Enhanced premium tax credits (PTCs) were a key element of the American Rescue Plan Act passed by Congress in March 2021, which aimed to expand and stabilize health insurance coverage during the COVID-19 pandemic. The enhanced PTCs substantially increased the subsidies available for people to buy insurance in the Marketplace: they reduced net premiums to zero for some people with low incomes and made subsidies available to people with higher incomes for the first time. The American Rescue Plan Act provisions regarding enhanced PTCs are temporary and were set to expire after 2022, but the Inflation Reduction Act of 2022 extended them through 2025. As a result, Marketplace enrollment steadily increased and, during the 2024 open enrollment period, jumped by 5 million people, or 31 percent.

In this brief, we estimate the impact of the American Rescue Plan Act/Inflation Reduction Act enhanced PTCs on coverage for 2025, the last year in which they are authorized under current law. When estimating coverage under a policy without enhanced PTCs, we assume an alternate scenario in which the original Affordable Care Act PTCs would have remained in effect.

WHY THIS MATTERS

Soon, Congress will debate whether to extend enhanced PTCs again, or possibly make them permanent. Since the enhanced PTCs were first enacted in 2021, they have led to record-high enrollment in the Marketplaces at all income levels. We will see their greatest impact on coverage in 2025, the final year in which they will be in effect unless they are extended by Congress. Enhanced PTCs result in lower premiums for Marketplace consumers at all income levels and set zero-cost premiums for many low-income consumers. Even those not eligible for PTCs see lower premiums with enhanced PTCs because the additional enrollment has improved the nongroup market risk pool. If Congress does not extend enhanced PTCs after 2025, we project that these gains will be reversed, and 4 million people could become uninsured.

WHAT WE FOUND

Our key findings are as follows:

• Because enhanced PTCs make coverage more affordable to more people, we project that 7.2 million more people will receive subsidized Marketplace coverage under enhanced PTCs in 2025 than if original PTCs had stayed in place.
• Under enhanced PTCs, we project that there will be 4 million fewer uninsured people in 2025 relative to a policy under original PTCs, a difference of 14 percent.
• In 2025, we project that household net premiums will be lower by 50 to 100 percent for the lowest income groups under a policy of enhanced PTCs compared with a policy of original PTCs. Net premiums will be lower by about one-quarter for people with higher incomes who receive subsidized Marketplace coverage.
• In five states—Texas, South Carolina, Mississippi, Louisiana, and Georgia—we project the nongroup market in 2025 will be roughly double the size under enhanced PTCs compared with original PTCs, leading to declines of 21 percent or greater in the number of uninsured people.