Will the premium tax credit cap change after 2025 or require new legislation in 2026?
Executive summary
The enhanced Premium Tax Credit (ePTC) provisions that eliminated the 400% federal poverty level (FPL) cap and increased subsidy generosity expired on December 31, 2025; the underlying Premium Tax Credit remains law but would revert to pre‑enhancement rules (including a 400% FPL cap and higher required contribution percentages) absent new legislation [1] [2]. Congress can change those caps and subsidy formulas only by passing new legislation; the House passed a three‑year extension in January 2026 but its fate in the Senate and as law remained uncertain at the time of reporting [3] [4].
1. What actually expired at the end of 2025 and what did not
The temporary ARPA/IRA enhancements that removed the 400% FPL eligibility ceiling and lowered the applicable percentage households must pay toward premiums were statutory, time‑limited changes that were explicitly extended only through the 2021–2025 coverage years and therefore expired on December 31, 2025 [1] [2]. The core Premium Tax Credit in Internal Revenue Code §36B did not sunset; rather the temporary enhancements to eligibility and subsidy amounts lapsed, meaning the program continues but with the pre‑2021 income limits and higher contribution percentages unless Congress acts [1] [4].
2. Practical effects on subsidy “caps” and repayment rules after 2025
With the lapse of the enhancements, the maximum income limit of 400% FPL is reinstated and the applicable percentages used to calculate required premium contributions revert to their prior, less generous levels—producing materially smaller subsidies for many households and removing eligibility for some higher‑income enrollees [1] [4]. The IRS updated guidance also notes a separate statutory change: repayment caps on excess advance payments that had protected lower‑income households no longer apply for tax years beginning after 2025, so taxpayers may face full repayment obligations if advance credits exceeded allowable credits [5] [6] [7].
3. Will the cap change automatically after 2025?
No statutory mechanism automatically re‑enacts the ePTC levels or keeps the expanded eligibility in place; altering the income cap or the percentage calculation requires affirmative legislative action by Congress and signature by the President [1] [4]. Analyses from nonpartisan bodies warn that without extension or a permanent change, premiums and net costs for many marketplace enrollees will rise—CBO and KFF projections estimated significant increases in benchmark premiums and average enrollee payments if enhancements are not extended [1] [8] [9].
4. What happened in 2026 legislative action and the political landscape
The U.S. House passed a bill in January 2026 to extend the enhanced subsidies for three years, with a bipartisan minority of Republicans joining Democrats, but passage in the House does not itself change the law; Senate negotiations reportedly considered alternative proposals including shorter extensions or modifications like income caps and integrity measures, leaving the ultimate outcome uncertain at reporting [3]. Observers such as KFF stressed there is no absolute “drop‑dead” legal deadline for an extension—Congress could act later and make subsidies retroactive—but the timing affects enrollment windows, plan selection, and insurer premiums [10].
5. Competing interests, public stakes, and what to watch next
Health‑care advocates, insurers, and medical groups framed extension as essential to affordability and coverage, warning of millions more uninsured and large premium hikes if enhancements remain expired—projections cited include a potential 114% average premium increase for subsidized enrollees and long‑run increases in uninsurance if not extended [9] [8] [11]. Fiscal conservatives and some Senate negotiators pushed for tighter income limits, higher enrollee contributions, or program integrity measures as the price of an extension—an implicit agenda that could reshape any compromise [3]. Given these clear political fault lines, the concrete answer remains procedural: changing the cap or reinstating enhanced subsidies after 2025 requires new legislation; administrative fixes can adjust timing or retroactivity but cannot lawfully re‑write income eligibility or subsidy formulas without Congress [1] [10].