Healthcare Tax Credits

 

The Affordable Care Act (ACA) was enacted in 2010 to increase health insurance coverage, lower healthcare costs, and improve health outcomes for all Americans. 

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A critical provision of the ACA was the introduction of tax credits designed to help low- and moderate-income Americans afford private health insurance through the Health Insurance Marketplace. Importantly, these credits are “advanceable,” meaning that families can reduce their costs when they purchase their plan rather than waiting until they file their taxes at the end of the year.

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Originally, these credits were targeted only to those whose income falls between 100% and 400% of the Federal Poverty Level (FPL). For example, in Colorado, the FPL for a household of four is $31,200, so families earning between $31,200 and $124,800 would qualify. But the program was expanded further during the COVID-19 pandemic when Congress passed the American Rescue Plan Act of 2020 (ARPA). ARPA provided temporary enhancements to ACA tax credits, including:

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• Allowing more people to qualify: ARPA expanded the income thresholds for qualifying for tax credits, allowing individuals and families with incomes above 400% of the FPL to access tax credits.

• Providing larger tax credits: ARPA increased the value of the tax credits, further reducing premiums for many enrollees and making their insurance more affordable.

• Extending coverage options: ARPA also made it easier to enroll in plans and streamlined the process for receiving tax credits.

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The ARPA tax credit enhancements were originally set to expire at the end of 2022, but fortunately, Congress took action that year by passing the Inflation Reduction Act (IRA) and extending the enhanced credits for three more years through the end of 2025. 

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Coloradans have taken advantage of these increased benefits in massive numbers. In 2024, nearly 220,00 people here in the Centennial State enrolled in a plan through the ACA Marketplace, marking a 40% increase since 2020. Of these new enrollees, 78% received an advanced premium tax credit to help them pay their healthcare costs.

Nationwide, a whopping 19.7 million people have taken advantage of the premium tax credits to help them afford coverage. The average enrollee saved $700 in 2024 alone, and average monthly premiums dropped 32% lower than before the enhancements took effect. These savings allowed millions of Americans to get health insurance for the first time. A record 21.4 million people took advantage of the Health Insurance Marketplace in 2024, compared to just 12 million enrollees in 2021 before the enhanced tax credits took effect. 

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Notably, the enhanced tax credits created greater equity in our health system. For the first time, in 2023, people of color made up the majority of Health Care Marketplace enrollees. Enrollment for Latino and Black Americans–two populations historically less likely to be insured–increased by over 80%, and low-income Americans of all backgrounds have more than doubled their enrollment since 2021. Clearly, the enhanced tax credits have been a resounding public health success story

However, we are once again nearing another expiration date. If the enhanced premium tax credits are not made permanent, just about everyone enrolled in the ACA Marketplace will face significantly higher monthly costs. Premiums would rise for every age group and every income level. 

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The Center on Budget and Policy Priorities calculates that the average family of four earning $60,000 a year would see their premiums triple if the tax credits were to expire, increasing their costs by $226 each month. And an average 60-year-old Colorado couple earning $80,000 a year would see their premiums jump nearly $10,000 annually! 

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This picture gets even more bleak in states where underlying market premiums are already high. If that same “average” 60-year-old Colorado couple moved to West Virginia, their premiums would skyrocket from $6,800 each year to over $43,000! 

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In scenarios like this, many Americans would simply decide–or be forced–to drop their coverage. According to the Congressional Budget Office, if the tax credits are not made permanent, as many as 3.8 million more people may be left without health insurance altogether.

That would be awful news for all Americans–and not just for those families and individuals who are directly impacted. People who are insured are far more likely to seek preventative care and early intervention, which is more accessible and far less expensive to treat than waiting until a health concern becomes a significant problem. Ultimately, a higher rate of covered individuals lowers health costs and improves outcomes for all of us.

 

Here in Colorado, we’ve seen what the enhanced premium tax credits can do: families have enjoyed steep reductions in their monthly premiums, and the rate of uninsured Coloradans has declined significantly. According to a survey by the Colorado Health Institute, the state’s uninsured rate dropped to just 4.6% in 2023 after hovering around 6.5% for nearly a decade. That’s good news, but it’s a trend that would reverse itself quickly if the enhanced tax credits were allowed to expire. The same survey found that the cost of coverage remained, by far, the primary reason that some Coloradans still go without health insurance. 

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As we approach the 2025 deadline, Coloradans need to understand what may change in their health insurance options. The potential lapse in tax credits could lead to a significant increase in premium costs, which would likely deter individuals and families from maintaining their coverage.

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The Affordable Care Act of 2010 and the Inflation Reduction Act of 2022 have helped millions of Americans access healthcare coverage, lower their costs, and improve health outcomes from coast to coast. The enhanced premium tax credits have exceeded all expectations by getting millions of Americans covered, no matter what state they live in or how much money they make. It’s been a tremendously successful and wildly popular public policy, and the implications of reversing course now are simply unthinkable. 

 

If the enhanced premium tax credits are made permanent, we keep winning. Millions of families in Colorado and around the country will be able to live longer, enjoy healthier lives, and continue to access the care they need.​