Susan Dentzer: Extending the ACA’s enhance premium tax credits — It’s the right thing to do

Winston Churchill is often credited with the assertion that Americans always do the right thing after exhausting all the other alternatives. Whether or not he actually said it, current U.S. healthcare policy underscores the underlying truth. 

The latest evidence is Congress’s inability to broker an extension of the enhanced premium tax credits (EPTCs) established under the ACA, which expired following congressional inaction on Dec. 31, 2025. Many U.S. policymakers seem curiously loathe to avoid further self-inflicted harm to the substantial health insurance coverage expansion achieved under the ACA, the primary force in driving U.S. health coverage to an all-time high in 2022.^a 

The EPTC debacle is also emblematic of the nation’s long history of cognitive dissonance, or simultaneously holding conflicting ideas, when it comes to the financing of healthcare and the provision of health insurance.

The United States’ unique vision impairment around healthcare

All nations face the overall challenge of financing healthcare, thanks to rising costs, demographic pressures due largely to population aging, healthcare workforce shortages and rising income inequality.^b But the United States appears incapable of separating this universal financing challenge from its ambivalence about universal health coverage, which this nation — alone among high-income countries — still lacks.

The cognitive dissonance afflicting many policymakers is evident in their belief that they can meaningfully address the nation’s healthcare financing challenges by throttling back further on publicly financed health insurance, rearranging funds flowing into different forms of health insurance or health spending or, more improbably, hoping that money will mysteriously appear from somewhere to pay for the care of Americans who need it.

Understanding the role of the EPTCs

This muddled thinking may have reached a recent high watermark in attitudes toward the expiring EPTCs, whose role in recent coverage expansion was arguably poorly understood. An analysis by Harvard economists shows that, by 2023, 55% of the coverage gains achieved through the ACA came from the tax credits, or subsidies, extended to people who purchased private coverage through the ACA marketplaces, with the balance coming from the expansion of Medicaid.^c

The subsidies originally put in place when the ACA was enacted produced about 37 percentage points of the coverage gains, while another 19 percentage points came from the enhanced subsidies adopted under the COVID-era American Rescue Plan in 2021. These enhanced subsidies both extended ACA tax credits for the first time to households earning more than four times the federal poverty level (FPL) and boosted the existing credits for those earning between one to four times FPL.

Conservative critics of the EPTCs argue that enhanced subsidies were only needed to shore up coverage during the COVID pandemic. A group of leaders for conservative organizations wrote to members of Congress that the credits were “always supposed to be temporary.”^d

However, the Harvard economists’ analysis suggests that the enhanced credits were especially helpful in reducing uninsurance even after the public health emergency was over, when pandemic-era provisions to shore up Medicaid coverage expired. Each 10 percentage-point increase in the average ACA subsidy decreased the uninsured rate by 0.68 percentage points in 2023, they calculated.

Said another way, the increased tax-based financing of health insurance stemming from, but continuing after the pandemic, enabled about 3.7 million more individuals to gain health coverage in 2023. Extending the enhanced subsidies through 2028, as Senate Democrats proposed, would have resulted in 4 million additional individuals having coverage as well, according to an estimate by the nonpartisan Congressional Budget Office (CBO).^e

How lawmakers have responded

Apparently unconvinced that coverage expansion remains a worthy policy goal, many in Congress last fall endorsed axing the enhanced subsidies altogether, presumably to avert billions of dollars in federal spending. (For example, the Senate Democrats’ plan to extend the subsidies through 2028 would have cost roughly $68 billion over the three years, according to the CBO.) Somehow, the muddled thinking was that people seeking to get or retain health coverage could either find an employer to grant them insurance or come up with the money to pay the higher non-subsidized premiums on their own.

Still other lawmakers proposed not to use the equivalent dollar amount of the tax subsidies to help maintain or expand existing health coverage, but rather to steer the money into health savings accounts (HSAs) paired with alternative health insurance arrangements — presumptively, to lower overall health spending. These amounts would be coupled with so-called bronze or catastrophic ACA plans that carry lower premiums than the more generous silver and gold plans in which most ACA participants are enrolled — or under some proposals, even short-term plans that can exclude enrollees based on their pre-existing conditions.

A closer look at HSAs

HSAs clearly hold appeal, particularly for better-off, healthier consumers. If invested, any funds that accumulate in HSAs do so tax free and provide the largest benefits to those in the highest marginal tax brackets.

But multiple studies have shown that use of HSAs doesn’t result in lower healthcare spending.^f  What’s more, average deductibles under bronze plans are estimated at $7,476 per person in 2026, and for catastrophic plans, as much as $10,600 for an individual or $21,200 for a family.^g Given HSA contribution limits of $4,400 for an individual or $8,750 for a family in 2026, sicker enrollees facing high healthcare expenses could incur very high out-of-pocket costs for care even after they used up their HSAs. 

Impending consequences of congressional inaction

Despite a congressional scramble after the EPTCs expired in early January to find a broadly acceptable solution, neither a simple extension of the EPTCs nor any of the alternative proposals featuring HSAs appears likely to garner enough support to be enacted. Millions of Americans are incurring higher health insurance premiums or dropping coverage. Analyses suggest that insurance risk pools in many states will continue to deteriorate as sicker people remain enrolled while others drop out.^h

The resulting higher use of emergency department services and growing uncompensated care won’t reduce spending. Insurance premiums will continue to skyrocket; and the already formidable challenges of financing U.S. healthcare will only grow.

For anyone who subscribes to the view that Americans will always do the right thing eventually, clearly we’re still waiting. 

Footnotes

a.  Glied, S., Swartz, K., “Stopping the ‘Medicaid churn’ — Addressing Medicaid coverage after the COVID-19 public health emergency ends,” JAMA Health Forum, Nov. 3, 2022.
b.  Papanicolas, I., et al., “Policy questions as a guide for health systems’ performance comparisons,” Bulletin of the World Health Organization, 2024.
c.  Aboulafia, G., Gruber, J., and Sommers, B.D., The rise and fall (and rise) of the Affordable Care Act: Varying impacts on coverage over time and place, NBER working paper, March 2025.
d.  Brooks, E., “Conservative leaders urge Trump to let health care tax credits expire,” The Hill, Sept. 26, 2025.
e.  CBO, “Cost estimate,” Dec. 10, 2025.
f.  Ding, D., and Glied, S., “Health care-related savings accounts, health care expenditures, and tax expenditures,” JAMA Health Forum, Sept. 20, 2024.
g.  KFF, “Deductibles in ACA marketplace plans, 2014-2026,”  Nov. 6, 2025; and Long, M., et al. “Policy changes bring renewed focus on high-deductible health plans,” KFF, Jan. 5, 2026.
h.  See, for example, AM Best, “Expiring subsidies may result in shrinking ACA enrollment, deteriorating risk pool,” commentary, Nov. 11, 2025.