How would Congress extending the enhanced premium tax credits beyond 2025 change eligibility and costs for 2026?
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Executive summary
If Congress extends the enhanced premium tax credits (ePTCs) past their current December 31, 2025, statutory expiration, the temporary changes that expanded eligibility above 400% of the federal poverty level (FPL) and increased subsidy amounts would remain in force for 2026 rather than reverting to pre‑enhancement rules [1]. That extension would sharply reduce 2026 out‑of‑pocket premiums for millions of marketplace enrollees, blunt insurer‑projected rate pressures, and avert large projected increases in the uninsured — at the cost of a substantial projected increase in the federal deficit over the coming decade [2] [3] [1].
1. What currently expires and what an extension legally preserves
The underlying premium tax credit is permanent, but the ARPA/IRA enhancements — elimination of the 400% FPL cap and lower “applicable percentage” contribution clamps that make subsidies larger — are temporary and scheduled to lapse on January 1, 2026 unless Congress enacts an extension [1] [4]. A one‑year “clean” extension bill introduced in 2025 would simply push that sunset to the end of 2026, preserving eligibility rules and subsidy formulas exactly as currently in effect for one more year [5] [6].
2. Who would become (or remain) eligible in 2026 if extended
With an extension, people with incomes above 400% of FPL who became newly eligible under ARPA/IRA would still qualify for credits in 2026; without extension those households would lose eligibility under the reinstated 400% cap [7] [1]. Beyond high‑income households, lower‑ and middle‑income enrollees already receiving subsidies would continue to benefit from the lower contribution caps that reduce required premium shares relative to pre‑enhancement law [7] [4].
3. Direct impact on consumer premiums and out‑of‑pocket costs
Analysts estimate a large, immediate consumer benefit from extension: KFF projects that if Congress extends ePTCs, subsidized enrollees would save about $1,016 on average in 2026 compared with a lapse scenario, and that average annual premium payments would more than double without extension (a projected 114% increase from 2025 to 2026 absent action) [2] [8]. CBPP and other advocates similarly warn that inaction will leave many paying substantially more because required contribution percentages would revert to higher levels [9] [7].
4. How extension changes insurer behavior and marketplace premiums
CBO and industry filings suggest that keeping enhanced credits restrains gross benchmark premiums by reducing adverse selection pressures; CBO estimated that without extension gross benchmark premiums would rise ~4.3% in 2026 simply from subsidy expiration effects and more in later years, whereas insurers’ rate filings reflected larger proposed increases tied to many factors including anticipation of subsidy changes [1] [3] [10]. KFF and others note that if subsidies lapse, healthier enrollees will disproportionately drop coverage, raising average enrollee costs and producing further premium pressure — a feedback loop an extension would blunt [9] [2].
5. Fiscal, policy and political tradeoffs
Extending the enhanced credits is not free: CBO and related analyses project that a permanent extension would increase the federal deficit substantially (CBO/JCT estimate cited ~+$350 billion from 2026–2035), while increasing the number insured by millions relative to a lapse scenario [3] [4]. That fiscal cost fuels political opposition framed as rolling back pandemic‑era supports, while proponents emphasize short‑term affordability, enrollment stability, and downstream economic effects such as workforce and hospital revenue impacts tied to coverage losses [3] [11].
6. Bottom line — who wins and who pays in 2026
If Congress extends the enhanced PTCs through 2026, eligibility above 400% FPL and larger subsidies would continue, producing substantial average premium savings for subsidized enrollees, moderating insurer rate pressure, and preventing millions from losing coverage in 2026; if Congress does not act, out‑of‑pocket premiums for many would jump sharply, insurer risk pools would likely worsen, and federal budget spending would be lower compared with extension scenarios [5] [2] [1] [3]. The choice is therefore explicit: near‑term consumer relief and higher federal outlays versus fiscal savings and a significant increase in marketplace costs and uninsured counts — a tradeoff that Congress must weigh amid competing political agendas [3] [4].