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Enhanced Premium Tax Credit Expiration: Frequently Asked Questions (CRS Report for Congress)

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Release Date Dec. 4, 2024
Report Number R48290
Report Type Report
Authors Bernadette Fernandez
Source Agency Congressional Research Service
Summary:

Although the premium tax credit (PTC) has been available since 2014, there is increased congressional interest in the federal subsidy due to the impending expiration of a provision that enhanced the PTC. The Patient Protection and Affordable Care Act (ACA; P.L. 111-148, as amended) established the PTC to help eligible households lower their payments toward premiums for qualified health plans offered through health insurance exchanges. The American Rescue Plan Act of 2021 (ARPA; P.L. 117-2) expanded eligibility for and the amount of the PTC for tax years 2021 and 2022. The budget reconciliation measure known as the Inflation Reduction Act (IRA; P.L. 117-169) extended the ARPA provision for three additional tax years, 2023 to 2025. In general, the enhanced PTC provision allowed more households to become eligible for the credit and provided larger subsidies to all eligible households, compared with ACA-only rules. As a result, federal expenditures for the PTC were larger under ARPA/IRA rules than under ACA-only rules. If the enhanced subsidies are allowed to expire, the Congressional Budget Office (CBO) estimates a decrease in enrollees with subsidized exchange coverage resulting in a reduction in federal expenditures. CBO also estimates that expiration of the enhanced PTC would contribute to a rise in the uninsured rate. If the enhanced subsidies were permanently extended, CBO and the staff of the Joint Committee on Taxation estimate an overall increase in exchange enrollment leading to an increase in the federal budget deficit.