ACA Enhanced Premium Tax Credits: Legislative Developments in 2025 and 2026

January 20, 2026 | Catherine Jones

Health care policy dominated the congressional agenda in 2025 and is poised to do so again in 2026. Disputes over health care insurance affordability was a major contributor to the recent federal government shutdown — the longest in U.S. history, lasting 43 days. The continuing resolution agreement that reopened the government in November 2025: 1) extended federal funding through Jan. 30, 2026, 2) fully funded programs within the Department of Agriculture, FDA, and the Department of Veteran Affairs, and 3) secured a vote on legislation to preserve the Affordable Care Act’s (ACA’s) enhanced premium tax credits (PTCs).

The Lower Health Care Costs Act (S 3385), which aimed to extend the enhanced PTCs until 2028, ultimately failed to garner the 60 votes necessary to proceed through the Senate. Early in the new year, Congress continues to face the same funding and policy cliff regarding the enhanced PTCs. To complicate matters, in late December, there was a discharge petition related to The Health Subsidies Extension Measure (HR 1834), which garnered support from members of both sides of the aisle in the U.S. House of Representatives to force a floor vote on a three-year extension of the enhanced PTCs. On Jan. 8, after a procedural vote the day before, this legislation passed the House (230 to 196) and advanced to the Senate.

Lawmakers from both parties acknowledge this bill is likely to fail in the Senate, where previous three-year extension efforts stalled. That said, efforts to reach a compromise are ongoing. A bipartisan Senate group is close to finalizing legislation, the Consumer Affordability and Responsibility Enhancement (CARE) Act, to reestablish enhanced PTCs for two years, implement minimum premium payments, and introduce income caps. Additionally, it includes cost-sharing reduction measures and expanded access to health savings accounts.

A Brief History

2014 Launch

When the ACA private health insurance marketplace system (also called ACA exchanges) launched in 2014, four years after the ACA was enacted in 2010, PTCs were available to individuals and families earning between 100% and 400% of the federal poverty level. They were designed to ensure affordable marketplace coverage based on income by covering the difference between the full premium (set by insurers) and an affordable amount based on income.

While this structure significantly expanded coverage, affordability gaps persisted due to high premiums, age ratings, and regional cost variations — particularly for middle-income households, self-employed and gig workers, small business owners, rural communities, and older adults. This group of 40 to 50 million people fit into what is commonly referred to as the “missing middle,” meaning they earn too much to qualify for Medicaid, are too young for Medicare, or don’t have job-related health insurance.

2021 and 2022 Expansions

In 2021, Congress temporarily expanded enhanced PTCs through the American Rescue Plan Act (ARPA) in response to pandemic-related economic disruption. These changes increased subsidy levels and eliminated the 400% federal poverty level income cap for two years, allowing higher-income households to qualify for assistance if premiums exceeded a fixed share of income, starting at 0% for low incomes and capped at 8.5% (the original range was 2% to 10%).

In 2022, the Inflation Reduction Act extended these enhanced PTCs through the end of 2025, setting up the current expiration cliff and causing subsidies to revert to pre-ARPA levels on Jan. 1, 2026. Since enhanced PTCs began in 2021, health insurance enrollment through ACA marketplaces reached 24.3 million in 2025, more than double the 11.4 million who were enrolled in 2020. About 22.4 million enrollees (92%) received enhanced PTCs in 2025.

Ongoing Proposals

For years, some members of Congress have pushed to make the enhanced PTCs permanent or to extend them further, citing record marketplace enrollment, historically low uninsured rates, and improved market stability (S 3385). Other members, by contrast, have resisted clean extensions without offsets or structural reforms. Recent alternative proposals have included:

• Reverting to original tax credit levels combined with consumer-directed health savings accounts (S 3386 and S 3362).
• Greater reliance on out-of-pocket payment tools rather than premium-based subsidies, market-oriented reforms (e.g., association health plans and regulatory flexibility).
• Expanded oversight provisions to address fraud (HR 6703).

In December 2025, the Senate voted on some of these competing approaches. None advanced, leaving the enhanced PTCs to expire.

Potential Impacts

Analysts project that the lapse of enhanced PTCs will result in 2026 coverage losses. The Urban Institute estimates that approximately 4.8 million more people will become uninsured without the extensions in place, with more than 7 million people losing subsidized marketplace coverage overall. This would add to the already 26 million Americans who have no health coverage, a steady level since 2016. KFF estimates that average net marketplace premium payments would more than double without the enhanced PTCs. Early state-level data already suggests that higher premiums are leading some households to drop coverage altogether, insure only select family members, skip filling prescriptions, or take on increased medical debt.

For public health systems, higher uninsured rates translate directly into delayed or forgone care, which leads to:

• Reductions in preventive screenings. Interruptions in chronic disease detection and management.
• Decreased access to maternal and behavioral health care.
• Worsening outcomes for existing conditions or emergent medical events.

Uninsured populations tend to be diagnosed at later disease stages with more severe disease and face higher mortality rates. These coverage losses increase pressure on local safety net providers (e.g., hospital emergency rooms and federally qualified health centers) and expand uncompensated care costs that hospitals and state/local budgets absorb. Hospitals overcrowded with uninsured patients are at risk of reduced system capacity during public health emergencies.

Going Forward

To date, Congressional efforts to extend the ACA PTCs have stalled, and the path forward is unclear. It’s possible that Congress attaches legislation to a moving vehicle such as an appropriations bill or, alternatively, addresses health care broadly in a reconciliation package later this year. ASTHO will continue to monitor and provide updates.