New legislation seeks to make ACA premium tax credits permanent
The initiative arrives as the temporary expansion of tax credits is set to expire after 2025.
Photo: John Baggaley/Getty Images
In a move aimed at keeping people covered through reduced healthcare costs, Senators Jeanne Shaheen, D-N.H., and Tammy Baldwin, D-Wis., have introduced legislation that would make Affordable Care Act (ACA) premium tax credits permanent.
The proposed Making Health Care More Affordable Act of 2024 seeks to ensure that the enhanced tax credits, initially expanded under the American Rescue Plan (ARP), remain available, which Shaheen said would provide financial relief to low- and middle-income families.
The initiative arrives as the temporary expansion of tax credits, a measure that increased affordability for ACA Marketplace plans, is set to expire after 2025. Without congressional action, those who have benefited from lower premiums under the expanded credits could face significant increases in their healthcare costs, the senators said.
WHAT'S THE IMPACT?
The premium tax credits, first introduced under the Affordable Care Act, help offset the cost of health insurance purchased through the ACA Marketplace. The ARP temporarily expanded these credits, making subsidies more generous and extending them to individuals earning more than 400% of the federal poverty level.
According to Shaheen, these credits have saved families an average of $800 annually on their premiums.
"The enhanced tax credits have been a game changer for millions of Americans, reducing healthcare costs and increasing access to coverage," Shaheen said by statement. "Making these credits permanent is essential to ensuring that families don't see their premiums skyrocket."
A 2022 report from the Department of Health and Human Services showed the enhanced credits helped drive record ACA enrollment in 2022, with over 14.5 million people signing up for coverage. The extension of these credits through the Inflation Reduction Act (IRA) of 2022 ensured that they would remain in place until 2025, but the new legislation aims to remove the uncertainty of expiration and secure long-term affordability.
"We've seen how these tax credits have improved lives," said Baldwin. "By making them permanent, we can lower healthcare costs and continue to help working families get the care they need."
THE LARGER TREND
The tax credits were originally set to expire on January 1, 2023. The new provision within the Inflation Reduction Act extends them through 2025.
According to a Congressional Budget Office report, the enhanced ACA subsidies played a significant role in improving affordability and driving higher enrollment, especially during the COVID-19 pandemic. More than 12 million people benefited from the ACA tax credits, the report found.
These subsidies have particularly helped middle-income families who were previously priced out of ACA coverage, according to a Health Affairs study.
Should the tax credits expire, state estimates show that more than 40,000 current marketplace enrollees in Colorado, over 55,000 in Washington, and as many as 246,000 in California are likely to drop coverage, according to a new Commonwealth Fund report.
Jeff Lagasse is editor of Healthcare Finance News.
Email: jlagasse@himss.org
Healthcare Finance News is a HIMSS Media publication.
