Why ACA tax credits for 22 million Americans are at the center of the government shutdown drama

The dispute at the heart of ongoing American tensions government shutdown centers around a tax credit that helps 22 million Americans lower their health insurance costs when they purchase policies on the Affordable Care Act marketplaces.

Known as the Enhanced Premium Tax Credit, the subsidy has been used by millions of lower- 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 nearly doubled, according to health care publication KFF.

But it is set to expire at the end of 2025, and top Democratic lawmakers are reaching a funding deal to keep the government open, provided Republicans agree to extend the credit. A new Oct. 3 survey from health news group KFF found that three-quarters of respondents say they want Congress to extend the tax credits, with about 59% of Republicans saying they would like to see an extension.

Although the outcome of funding negotiations in Washington, D.C., remains uncertain, the expiration of premium health care credits could inflict financial hardship on millions of Americans, experts told CBS News.

“Insurers are already preparing to send notices to households informing them that they will see increases starting in January 2026,” Alex Jacquez, policy chief at Groundwork Collaborative, a free-market advocacy group, and a former White House economic official under former President Joe Biden, said on a conference call Friday to discuss the tax credit.

He added: “People are increasingly concerned about the cost of living, and that’s a big hit to their wallets that they will start to see in a matter of weeks.”

The White House did not respond to a request for comment.

Here’s what to know about the enhanced ACA premium tax credits that expire at the end of 2025.

How Much Could ACA Premiums Increase?

The cost of premiums for people who buy their insurance on the ACA marketplaces could more than double, from an average of $888 in 2025 to $1,904 in 2026, according to a Sept. 30 analysis by KFF. About 4 million people would likely drop their insurance coverage if the credit expired because they would not be able to afford the costs, the Congressional Budget Office estimated.

The premium tax credit is for people who earn too much money to qualify for Medicaid, the health insurance program for low-income Americans, and who cannot get affordable health care through an employer. The credit is available to those earning between 100% and 400% of the poverty level, meaning a family of four with an annual income of up to $128,600 would qualify for the credit.

With the ACA coverage credit set to expire in just a few months, some policyholders have already noticed that their premiums – the monthly fees paid for insurance coverage – are about to increase next year. Insurers have sent notices to nearly every state, with some proposing premium increases of up to 50%.

Insurers are already forecasting substantial premium increases in 2026, according to a Peterson KFF Health System Tracker survey released last month. The survey found that 312 insurers participating in the ACA marketplaces are proposing median increases of 18% next year, about 11 percentage points higher than in 2025.

The increase would represent the largest rate hike since 2018 and is due to rising medical care costs as well as the expiration of 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 increases range from a maximum of 39.9%, for Blue Cross Blue Shield of Oklahoma, to a minimum of 4.6% for Oscar Garden State Insurance Corporation, according to their survey.

In Iowa last month, the state’s insurance commissioner considered increases ranging from 3% to 37%, sparking public concern. A woman who runs a garden center in Cedar Falls, Iowa, said she is considering giving up health insurance altogether.

“I already live as frugally as I can while working as hard as I can, putting in as many hours as I can at my job, never missing a day of work,” one woman, LuAnn, wrote in a comment posted on the commissioner’s website.

Signs of financial fragility

The potential rise in insurance costs comes as many Americans continue to struggle with the cost of living, Rohit Chopra, former director of the Consumer Financial Protection Bureau, said on the conference call with Jacquez, hosted by Groundwork, which supports the credit expansion.

“Some people will have to drop their insurance altogether, but households with someone with a chronic illness will have to pay these very big increases,” Chopra said. That would force some families to make difficult financial choices, such as not paying other bills or accumulating debt to cover expenses, he added.

Although U.S. inflation has fallen significantly since its post-pandemic peak in 2022, costs continue to climb slightly. The Federal Reserve’s 2% inflation target is moving further away from being achieved this year, along with the Consumer Price Index. climb higher in recent months. Some consumers are showing signs of increasing financial stress, with rising credit card delinquencies and ever-higher balances.

Meanwhile, many Americans don’t know that the ACA’s enhanced premium tax credits will expire in a few months, KFF found in an investigation.

“Consumers should not panic, but they should prepare,” Louise Norris, a health policy analyst at the insurance site Healthinsurance.org, said in an email.

People should be sure to compare different plans available in the markets and explore options such as health savings plans, which allow people to put money aside to pay for medical expenses, she said.

“Being proactive will help minimize financial surprises,” Norris said.

The Associated Press

contributed to this report.