The federal marketplace provides health insurance plans that are more affordable for participants through the premium tax credit. However, there is concern that premiums could see a significant increase after 2025 if Congress does not take action. The temporary enhancement of the credit through the American Rescue Plan Act, which covered plans in 2021 and 2022, was extended through 2025 by the Inflation Reduction Act. According to Gideon Lukens from the Center on Budget and Policy Priorities, if the benefits of the credit expire after 2025, virtually everybody would face higher premiums.
President Joe Biden has proposed making the premium tax credit expansion permanent in his fiscal year 2025 budget request. This move aims to ensure the affordability of health insurance for millions of Americans. However, making the program permanent would come at a cost – increasing the federal budget deficit by $335 billion from 2025 through 2034, as estimated by the Congressional Budget Office and Joint Committee on Taxation. Former President Donald Trump’s campaign did not provide a comment on the program.
If Congress does not extend the benefits of the premium tax credit, marketplace premiums are expected to rise for Americans across the income spectrum. This increase would be felt in mid-2025 when health insurers release new rates. For instance, a typical family of four earning $60,000 could see their monthly premiums spike from $100 to $326, resulting in an additional cost of about $2,700 per year. Similarly, a family with a $125,000 income would face a jump in monthly premiums from $885 to $1,525, equating to around $7,700 more annually.
The expiration of the premium tax credit expansion is anticipated to have a broad impact on the community. Andrew Lautz, associate director for the Bipartisan Policy Center’s economic policy program, emphasized that the impact would be felt by nearly everyone. The tax credit has not only reduced costs for enrollees eligible for the break but has also improved the nongroup market risk pool due to additional enrollments. Previously, the credit was only available to households with incomes between 100% to 400% of the federal poverty level. However, the American Rescue Plan Act removed these restrictions and capped premiums at 8.5% of income.
The future of health insurance premiums purchased through the federal marketplace remains uncertain beyond 2025. Without further action from Congress, there is a risk of substantial premium increases, impacting millions of Americans across various income levels. President Biden’s proposal to make the premium tax credit expansion permanent has the potential to ensure continued affordability but comes with a significant budgetary cost. It is essential for policymakers to carefully consider the implications of these decisions on individuals and families relying on marketplace health insurance for their coverage.
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