ACA tax credits

When it comes to the cost of living, the advanced premium tax credits available under the Affordable Care Act have been a lifesaver for millions of Americans who would otherwise have struggled mightily to afford health insurance coverage. That’s been particularly true since those tax credits were enhanced as part of the COVID relief measures passed in 2021 and then extended in the Inflation Reduction Act of 2022.
That was one of many ways that the Inflation Reduction Act truly did reduce the cost of living for millions of Americans. The enhanced tax credits made private health insurance so affordable that it literally doubled the number of Americans who signed up for insurance under the ACA’s marketplace, which we access in Minnesota through MNsure. Today, more than 21 million Americans benefit from the tax credits to make their health insurance affordable. Here in Minnesota, the ranks of beneficiaries include many small business owners, farmers, and lower-wage workers whose employers can’t afford to provide coverage through their businesses.
But with the change coming in Washington in January, millions of families may soon be paying significantly more for health coverage then they have in the past. The enhanced tax credits are set to expire next year and there appears to be little enthusiasm on the part of the Republicans or President-elect Trump to extend the benefit. They’ll be focused much more on extending the Trump tax cuts, a tax formula that is overwhelmingly slanted to the benefit of high earners and the wealthy. According to the Congressional Budget Office, extending the Trump cuts will add $4 trillion to the deficit over the next decade. Extending the ACA’s enhanced premium tax credits, another form of tax cut that would primarily benefit small entrepreneurs, farmers, and low-wage workers, would add an estimated $335 billion to the deficit over the next decade, or less than one-tenth the amount of the Trump tax cut extension.
Without the extension, Americans who qualify for the tax credits would see their annual premiums increase by more than $1,000. Some could face a much bigger hit depending on their circumstances. According to the Kaiser Family Foundation, the enhanced tax credits not only increase the assistance for those who were already qualified, it expanded the eligibility pool to allow middle-class families (earning up to $123,000 per year for a family of four) to qualify for the tax credits for the first time. If those families no longer qualify for the credit, it could be a noticeable financial hit.
MNsure’s own calculations provide a better sense of just how big a hit. As reported in the Star Tribune last week, residents of northeastern Minnesota can expect an average premium increase of $175 per month without an extension of the enhanced tax credits. That’s $2,100 a year. Just as the enhanced tax credits encouraged many more families to sign up for coverage, their expiration will force many to drop their coverage, which will once again increase the ranks of the uninsured.
Of course, as always when it comes to politics, decisions reflect the priorities of those in charge. Unfortunately, helping working-class families afford health insurance doesn’t appear to be a high priority for the next administration, or for Congress.
Those priorities, of course, can change depending on the feedback members of Congress receive from the public — which is why we all should be thinking how we can move the needle to build support for extending the tax credits.
The fact is, the ACA has worked largely as it was designed to do. It has dramatically reduced the ranks of the uninsured by expanding eligibility for programs like Medical Assistance while providing premium tax credits for tens of millions of Americans who don’t qualify for Medical Assistance. Given that most families today either benefit from, or know family members who benefit from the ACA, it’s no surprise that nearly two-thirds of Americans now say they have a favorable view of the program. That’s a remarkably high percentage for any government program, and it’s a reflection of the fact that the ACA is working for so many Americans.
It’s easy to forget that as recently as 2010, about 16 percent of Americans lived without health coverage. Today, it’s half that, about 7.7 percent according to the latest government data. That’s a success story, one that Americans should fight to protect.