How would extending enhanced premium tax credits beyond 2025 change eligibility and subsidy amounts for 2026?
Executive summary
Extending the enhanced premium tax credits (ePTCs) beyond their scheduled December 31, 2025 expiration would largely preserve the broadened eligibility and larger subsidies that characterized 2023–2025, keeping higher‑income households eligible (including those above 400% of the federal poverty level) and holding down many enrollees’ monthly premiums in 2026 [1] [2]. Policymakers face a tradeoff: extension would reduce premiums and likely boost enrollment but increase federal deficits and influence marketplace risk pools and insurer rate-setting [3] [4].
1. What “extending” actually preserves: eligibility rules and contribution caps
A legislative extension that simply continues the enhanced rules would maintain two central features: a reduced set of required contribution caps (the “applicable percentages”) that make households between 100% and 150% of FPL eligible for full subsidies—often reducing premiums to zero—and the temporary elimination of the strict 400%‑of‑FPL eligibility cliff that previously left middle‑income families uncovered [3] [1]. Proposals described as “clean” extensions would only change the sunset date through the end of 2026 and not alter benefit design, meaning the same eligibility bands and contribution limits would apply in 2026 as they did in 2025 [5].
2. Direct effect on subsidy amounts and out‑of‑pocket premiums for 2026
If extended, the enhanced credits would materially reduce out‑of‑pocket premium costs in 2026: KFF estimates that subsidized enrollees would save about $1,016 on average over the year compared with letting the enhancements lapse, preventing what would otherwise be a roughly 114% average rise in annual premium payments (from $888 in 2025 to an estimated $1,904 without extension) [6] [7]. Concrete examples in public analysis illustrate the scale: a family of four at 140% of FPL that had a $0 premium in 2025 could face an annual premium near $1,607 if enhancements expire [2], while the ePTCs generally raised total credit amounts for people already receiving subsidies [1].
3. Who gains the most — and who loses if Congress does nothing
Extending the credits most benefits lower‑ and middle‑income households—including those near 100–150% of FPL who can see premiums drop to zero—and the newly eligible middle‑income people above the former 400% cliff who gained coverage under ARPA/IRA enhancements [3] [1]. Analyses warn that expiration would substantially increase uninsured counts and premium burdens: CBO and other researchers project notable enrollment declines and insurance losses if enhancements end, while organizations such as the Urban Institute and others estimate millions could lose coverage over coming years absent extension [4] [3].
4. Market dynamics and insurer pricing: second‑order consequences
Keeping ePTCs would likely hold down net premiums for enrollees and could attract healthier individuals back into marketplaces, modestly lowering gross benchmark premiums over time according to CBO modeling; conversely, letting them lapse is expected to push many lower‑cost participants out of the market, worsening risk pools and leading insurers to file for higher gross rates—some filings already projecting additional increases in 2026 tied to the rollback [3] [8]. State differences matter: a few states with supplemental subsidies or different market dynamics may see smaller or larger insurer responses [8].
5. The fiscal and political tradeoffs: deficits, timing, and the “clean” extension debate
Analysts and budget offices underscore a clear fiscal tradeoff: making enhanced credits permanent or extending them for another year increases federal deficits—CBO/JCT and other estimates quantify substantial budget effects over multi‑year windows—while a short “clean” one‑year extension through 2026 has been proposed to buy more time for a longer‑term decision [3] [4] [5]. The political calculus also affects timing: late or retroactive action could complicate premium invoices and marketplace operations, and some insurers and marketplaces have already adjusted 2026 communications assuming expiration [9] [10].
6. Bottom line for 2026: extension means lower premiums, broader eligibility, higher federal cost
For plan year 2026, extending the enhanced premium tax credits would preserve broader eligibility (including people above 400% FPL) and maintain lower required contribution caps that in many cases reduce premiums to zero—saving subsidized enrollees roughly $1,000 on average compared with expiration scenarios—while also shifting costs to the federal budget and altering insurer pricing dynamics that regulators and lawmakers must weigh [3] [6] [1] [4]. If Congress does not act, subsidies remain available under original ACA rules but many people will receive smaller credits or none at all and average marketplace premium payments are projected to rise sharply [10] [11].