The open enrollment period for the Affordable Care Act (ACA) Marketplace is underway and lasts until January 15, 2025, for those looking to buy or change their health insurance. For those applying for health insurance this year, premium tax credits offered through the ACA have given more Americans and small business owners coverage. However, these credits are set to expire for many after 2025 if Congress does not act soon.
Prior to the passage of the ACA, small business owners and their workers had limited – and often unaffordable – options for health coverage. The law changed that through several key provisions, including creating Marketplaces for people to easily compare and purchase affordable coverage instead of having to rely on getting it through their employer and prohibiting health insurance companies from denying or charging higher premiums because of a person’s pre-existing condition. In addition, the ACA expanded Medicaid, allowing self-employed workers with incomes that are up to 138% of the poverty level to enroll in Medicaid in the 40 states (and Washington, D.C.) that have adopted expansion.
Since the ACA went into effect, the uninsured rate for employees of businesses with fewer than 100 workers dropped from 25.2% in 2013 to a record low of 16.3% by 2022. The latter is due in part to ACA’s Advanced Premium Tax Credits, which can lower monthly payments. The American Rescue Plan and the Inflation Reduction Act made these credits available to people purchasing coverage by increasing the amount of it for individuals with low and moderate incomes and expanding the eligibility for people with middle incomes facing high premiums. In 2022, more than 2.7 million small business owners and self-employed workers claimed the Advanced Premium Tax Credit, including about 285,000 taxpayers with incomes below $54,360 for a single person or $111,000 for a family of four.
Unfortunately, these expanded tax credits are scheduled to expire at the end of 2025 if Congress does not take action to extend them or make them permanent. If these tax credits expire, many people enrolled in coverage offered through the ACA Marketplace will see their premium payments increase substantially. For example, these premiums would at the very least double on average for enrollees in 12 states using Healthcare.gov who are now eligible for the tax credit.
This will also impact everyone in the ACA Marketplace. The nonprofit Congressional Budget Office (CBO) writes, “Without an extension through 2026, CBO estimates, the number of people without insurance will rise by 2.2 million in that year. Without a permanent extension, CBO estimates, the number of uninsured people will rise by 2.2 million in 2026, by 3.7 million in 2027, and by 3.8 million, on average, in each year over the 2026-2034 period.” In addition, CBO estimates that premiums for most in the Marketplace will increase by 4.3%, on average, for 2026, and by 7.9%, on average, over the 2026-2034 period.
An economy is stronger when its leading job creators, small businesses, and their employees have access to healthcare. The new Congress should not let up on this progress by either extending the enhanced tax credits beyond 2025, or even better, making them permanent.
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