CBO: Not extending IRA subsidies will cause 3.8M to lose coverage, ~7.9% avg *additional* premium hike

Not that this should surprise anyone, but it's good to have the Congressional Budget Office (CBO) formally chime in:

Re: The Effects of Not Extending the Expanded Premium Tax Credits for the Number of Uninsured People and the Growth in Premiums

Dear Chairman Wyden, Ranking Member Neal, Senator Shaheen, and Congresswoman Underwood:

You have asked the Congressional Budget Office to discuss the effects on health insurance coverage and premiums that will result from not extending—either for one year or permanently—the expanded premium tax credit structure provided in the American Rescue Plan Act of 2021 (ARPA, Public Law 117-2).

ARPA reduced the maximum amount eligible enrollees must contribute toward premiums for health insurance purchased through the marketplaces established by the Affordable Care Act, and it extended eligibility to people whose income is above 400 percent of the federal poverty level (FPL). Those provisions were extended through calendar year 2025 in the 2022 reconciliation act (P.L. 117-169).

CBO expects that not extending the credit will increase the number of people without health insurance and raise the average gross benchmark premiums for plans purchased through the marketplaces.

Structure of the Premium Tax Credit

The premium tax credit is an advanceable, refundable credit that lowers the out-of-pocket cost of health insurance premiums for people who obtain insurance through the marketplaces. 1 The credit is calculated as the difference between the benchmark premium (that is, the premium for the second-lowest-cost silver plan available in a region) and a maximum contribution per household, calculated as a percentage of household income and adjusted over time.

Until 2021, the premium tax credit was available to people who met the following criteria:

• Their modified adjusted gross income was between 100 percent and 400 percent of the FPL,
• They were lawfully present in the United States,
• They were not eligible for public coverage, such as Medicaid, and
• They did not have an affordable offer of employment-based coverage.

For 2021 and 2022, ARPA expanded eligibility to include enrollees whose income was above 400 percent of the FPL and lowered the maximum household contribution. The 2022 reconciliation act extended those provisions through calendar year 2025.

Effects on the Uninsured Population

CBO estimates that, relative to extending the tax credits, not extending them—either for a year or permanently—will increase the number of people without health insurance. The agency expects some people will exit the marketplaces and become uninsured because of higher out-of-pocket costs for health insurance premiums.

Without an extension through 2026, CBO estimates, the number of people without insurance will rise by 2.2 million in that year. Without a permanent extension, CBO estimates, the number of uninsured people will rise by 2.2 million in 2026, by 3.7 million in 2027, and by 3.8 million, on average, in each year over the 2026-2034 period. (The initial increase is significantly smaller because CBO expects that some people will remain temporarily enrolled after the expanded credits expire at the end of 2025. CBO assumes enrollees would need time to fully respond to the expiration, for example, because of automatic renewal policies.)

Effects on Average Gross Benchmark Premiums

CBO estimates that, relative to extending the premium tax credits, not extending them—either for a year or permanently—will lead to higher gross benchmark premiums, on average, in marketplace plans. (Those premiums reflect the amount before the tax credits are accounted for.) CBO expects that healthier-than-average people will exit the marketplaces if the expanded credits are no longer available and, in response, insurers will raise premiums for the remaining enrollees.

Without an extension through 2026, CBO estimates, gross benchmark premiums will increase by 4.3 percent, on average, for that year. Without a permanent extension, CBO estimates, gross benchmark premiums will increase by 4.3 percent in 2026, by 7.7 percent in 2027, and by 7.9 percent, on average, over the 2026-2034 period. (Similar to the effects on the uninsured population, the initial increase is significantly smaller because some people will remain temporarily enrolled.)

I hope this information is helpful. Please contact me if you have further questions.

Sincerely,
Phillip L. Swagel Director

It's important to keep in mind that the 4.3% average premium hike in 2026, as well as the eventual 7.9% average hike long-term, would be on top of whatever other premium rate increases would normally be expected to happen each year if the IRA subsidies are extended/made permanent.

For instance, average premiums went up around 6.0% in 2024 and are going up another 6.1% on average in 2025. Assuming they were to go up another 6% in 2026 if the IRA subsidies are extended by at least one year, the CBO is saying that they'd actually go up more like 10.3% if the IRA subsidies aren't extended...and in the following years, you'd have to tack on another 7.9% each year, give or take.

That'd be something like an additional $28/mo on average in 2026 ($336/yr), and another $51/mo ($612/yr) for 7.9% based on 2025 pricing.