- If you buy your health insurance through the federal marketplace, your premiums could rise significantly after 2025 – unless Congress takes action.
- The premium tax credit reduces upfront health insurance premiums and benefits have been temporarily increased during the Covid-19 pandemic.
- “The expiration of the expansion will impact pretty much everyone,” said Andrew Lautz, deputy director of the Bipartisan Policy Center’s economic policy program.
If you buy your health insurance through the federal marketplace, your premiums could rise significantly after 2025 – unless Congress takes action.
The premium tax credit makes health insurance purchased through the marketplace more affordable. Participants can use the credit to lower insurance premiums up front or claim the tax reduction when filing their tax return.
The credit was temporarily increased during the COVID-19 pandemic by the American Rescue Plan Act. The law covered plans for 2021 and 2022, but the Inflation Reduction Act extended this benefit through 2025.
If the benefits expire after 2025, “virtually everyone would face higher premiums,” said Gideon Lukens, senior fellow and director of research and data analysis at the Center on Budget and Policy Priorities, who wrote about the phaseouts this month.
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The White House reported in January a record number of registrations for marketplace plans for 2024, with more than 21 million participants.
In his budget proposal for fiscal year 2025, President Joe Biden proposed making the premium tax credit expansion permanent. During the first presidential debate on Thursday, he briefly touted the program’s benefits for communities of color.
However, making the program permanent would increase the federal budget deficit by $335 billion between 2025 and 2034, according to the Congressional Budget Office and the Joint Committee on Taxation.
Former President Donald TrumpCNBC’s campaign team did not respond to a request for comment on the broadcast.
The expiration of the tax breaks will affect “pretty much everyone”
Without an extension from Congress, market premiums will rise for Americans of all income levels, with the impact set to take effect in mid-2025 when health insurers begin releasing their rates, according to the report from the Center on Budget and Policy Priorities.
For example, a typical family of four earning $60,000 would see monthly premiums increase from $100 to $326, or about $2,700 more per year. By comparison, a family of the same size earning $125,000 would see monthly premiums increase from $885 to $1,525, or about $7,700 more per year.
“The expiration of the expansion will impact pretty much everyone,” said Andrew Lautz, deputy director of the Bipartisan Policy Center’s economic policy program.
The tax credit has reduced costs for all insureds, even those who were not eligible for the tax credit, because “the additional insureds have improved the pool of non-group market risks,” according to the Urban Institute.
Until 2021, the credit was only available to households with incomes between 100% and 400% of the federal poverty level. But the American Rescue Plan Act removed those limits and capped premiums at 8.5% of income.
The premium tax credit is based on the difference between a benchmark premium—the cost of the second-cheapest silver plan available in a region—and a maximum contribution based on a percentage of income. The tax credit is adjusted over time.
