If the ACA tax credit ends – Retirement Research Center, millions of health coverage
If health care is provided to more Americans, the tax credit for those who purchase insurance in the Affordable Care Act (ACA) market has been a huge success.
Since Congress approved credit in 2021, the number of enrollment in ACA policy has doubled to a record 24 million, which reduces monthly premiums by hundreds of dollars and ensures health insurance during the pandemic. The 2022 Inflation Reduction Act extends subsidies until the end of this year.
However, under some budgetary recommendations considered by the House, the tax credit will not be renewed.
Without them, City College estimates that enrollment in ACA policy will drop by more than 7 million, with 4 million of them not able to find affordable alternatives. The long-term losses may be higher.
The federal government pays the tax credit directly to insurers, which pass it on to consumers in the form of lower premiums. Although points reduce premiums, the deductible will not be affected. As a result, policy holders are often still paying high out-of-pocket expenses for visits, examinations, surgeries and treatments for their physicians.
Who will be hurt if Congress does not renew generous credits? Researchers from the Commonwealth Foundation, KFF and City College have carefully examined who will be most affected.
A clear group will be many low-income workers currently paying under $10 per month for the market plan. However, credit also reduces insurance costs for workers and middle-class Americans. The 2021 legislation even expands the tax credit to those who earn more than 400% of the federal poverty level – $62,600 for individuals and $128,600 for families of four in 2025, and limits its premium to 8.5% of the fare.
KFF estimates that if the credit expires by the end of 2025, a 60-year-old couple earns $85,000, with an average monthly premium increase of $1,500. A large portion of the credits earned are self-employed workers, small business owners, and people over 50 but too young for Medicare.
Other vulnerable groups are blacks and Hispanics, who disproportionately rely on tax credits that lower their premiums – if premiums rise, that gain will reverse. If young people think the cost is too high, it could undermine the enrollment of a person who benefits from younger, healthier people, they may also waive coverage.
Rural communities and residents of the 10 states that have not yet expanded Medicaid are also dependent on ACA insurance – both coverage itself and support it provides to local health care economies.
If the tax credit expires, causing premium surges, 2.5 million people may discard their insurance in 10 non-expanding states (Alabama, Florida, Georgia, Kansas, Kansas, Mississippi, South Carolina, Tennessee, Texas, Wisconsin, Wisconsin, Wisconsin and Wyoming – the Urban Institute says). By comparison, 1.5 million people will lose coverage in 40 other states that have expanded Medicaid.
In expanded states, low-income workers are more likely to access health insurance, as the ACA also raises the income cap on Medicaid eligibility to 138% of poverty levels in states that agree to increase Medicaid enrollment. In a non-inflated state, the upper limit is still at the poverty level, pushing more people toward private policies in the ACA market.
But here are measures about tax credits: They are budget items over $10 billion. The question for Congress is whether they are willing to allow millions of voters to rise sharply monthly insurance premiums.
Kim Blanton, a writer from the square, invites you to follow us @squaredawaybc On X. To stay on our blog, join in Our free email list. You will receive an email every week – a week's post link – Register here. The blog is supported by the Boston College Retirement Research Center.
