The Affordable Care Act transformed U.S. health coverage by making premiums more affordable for millions through tax credits. But the enhanced premium tax credits (eAPTCs)—introduced under the American Rescue Plan and extended by the Inflation Reduction Act—are set to expire at the end of 2025 unless Congress acts. This decision carries enormous implications: for consumers, for insurers, and critically, for health care providers.
Congress faces a fiscal crossroads. Renewing these credits could cost $350 billion over the next decade, yet letting them lapse risks a surge in uninsured rates and premium spikes. Nearly 24 million people are enrolled in ACA marketplace plans in 2025—double the number in 2020—and 93% rely on advance premium tax credits to keep coverage affordable. If enhanced credits disappear, affordability could collapse for millions.
Source: KFF
eAPTC mechanics
Enhanced advance premium tax credits provide additional subsidies to households that are already eligible for the regular tax credit. This reduces the insurance premiums based on a percentage of income and eliminates the old “subsidy cliff” for families earning above 400% of the Federal Poverty Level. These credits are advanceable and refundable: the government sends payments directly to insurers each month to reduce billed premiums, then reconciles the amount on the enrollee’s tax return. If income shifts and the household receives excess credit, the difference must be repaid to the IRS because the government essentially paid the insurer on the enrollee’s behalf. Insurers are free to set premiums, with some state and federal oversight. The credits subsidize the consumer costs, not the underlying premiums.
Who’s at risk?
Lower-income families dominate ACA enrollment. About 75% of marketplace enrollees fall below 250% of the FPL, roughly $80,375 for a family of four. For households under 150% FPL, enhanced credits mean near-zero premiums and significant cost reductions for those between 200% to 250% FPL. Without the enhanced credits, costs spike sharply.
Up to 250% FPL family of 4 income $0 – $80,375 (2025)
Above 250% – 400% family of 4 income $80,376 – $128,600 (2025)
In addition, the lapse could cause many middle-income households to lose eligibility. Roughly 2 million enrollees above 400% FPL would lose all subsidy support, facing premium hikes from $888 to $1,904 annually for benchmark plans.
And, for certain, premiums will rise regardless. Insurers expect an 18% increase in gross premiums for 2025, 11 points higher than last year, according to KFF. The surge is driven by inflation, rising labor costs, high-priced drugs and a shift in risk pool. As enhanced credit lapses, healthier enrollees are likely to exit the exchanges, leaving a higher concentration of older or sicker individuals. This adverse selection could raise average claims costs, resulting in raised premium prices. Without enhanced credits, the impact on consumers, and indirectly on providers, intensifies.
The ripple effect on providers
When coverage erodes, hospitals and health systems, in particular those servicing rural areas, often absorb the fallout. This could mean higher uncompensated care as uninsured people turn to emergency departments; financial strain from deteriorating payer mix and rising bad debt; as well as operational pressure as patient volumes shift unpredictably. In addition, this all comes amid broader uncertainty from other policy changes like those from the One Big Beautiful Bill Act, compounding risk for health systems already navigating tight margins.
What providers should do now
Health systems should consider the following to stay ahead of challenges:
- Strengthen enrollment assistance to help patients maintain coverage.
- Advocate for state-level safety nets and alternative coverage models.
- Monitor payer mix and financial indicators to anticipate revenue shifts.
- Invest in community partnerships to address social determinants of health as affordability gaps widen.
The takeaway
The looming expiration of enhanced ACA tax credits could reshape coverage affordability and ripple through health systems, driving higher premiums, uninsured rates and financial volatility. Beyond immediate cost concerns, providers face strategic decisions on how to maintain stability and community trust in an environment of policy uncertainty.
Congress is signaling action on affordability, with proposals aimed at exploring broader reforms to rein in health care costs. These debates underscore the complexity of U.S. health care, where rising premiums, labor pressures and inflation collide with consumer expectations for access and affordability.
For providers, the mandate is clear: stay nimble. Strategic planning must account for shifting reimbursement models, payer negotiations and potential legislative changes. Maintaining operational resilience and community trust will require proactive engagement, cost discipline and adaptability as the policy landscape evolves.
Rebekuh Ely
Rebekuh Ely is National Exempt Health Care Tax Industry Leader for RSM US LLP.
