Jessica I. Marschall, CPA
October 15th, 2025
As we finish extension season, it is clear that our clients and their businesses are not prepared for the significantly rising healthcare costs that are already implemented due to rising costs, but this is especially important if the Affordable Care Act Premium Tax Credits expire.
If Congress does not extend the enhanced Affordable Care Act (ACA) premium tax credits before they expire on December 31, 2025, millions of Americans who purchase coverage through the marketplaces will face dramatically higher costs. KFF estimates that subsidized enrollees would see their out-of-pocket premium payments increase by 114% on average in 2026, rising from approximately $888 annually in 2025 to about $1,904 in 2026. ACA Marketplace Premium Payments Would More than Double on Average Next Year if Enhanced Premium Tax Credits Expire | KFF
This increase stems from two concurrent factors: the loss of enhanced subsidies and rising underlying premiums. With marketplace enrollment now exceeding 24 million people, the impact would be widespread. ACA Marketplace Premium Payments Would More than Double on Average Next Year if Enhanced Premium Tax Credits Expire | KFF
Why Premium Costs Would Jump
Two major forces would drive these increases:
1. Return of the subsidy cliff for middle-income buyers Under the enhanced credits, no one pays more than 8.5% of their income for a benchmark plan. Without them, households earning above 400% of the federal poverty level (approximately $62,600 for an individual in 2026) would lose eligibility for any subsidies and face full premium costs. KFFStatnews KFF describes this as a “double whammy” of rising sticker prices combined with lost financial assistance. ACA Marketplace Premium Payments Would More than Double on Average Next Year if Enhanced Premium Tax Credits Expire | KFF
2. Significant 2026 rate increases from insurers Early filings indicate a median 18% premium increase for ACA plans in 2026, representing the largest increase since 2018. These increases reflect medical cost inflation, expensive prescription drugs including GLP-1 medications, and other cost pressures. Peterson-KFF Health System TrackerKFF Without enhanced credits, these increases would hit consumers directly.
Impact Beyond the Marketplaces
The effects extend beyond ACA enrollees. Federal employees face another significant FEHB premium increase in 2026, with costs rising 12.3% on average, following a 13.5% increase in 2025. Government ExecutiveFederal News Network Combined with broader healthcare cost trends, any loss of subsidies becomes particularly challenging for household budgets.
Who Faces the Greatest Impact
- Middle-income families: Those newly eligible for help under the enhancements would lose all subsidies and face full premiums. Premium Payments if Enhanced Premium Tax Credits Expire | KFF
- High marketplace enrollment states: States with significant marketplace participation, particularly Texas, would see outsized effects. KFF projects that of the 3.98 million Americans who would drop coverage, 1.04 million (26%) would come from Texas. Texas could bear the brunt of expiring ACA tax credits. Is the GOP delegation willing to make a deal?
- Older enrollees: A 60-year-old couple earning $85,000 would see yearly premium payments rise by over $22,600 in 2026, bringing their benchmark plan cost to about 25% of their annual income, up from 8.5%. ACA Marketplace Premium Payments Would More than Double on Average Next Year if Enhanced Premium Tax Credits Expire | KFF
- Low-income enrollees: A single person earning $28,000 would see their required premium contribution jump from approximately 1% of income to nearly 6%. Premium Payments if Enhanced Premium Tax Credits Expire | KFF
Economic and Fiscal Implications
Higher premiums can trigger significant ripple effects across the healthcare system. If enhanced tax credits expire, uncompensated care would increase by $7.7 billion, with hospitals bearing about $2.2 billion, physician offices $1.0 billion, prescription drugs $1.5 billion, and other services $3.1 billion of this burden. How Expiration of ACA Tax Credits Will Affect Healthcare …
Healthcare providers would face more than $32.1 billion in lost revenue in 2026 if the credits expire, including approximately $14.2 billion less spent on hospital services, $5.1 billion less on office-based physicians, $5.8 billion less on prescription drugs, and $6.9 billion less on other healthcare services. How Expiration of ACA Tax Credits Will Affect Healthcare …
Policy Options Available
1. Extend the enhanced credits A straight extension would maintain the 8.5% income cap and prevent the premium spike for 2026. KFF estimates this would save subsidized enrollees an average of $1,016 in 2026. ACA Marketplace Premium Payments Would More than Double on Average Next Year if Enhanced Premium Tax Credits Expire | KFF This option would preserve current affordability levels and prevent coverage losses.
2. Targeted modifications Policymakers could implement partial solutions such as:
- Capping contributions for older adults who face the steepest dollar increases
- Providing additional support for high-cost regions where premiums are particularly expensive
- Maintaining enhanced subsidies only for certain income levels
While these approaches could reduce the most severe impacts, many enrollees would still face higher bills.
3. Broader cost containment measures Structural reforms could address underlying premium growth:
- Site-neutral payment reforms to equalize payments across care settings
- Anti-consolidation measures to increase competition
- Drug pricing enforcement and negotiation expansion
- However, these measures alone cannot prevent the immediate 2026 cliff without extending the enhanced credits
What Consumers Should Do Now
1. Check 2026 preliminary rates Monitor your state’s rate filings as they are posted and compare plans aggressively during open enrollment, which begins November 1, 2025. How much and why ACA Marketplace premiums are going up in 2026 – Peterson-KFF Health System Tracker
2. Model different subsidy scenarios Use KFF’s calculators and resources to understand your potential premium both with and without enhanced credits. This preparation can help avoid surprises when final rates are announced.
3. Plan for employer and federal employee impacts If you are an employer or federal employee, budget for higher contributions in 2026. Federal employees should prepare for a 12.3% average increase. Review plan design options, Health Savings Account availability, and wellness incentives during open enrollment. Government ExecutiveFederal News Network
4. Consider your options carefully
- If you are currently in a marketplace plan, evaluate whether you might need to switch to a lower-cost plan tier
- Small business owners and self-employed individuals should assess whether maintaining coverage remains feasible
- Those near Medicare eligibility should calculate whether temporary coverage options might bridge the gap
State-Level Impacts
Texas faces particularly severe consequences. The state receives $24 billion in federal funding from enhanced premium tax credits through payments to insurers for Texas enrollees. KFF projects that 1.04 million Texans could lose coverage if the credits expire. Currently, 58% of Texas ACA enrollees pay monthly premiums under $10, but this would change dramatically without the enhanced subsidies. The Texas TribuneThe Texas Tribune
Five southern states—Texas, South Carolina, Mississippi, Tennessee, and Georgia—could see increases of 27% or greater in their uninsured populations if the credits expire. These states, which have not expanded Medicaid, would experience the most acute effects. Enhanced Premium Tax Credits for ACA Health Plans: Who They Help, and Who Gets Hurt If They’re Not Extended
The Political and Economic Context
The enhanced premium tax credits are currently a central issue in government funding negotiations. Democrats want to extend them as part of any deal to fund the government, while Republicans argue that health care policy negotiations should occur separately. ACA premiums to more than double without enhanced subsidies: KFF
According to Urban Institute estimates, subsidized enrollees would face an average 136% increase in premiums nationally if enhanced credits expire, with some states seeing increases above 300%. Health Insurance Premium Costs Will More Than Double for Millions of Americans Unless Congress Acts – Center for American Progress
The Congressional Budget Office estimates that without extension, the uninsured population would increase by 2.2 million in 2026 and could reach 4 million over time. CBO also projects that gross benchmark premiums would increase by 4.3% in 2026 due to healthier enrollees leaving the market. Congress.govCenter on Budget and Policy Priorities
Timeline and Urgency
If Congress extends the premium tax credit enhancements by early October, people shopping for coverage during “window shopping” (mid-October) and early November open enrollment would see accurate premium estimates. Otherwise, consumers may face significant uncertainty about their 2026 costs during the enrollment period. Five Key Changes to ACA Marketplaces Amid Uncertainty Over Premium Tax Credit Enhancements | Center on Budget and Policy Priorities
The combination of expiring enhanced subsidies, underlying premium increases, and administrative changes creates a perfect storm for healthcare affordability in 2026. Without Congressional action, millions of Americans will face difficult decisions about maintaining their health coverage, with impacts reverberating through the entire healthcare system.
This analysis draws from: KFF (September-October 2025), Peterson-KFF Health System Tracker (2025), Congressional Research Service Report R48290 (2025), Federal News Network (October 2025), Texas Tribune (August and October 2025), Commonwealth Fund (February-March 2025), Center for American Progress (2025), Center on Budget and Policy Priorities (2025), Urban Institute (2025)
