The Robert Wood Johnson Foundation analysis, released Thursday, concluded that Congress must act by the summer to extend the enhanced tax credits, which are set to expire in 2023. The increased credits were a major reason for the ACA exchanges' record-breaking enrollment of 14.5 million people for 2022.
"The combined effect of terminating both the premium tax credits and the public health emergency could result in a tsunami of coverage loss," Kathy Hempstead, senior policy adviser at the Robert Wood Johnson Foundation, said in a statement Thursday. "If Congress does not act, it appears that progress toward increasing coverage rates to record levels will be reversed."
Researchers discovered that if the increased subsidies expire in 2023, 8.5 million people will enroll in coverage with premium tax credits the following year. There will be nearly 5 million fewer people than if the enhanced credits were extended, representing a 36.7% reduction.
The American Rescue Plan Act, signed in 2021, significantly increased tax credits, ensuring that some low-income ACA customers only had to pay $10 or $0 per month in premiums.
Another significant change was that people earning more than 400% of the federal poverty line would not be required to pay more than 8.5% of their income for healthcare coverage. Previously, the 400% threshold was the cutoff for people to become eligible for income-based subsidies.
The analysis, conducted by the think tank Urban Institute, found that most people enrolled in the exchanges with 400% income above the poverty level will lose tax credit eligibility and that unsubsidized nongroup enrollees would increase by 1 million.
If the credits are not extended, Urban estimates that 3.1 million more people will become uninsured. The researchers used a simulation model with the most recent enrollment data for 2022.
According to Urban, not everyone who obtained coverage through the exchanges this year was previously uninsured; some had coverage through an employer-sponsored plan.
“The number of people with such coverage would increase by 681,000 if the enhanced [tax credits] were to expire,” the analysis said. “That represents an increase of only 0.4%.”
Urban also discovered that people with incomes between 138 and 400% above the federal poverty line had the greatest loss of coverage.
"In addition to losing coverage, people who already had nongroup coverage prior to the [American Rescue Plan] will spend hundreds of dollars more per person on health insurance premiums each year if the enhanced [tax credits] are not extended," according to the analysis.
The potential coverage losses come as the marketplaces prepare for changes in Medicaid rolls as the COVID-19 public health emergency (PHE) expires later this year. The PHE prohibited states from removing anyone from Medicaid rolls, and as the program expires, states will have to decide who is still eligible for coverage. Redeterminations must be made within 14 months of the end of the PHE.
If the credits are extended, more people falling off Medicaid rolls will be eligible for premium tax credits, “and all those eligible would pay less in premiums, reducing potential losses of health coverage as Medicaid enrollment falls,” Urban said.
It is unclear whether the subsidies will be extended by Congress. The $1.75 trillion Build Back Better Act included a 2025 extension, but the legislation has stalled in the Senate. Senate leaders hope to resurrect some provisions of the bill this year.