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Don’t Let Health Care Tax Credits Expire: What’s at Stake for Millions

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Published Jul 24, 2025 • by AHIP

Rising health care costs, recent policy changes, and shifting market dynamics are adding greater pressure on individual market premiums for the next year, according to a new analysis from the American Academy of Actuaries. “In the individual market, the risk pool faces significant disruption. The expiration of enhanced premium tax credits and the implementation of stricter enrollment verification under the CMS Marketplace Integrity and Affordability Rule are both expected to reduce enrollment and increase morbidity, leading to higher premiums,” the analysis warns.

Health plans are working hard to protect consumers from rising health care costs and the added uncertainty caused by recent policy changes. But to keep coverage affordable, it’s critical that policymakers act now to extend the health care tax credits—before millions of Americans face sudden, steep cost increases.

Key findings:

New Exchange Market Rules, Potential Sunsetting of Premium Tax Credits Add Uncertainty and Cost Pressures

  • “The enhanced premium tax credits...expire at the end of 2025. As a result, both the size of premium tax credits and the pool of individuals eligible for them are expected to be lower in 2026. These reductions are expected to reduce enrollment significantly and increase morbidity in the individual market single risk pool, leading to higher premiums.”
  • “Requirements finalized in the CMS Marketplace Integrity and Affordability Rule will significantly tighten enrollment and eligibility verification procedures... these provisions could lead to lower overall enrollment by adding administrative hurdles. While these hurdles may discourage some individuals across the board, healthier or lower-cost individuals may be more likely to forgo coverage entirely—whereas individuals with ongoing health needs may be more motivated to navigate the process. This dynamic could raise adverse selection concerns and contribute to upward pressure on premiums.”

Rising Cost of Hospital Care and Prescription Drugs Add to Premium Costs

  • “Continued growth in drug spending is expected to be a major driver to premium growth in 2026. Higher expected drug spending is due to higher unit price growth, launches of new expensive gene, cell, and biologic therapies, as well as the increased demand for expensive weight-loss drugs in plans that cover them.”
  • “Inflation contributes to higher input costs for health care services–through higher costs of goods and services, including labor costs. As a result, elevated inflation is expected to lead to higher medical trend.”

Bottom Line: Extending the Premium Tax Credits Would Provide Critical Relief to Consumers

The Academy's analysis underscores the urgent need for congressional action to extend the enhanced premium tax credits before they’re set to expire at the end of 2025. Absent the credits being extended, consumers will face significantly higher premium costs with many facing the likelihood of foregoing coverage altogether. The analysis notes that the expiration of enhanced premium tax credits will "reduce enrollment significantly and increase morbidity in the individual market single risk pool, leading to higher premiums." This creates a double burden for consumers who will face both higher base premiums and reduced subsidies to help afford their coverage.

There is still time for Congress to act to mitigate premium increases facing consumers when they enroll in coverage this fall. Congress has the power to prevent this affordability crisis by acting swiftly to extend the enhanced premium tax credits.

Key Resources: