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Compliance April 4, 2025
Elimination of ACA Tax Credits Could Cause Millions to Lose Health Coverage
In an attempt to reform the ACA, the administration of President Donald Trump on March 10, amended regulations governing insurance coverage standards subject to the ACA. Public comments on the proposed rule will be accepted for consideration until April 11.
Reported by Remy Samuels
Since Congress approved tax credits for people buying health insurance on the Affordable Care Act marketplaces in 2021, enrollment in ACA policies has doubled to a record 24 million and individuals’ monthly premiums have dropped by hundreds of dollars. While the Inflation Reduction Act of 2022 extended the subsidies through the end of this year, the ACA tax credits may not be renewed under some budget proposals being considered in the House of Representatives, according to the Center for Retirement Research at Boston College.
With rising costs of health insurance, the threat of millions losing health coverage due to the expiration of ACA tax credits highlights the importance of employer-sponsored health benefits and issues that can add to employees’ and retirees’ financial stress.
In an attempt to reform the ACA, the administration of President Donald Trump on March 10, amended regulations governing insurance coverage standards subject to the ACA. Public comments on the proposed rule will be accepted for consideration until April 11.
The first Trump administration tried to repeal the ACA in 2017, but no repeal was approved by Congress. It is unclear if Trump will try to repeal it again.
The proposed rule contains a variety of changes, including allowing insurers to deny coverage to individuals who have past-due premiums for prior coverage, thereby allowing insurers to consider past-due premium amounts as the initial premium for new coverage.
The proposed rule also eliminates the ability of an individual to certify their income when applying premium tax credits and cost-sharing reductions, instead requiring income determinations to be reconciled with tax filings or other information, which could create delays and administrative barriers.
Without these tax credits, the Urban Institute estimated that enrollment in ACA policies would decline by more than 7 million and that 4 million of those people would not be able to find an affordable alternative source of insurance.
Because insurers receive these tax credits directly from the federal government, they pass them on to consumers in the form of lower premiums. However, this does not impact deductibles, so policyholders are still often paying high out-of-pocket costs for physician visits, tests, surgeries and treatments, according to the CRR.
The Urban Institute found that both lower-income workers and middle-class workers would suffer from the removal of the tax credits. If the credits expire at the end of this year, premiums would increase $1,500 per month on average for a 60-year-old couple earning $85,000, according to an estimate by the health care nonprofit KFF. A large share of the people receiving credits are self-employed workers, small business owners and people older than 50 but still too young for Medicare.
According to the CRR, Black and Hispanic Americans disproportionately rely on the ACA tax credits and would be adversely affected if the credits expire.
In addition, if young adults drop their coverage because they feel the cost is too high, it could possibly destabilize a market that benefits from a higher enrollment rate among younger, heathier people.
“But here’s the rub about the tax credits: they are a more than $10 billion budget item,” wrote Kimberly Blanton at the CRR. “The question facing Congress is whether they’re willing to allow a sharp rise in millions of constituents’ monthly insurance premiums.”
Many Republicans in Congress are also considering, as part of their federal budget legislation, cuts to Medicaid, which currently covers more than 72 million people.
