Marketplace Pulse: What’s at stake for enrollees over 400% FPL if enhanced premium tax credits expire?

The Marketplace Pulse series provides expert insights on timely policy topics related to the health insurance marketplaces. The series, authored by RWJF Senior Policy Adviser Katherine Hempstead, analyzes changes in the individual market; shifting carrier trends; nationwide insurance data; and more to help states, researchers, and policymakers better understand the pulse of the marketplace

Off a cliff: What’s at stake for enrollees over 400% FPL if enhanced premium tax credits expire?

Key Takeaways:

• For 50-year-old individuals earning 401% of the federal poverty level (FPL), $60,391 in 2024, enrolled in the second-lowest cost silver plan in their zip code, premiums would increase by a national average of 53% if enhanced premium tax credits expire.
• The average statewide second-lowest cost silver plan (SLS) premiums would at least double for 50-year-old individuals earning 401% FPL in five states: Alaska, West Virginia, Wyoming, Vermont, and Connecticut.
• In zip codes where 20% of the total U.S. population resides, premiums for the second-lowest cost silver plan would increase by 75% or more for a 50-year-old if enhanced premium tax credits expired for individuals above 401% FPL. In only 12% of U.S. zip codes scattered across 14 states, where 16% of U.S. residents reside, would a 50-year-old consumer experience a premium increase of less than 25% for the second-lowest cost silver plan.

ACA v IRA Tax Credits

The enhancement of premium tax credits (PTCs) has had a dramatic effect on the affordability of coverage in the Affordable Care Act (ACA) marketplace. This enhancement, which was extended through the end of 2025 by the Inflation Reduction Act (IRA), both increased the size of the tax credits and expanded eligibility to include those whose incomes exceed 400% of the federal poverty level (FPL) who previously did not receive any federal premium assistance under the ACA. Enrollment gains have been particularly high in communities of color, driving a reduction in racial differences in uninsurance rates. The change in tax credits increased affordability across the board, contributing to a massive surge in enrollment in the ACA marketplace, which this year reached 21.3 million people.

The enhanced PTCs have the largest dollar impact on three (not mutually exclusive) types of enrollees: 1) those with incomes above 400% FPL, 2) older adults, and 3) those who live in states, or areas of a state, where premiums are relatively high. If the enhanced PTCs are allowed to expire, these populations would experience massive increases in premiums.  

People with incomes above 400% FPL

For those with incomes above 400% FPL, the impact of the enhanced PTCs is transformative. Previously, people in this income category received no tax credit at all and faced the full cost of coverage, a situation commonly referred to as the "subsidy cliff." Not surprisingly, enrollment for this population was very low because few could afford premiums, which in some situations comprised 20% of their income or more. Yet, with the enhanced PTCs, premium costs for this group are capped at 8.5% of income. Currently, a person with an income of $60,391 (Plan Year (PY) 2024, 401% FPL) would pay no more than 8.5% of their income for coverage, which translates to a monthly premium of $428.  Approximately 1.7 million individuals with incomes above 400% FPL got coverage in the ACA marketplace in 2024, a trend that is expected to continue in 2025.

Older adults

Older adults, a large and growing share of marketplace enrollees, are also major beneficiaries of the enhanced PTCs because they face higher costs of coverage. In 2024, approximately 7.5 million adults over age 50 enrolled in marketplace coverage, more than one-third of the total enrollment. The largest group of enrollees were aged 55-64 years. Given demographic and labor force trends, the share of enrollees who are older is likely to continue to grow. Older enrollees face higher costs because ACA premiums are generally age-rated. In most states there is a 3:1 ratio of premiums for the oldest versus the youngest enrollees, meaning that the premium of a 60-year-old is triple the price of the premium of a 24-year-old.¹ For many older enrollees, the enhanced tax credits have made it possible for them to afford coverage.

Residents of high-cost states

Finally, the enhanced PTCs have a heightened importance in states where the cost of coverage is high relative to the national average. In states like Alaska, West Virginia, and Wyoming, healthcare costs are high due to factors such as the health status of residents, lack of competitiveness in provider markets, or supply chain costs associated with long distances. Rural areas, in general, are more likely to be high-cost, a problem discussed in a recent assessment of the importance of the tax credits in farm states.

What happens if the enhanced PTCs expire?

States

The figures in this analysis highlight the individualized impact of a 50-year-old enrolled in the second-lowest cost silver plan moving from receiving enhanced premium subsidies at 401% FPL that limits their monthly premium to $428 per month, 8.5% of $60,391 (400% FPL in 2024), to paying the full premium cost if the enhanced tax credits expire. Nationally, premiums would increase by an average of 53% for this group of enrollees.  

While few states would escape very significant premium increases, in some states enrollees would experience calamitous reversals of fortune. In five states, highlighted in red in Figure 1, average statewide premiums would more than double, while in another five states, premiums would increase by more than 75%. 

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Zip Codes

In a small number of rating areas, premium increases without enhanced PTCs would be especially extreme. In 217 zip codes, premiums for a hypothetical 50-year-old would increase by more than 200% (tripling) if the enhanced PTCs were to expire. In zip codes where 20% of the total U.S. population resides, premiums would increase by at least 75%. In fact, residents in only 12% of zip codes scattered across 14 states, where 16% of U.S. residents reside, would experience premium increases of less than 25% if they stayed enrolled in the now unsubsidized silver plan.

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Even in the states with relatively lower overall statewide average premium increases, the difference in premiums within some states due to geographic rating means that the cliff effect of the end of enhanced premium tax credits in zip codes in higher cost rating areas could still be severe. For example, while Minnesota has the second-lowest statewide average increase and some of the lowest premiums in the nation, a consumer at 401% in the southern part of the state (rating area 1) would see a 77% ($331) increase in their monthly premium compared to just a 1% ($2) increase in Minneapolis.

Enhanced PTC Benefits < 400% FPL

This analysis has focused on those individuals above 400% FPL, particularly older adults and those who live in high-cost states. For these groups, the expanded tax credits have made coverage possible, and the consequences of their expiration would be disastrous. Yet it is important to recognize that the impact of the PTCs on the ACA marketplace is far broader, and if the credits expire at the end of 2025, millions will struggle with affordability. Recent coverage gains within Black and Latino communities will be threatened. Overall, the CBO estimated that 3.4 million people will lose coverage if the enhanced PTCs are not extended. The enhanced tax credits were created to build upon the original ACA subsidies, which left coverage unaffordable for too many. The massive increase in enrollment shows how well these enhanced PTCs have achieved their purpose. But their fate is not assured, with expiration looming at the end of 2025.  If policymakers allow these enhanced PTCs to expire, millions of enrollees will find themselves once again thrown off the subsidy cliff.

Methods for ZIP code level SLS premium and PTC data

This analysis was conducted using the HIX Compare dataset that contains every ACA-compliant individual market plan and the Center for Consumer Information and Insurance Oversight’s public use files (PUF) which contain plan level information on plan availability within states at the county and zip code level for both the federally facilitated marketplace (FFM) and state-based marketplaces (SBMs). Zip code level population data from the 2020 U.S. Census maintained by the Missouri Census Data Center was used to both match zip codes to counties and to population weight results.

Premium data from the HIX Compare data set was used to identify the premium for a 50-year-old for the second-lowest cost silver plan in each zip code and calculate tax credit amounts. For questions about the data, please contact Matt Valeta, at matthew.valeta@gmail.com.

About the co-author:

Matthew Valeta is a data analyst with prior experience working for the California and Colorado marketplaces. At Covered California he led the development of the California Health Coverage Survey which continues to be conducted annually by NORC. Then at Connect for Health Colorado he led the relaunch of the marketplace's public website and implemented their 2020 open enrollment email and social media outreach campaigns. He currently works as a Health Plan Trainer for Denver Health Medical Plan. The data and findings in this article do not reflect the views of Denver Health Medical Plan. Matthew studied Political Science and Religion at Colorado College and received a Masters of Public Policy from the University of California, Berkeley in 2017.

¹ In most states there is a 3:1 ratio of premiums for the oldest versus the youngest enrollees, meaning that the premium of a 60-year-old is triple the price of the premium of a 24-year-old. (There are a handful of states where the ratio is capped at a number closer to 2, and New York state does not do any age-rating.)