A possible U.S. government shutdown on Wednesday could hinge on a deal to maintain a tax credit that helps 22 million Americans lower their health insurance costs when they buy policies through the Affordable Care Act’s marketplaces.
Known as the enhanced premium tax credit, the subsidy has been used by millions of low- and middle-class households since it was authorized under the American Rescue Plan Act in 2021. Since then, spurred by the tax credit, the number of people who have enrolled in ACA marketplace health insurance plans has almost doubled, according to health care publication KFF.
But it is set to expire at the end of 2025, and leading Democratic lawmakers are making a funding deal to keep the government open contingent on Republicans agreeing to extend the credit.
Even as the outcome of the funding negotiations in Washington, D.C., remains uncertain, expiration of the premium health care credits could inflict financial pain on millions of Americans, experts told CBS News.
“Insurers are already preparing to send notices to households that they will see increases starting in January 2026,” said Alex Jacquez, chief of policy at Groundwork Collaborative, a liberal economic advocacy group, and former a White House economic official under former President Joe Biden, on a conference call Friday to discuss the tax credit.
He added, “People are more and more concerned about the cost of living, and [this is] a hit to their pocketbooks that they will start seeing in weeks.”
The White House didn’t respond to a request for comment.
Here’s what to know about the enhanced ACA premium tax credits set to expire at the end of 2025.
How much could ACA premiums increase?
The cost of premiums for people who buy their insurance through the ACA marketplaces could rise by an average of 75% after the tax credits expire, according to KFF. About 4 million people would likely drop their insurance coverage if the credit is allowed to expire because they would’t be able to afford the costs, the Congressional Budget Office has estimated.
The premium tax credit is aimed at people who earn too much to qualify for Medicaid, the health insurance program for low-income Americans, and who can’t get affordable health care through an employer. The credit is available for those who earn between 100% to 400% of the poverty level, which means a family of four with annual income of up to $128,600 would qualify for the credit.
With expiration of the ACA coverage credit only months away, some policy holders have already received noticed that their premiums — the monthly fee paid for insurance coverage — are poised to surge next year. Insurers have sent out notices in nearly every state, with some proposing premium increases of as much as 50%.
Insurers are already planning on substantial premium hikes in 2026, according to a Peterson KFF Health System Tracker survey published last month. The poll found that 312 insurers participating in ACA marketplaces are proposing median increases of 18% next year, about 11 percentage points higher than in 2025.
That increase would represent the largest rate hike since 2018, and is driven by higher costs for medical care as well as the expiration of the premium tax credits. Sharply higher ACA premiums would likely cause healthier people to drop coverage, making it more expensive to insure those who remain, the group said.
The proposed hikes range from a high of 39.9%, from Blue Cross Blue Shield of Oklahoma, to a low of 4.6% for Oscar Garden State Insurance Corporation, their survey found.
In Iowa last month, the state’s insurance commissioner weighed increases ranging from 3% to 37%, arousing public concerns. One woman who runs a garden center in Cedar Falls, Iowa, said she was considering dropping health insurance altogether.
“I am already living as frugally as I possibly can while working as hard as I possibly can, putting in as many hours as I am allowed to at my job, never missing a day of work,” one woman, LuAnn, wrote in a comment published on the commissioner’s website.
Signs of financial fragility
The potential hike in insurance costs comes as many Americans continue struggling with the cost of living, said Rohit Chopra, former director of the Consumer Financial Protection Bureau, on the conference call with Jacquez, organized by Groundwork, which supports extending the credits.
“Some people will need to drop their insurance all together, but households with someone with a chronic illness will have to pay those big, big increases,” Chopra said. That would require some families to make tough financial choices, such as not paying other bills or accumulating debt to cover their expenses, he added.
Although inflation around the U.S. has eased significantly since its post-pandemic peak in 2022, costs continue to inch higher. The Federal Reserve’s 2% inflation target is slipping further from reach this year, with the Consumer Price Index climbing higher in recent months. Some consumers are showing signs of increasing financial stress, with credit card delinquencies on the rise and balances creeping higher.
Meanwhile, many Americans aren’t aware that the ACA enhanced premium tax credits will expire in a matter of months, KFF found in a survey.
“Consumers should not panic, but they do need to prepare,” Louise Norris, a health policy analyst at insurance website Healthinsurance.org, said in an email.
People should make sure to compare various plans available to them on the marketplaces and explore options such as Health Savings Plans, which allows people to set aside money to pay for medical expenses, she said.
“Being proactive will help minimize financial surprises,” Norris said.
contributed to this report.
