot of options that are quite affordable at the bronze level, but even at the gold level," she said.

'NO STATE CAN COVER THE FULL GAP'

The state also has its own version of its own tax credits called Vermont Premium Assistance, which is available to households making 300% of the poverty level or less. Right now, around 11,000 people rely on both subsidies, but many do not even need to dip into the state assistance, since the federal credits cover the entire cost of their plans. Strumolo says that she expects the end of the enhanced subsidies to mean that more people will need the state subsidy. As of January 2025, the state premium assistance totaled around $4.3 million of support annually.

Still, it's nowhere near enough: The state does not have the $65 million it would take to use Vermont Premium Assistance to fill the entire gap left by the enhanced federal tax credits, Strumolo said, citing her department's 2024 legislative report.

"That is not something we're able to do on the state level. No state can cover the full gap," Strumolo said. "That value is not one that a state budget can typically backfill."

If the federal credits do expire at the end of the year, she expects that her department will look for "creative solutions" in the state budget during the coming legislative session, to try to soften the drop-off for those right over 400% of the poverty line. Still, those changes would not likely come before people start to enroll in 2026 marketplace plans.

Yet Strumolo has not totally lost hope that the federal government could pull through with an extension of the subsidies.

Senate Democrats are currently planning to withhold the votes needed to pass a bill to avert a shutdown of the federal government. A permanent extension of the enhanced tax credits is one of their primary requirements for their support.

Sen. Bernie Sanders also said he is prepared to vote on a federal budget if Republicans agree to expand these tax credits as part of the resolution. "When you talk about raising the premiums for people on the Affordable Care Act very very high, which means that people simply aren't going to be able to go to the doctor, that ain't making America healthy," he told CNN's Kaitlan Collins.

The continuing resolution that is currently funding the federal government ends at midnight on Sept. 30.

Strumolo hopes that at least people will know whether they will be able to rely on the enhanced tax credits before open enrollment begins. But if not, and an extension of the enhanced subsidies occurs after enrollment opens on Nov. 1, "a lot of damage will be done," she said. "People will see what they're facing for 2026 and make coverage decisions" that they might then want to rethink if subsidies are extended.

Yet, she said that in that scenario her department would "bend over backwards" to make sure people can get enrolled at that point.

WHAT HAPPENS NEXT?

In Washington, Welch and Sanders both have repeatedly called their colleagues' attention to the immense costs this will incur for all their constituents, as has Rep. Becca Balint, D-Vt. Welch believes that for a permanent extension of the enhanced premium tax credits to really get traction, President Donald Trump needs to weigh in.

"I've heard a number of my Republican colleagues say that they want to do it, but they won't do it unless President Trump says, 'Okay,'" Welch said, adding that for now Trump is insisting on no negotiations with Democrats. "We believe that extending premium support should absolutely be a bipartisan priority — everything that's going to happen to Vermonters is going to happen to folks in West Virginia or Wyoming."

He worries about what it will mean in a state with an already extremely strained health care system. "We have this enormous pressure on the private insurance market in Vermont, where we've seen very, very high premium increases. We pay among the highest insurance rates anywhere," he said. "What happens when the providers don't get reimbursement from the government or from Medicaid, Medicare or the Affordable Care Act?"

On Capitol Hill, legislators are gearing up for a week where this question will be at the center of the negotiations surrounding whether Democrats will vote on a federal budget resolution. Welch hopes that back at home, Vermonters will not need to learn the answer the hard way.