The Affordable Care Act’s (ACA) premium tax credits, which help lower the monthly cost of health insurance for eligible individuals and families, play a critical role in improving the affordability of marketplace coverage. Enhancements to these tax credits, first introduced under the American Rescue Plan Act (ARPA) and extended through the Inflation Reduction Act (IRA), have further expanded access by increasing the amount of financial assistance available and making more people eligible. Thanks in part to the enhancements, ACA health insurance marketplace enrollment reached record highs for five consecutive years, and in 2024, 1 in 6 Americans under age 65 had some form of ACA coverage. However, the future of these gains remains uncertain. Without congressional action to extend the enhanced tax credits beyond 2025, 20 million Americans will face significant premium increases, and nearly 4 million Americans will be uninsured by 2027.
This column highlights five ways the enhanced tax credits have improved health coverage and affordability—and why maintaining them is essential to protecting the progress made in expanding access to health care.
1. Enhanced tax credits reduced premium costs
Relative to original premium tax credits, the enhanced tax credits lowered marketplace premiums by an average of 44 percent for millions of low- and middle-income Americans in 2024. In 2025, 4 out of 5 HealthCare.gov consumers were able to select a plan with a monthly premium of $10 or less after the tax credit. For people earning 100 percent to 150 percent of the federal poverty level (FPL), the enhanced credits reduced premiums to $0 for silver plans. Middle-income families—particularly those earning more than 400 percent of the FPL, who were previously ineligible for assistance altogether—saw dramatic reductions in their monthly premiums. For example, a family of four earning $135,000 (433 percent of the FPL) saved an average of $658 per month due to the enhanced tax credits. A 55-year-old couple earning $82,000 (401 percent of the FPL) saved an average of $1,152 per month.
Some states have leveraged the savings generated by enhanced federal tax credits to improve premium affordability for their own residents. For example, in 2022, Maryland launched a pilot premium subsidy program for young adults ages 18 to 34 with household incomes 138 percent to 400 percent of the FPL. The pilot was extended and expanded for 2024 and 2025 to include adults up to age 37 and, as of September 2024, had reduced net premiums by an average of 30 percent for 60,000 Marylanders. By reducing financial barriers, the program helped attract more younger, healthier enrollees to the ACA marketplace, strengthening the overall risk pool.
2. Enhanced tax credits lowered out-of-pocket costs
Enhanced tax credits lowered the cost of more comprehensive coverage options, making marketplace plans with lower deductibles and copays more accessible to more consumers. As a result, enrollment in plans with $0 premium plans with lower cost sharing nearly doubled, rising from 5.7 million in 2020 to 10.6 million in 2024.
States have also capitalized on the enhanced tax credits to further lower out-of-pocket costs for their marketplace enrollees. In 2021, the New Mexico legislature established the Health Care Affordability Fund, financing it through savings from the federal enhanced tax credits and an increase to the state’s health insurer tax. In 2023, this fund enabled the state to roll out special marketplace plans that reduce deductibles, out-of-pocket limits, copays, and coinsurance for individuals and families earning up to 300 percent of the FPL. In 2024, California launched an enhanced cost-sharing reduction program that eliminated deductibles entirely and boosted the actuarial value for silver-plan enrollees earning up to 250 percent of the FPL. The long-term viability of these and other such state initiatives hinges on the continuation of enhanced tax credits beyond 2025.
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3. Enhanced tax credits drove record marketplace enrollment
By improving premium affordability, the enhanced tax credits helped drive unprecedented marketplace enrollment. In 2025, more than 24 million Americans, including nearly 4 million new consumers, selected a marketplace plan. This played a key role in reducing the nation’s uninsured rate, which dropped from 9.2 percent in 2021 to 7.6 percent by mid-2024. In some congressional districts, particularly in states that did not expand Medicaid under the ACA, large proportions of the population have marketplace coverage. For example, in Florida’s 26th district, nearly 1 in 2 adults under age 65 were enrolled in a marketplace plan in 2024, with 99 percent of enrollees receiving tax credits.
Certain groups saw particularly strong enrollment gains. Enrollment by people in rural communities rose from 1.2 million in 2021 to 2.9 million in 2024. Young adults also benefited from improved affordability, with enrollment among 18- to 34-year-olds growing from 3 million in 2021 to 5.7 million in 2024. Additionally, the enhanced tax credits made coverage more accessible for self-employed Americans, ensuring that those without traditional job-based insurance could afford comprehensive health plans. In 2022, this meant more than one-fifth of small-business owners and other self-employed workers in the states of Florida, Georgia, Maine, North Carolina, Nebraska, New Hampshire, South Carolina, Utah, and Wyoming obtained marketplace coverage.
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4. Enhanced tax credits expanded plan options and improved marketplace stability
Enhanced premium tax credits have also helped stabilize ACA marketplaces. By making coverage more affordable and driving record enrollment, the tax credits have attracted more insurers to participate, increasing competition and therefore plan availability for consumers. Insurer participation in the marketplaces reached its highest level in 2025, with an average of 9.6 insurers per state. Additionally, for the 2025 open enrollment period, 97 percent of HealthCare.gov enrollees had a choice among at least three or more ACA insurers, a significant increase from 68 percent in 2020. Should Congress not extend the enhanced tax credits, insurer participation could revert and families would have fewer affordable coverage options.
5. Enhanced tax credits narrowed racial and ethnic coverage gaps
Historically, communities of color have faced disproportionately high uninsured rates due to structural barriers, lower access to employer-sponsored insurance, and affordability challenges. By making marketplace plans more affordable, enhanced tax credits have helped narrow long-standing racial and ethnic disparities in health coverage. As a result, according to the U.S. Department of Health and Human Services, from 2020 to 2023, marketplace enrollment increased by more than 100 percent for Latino Americans and 95 percent for Black Americans. The same analysis also noted that disparities in health insurance coverage between Latino and Black Americans, relative to white Americans, narrowed over that time period.
These coverage gains are at risk. The Urban Institute projects that if the enhanced tax credits expire, the uninsured rate will rise from 17.9 percent to 19.8 percent for Hispanic Americans and from 9.7 percent to 11.9 percent for Black Americans, compared with an increase from 5.7 percent to 6.8 percent for white Americans.
Conclusion
The ACA’s enhanced tax credits have made health insurance more affordable and accessible for American families across the country. By lowering premiums, reducing out-of-pocket costs, increasing enrollment, narrowing racial disparities, and stabilizing the marketplaces, the enhanced tax credits have strengthened the ACA’s foundation and expanded health coverage to a record number of people. Without congressional action to extend the enhanced tax credits beyond 2025, millions of Americans shopping for coverage this fall will see higher premiums and reduced plan options, and many will become uninsured. Policymakers must act to preserve affordable health coverage.