Eliminating Enhanced PTCs Would Have Cascading Economic Impacts, Report Estimates

If Congress eliminates enhanced premium tax credits (PTCs), the net cost of marketplace premiums would rise, and many Americans would become ineligible for tax credits to offset the cost of health insurance premiums, a report published by The Commonwealth Fund warned.¹ In addition to direct consumer impacts, changing this policy would affect the entire health care industry on both national and state levels, according to the report.

The report estimates that the loss of enhanced PTCs would lead to a $26.1 billion reduction in federal tax credits given to individuals and health insurers, and in turn, health care providers. | Image credit: onephoto - stock.adobe.com

Enhanced PTCs, a product of the 2020 American Rescue Plan Act, were extended through December 2025 by the Inflation Reduction Act in 2022.² The enhanced PTCs give additional subsidies to individuals who are already eligible for the standard tax credits by purchasing insurance through the Affordable Care Act’s marketplaces. If Congress does not extend the enhanced PTCs past 2025, there would be substantial economic consequences, the new report projects.¹

“Eliminating federal premium tax credits will have serious economic repercussions nationwide. States will face deep job losses, particularly in health care, along with billions in lost economic activity,” lead study author Leighton Ku, MPH, PhD, director of the Center for Health Policy Research and professor of health policy and management at George Washington University’s Milken Institute School of Public Health, said in a statement.³ “Without these subsidies, families will struggle to afford coverage, businesses will take a hit, and state and local budgets will be stretched even thinner. The ripple effects will be felt in every community.”

The study used the IMPLAN economic modeling system to assess data on the changes in federally financed health spending that would be lost to states. The authors calculated the potential direct and indirect effects of eliminating enhanced PTCs, including job losses, changes in gross domestic products (GDPs), and tax revenue changes.

State-Level and National Impacts of Eliminating Enhanced PTCs

On the national scale, the report estimates that the loss of enhanced PTCs would lead to a $26.1 billion reduction in federal tax credits given to individuals and health insurers, and in turn, health care providers. Additionally, the report projects total state GDPs would decrease by $34.1 billion, and there would be a $57 billion reduction in economic output, meaning the net economic harm to states would eclipse the loss of $26.1 billion in federal funds to states if the enhanced PCTs end in 2025.

The authors also noted that the impacts could extend beyond the health care space, as individuals and families would lose personal income and therefore spend less on good and services. This additional fallout would affect other areas of state economies. Overall employment would also decline, with the report projecting 286,000 jobs lost. These include 130,000 jobs affected by direct reductions in the provision of care and reductions in pharmacy-related services, as well as 156,000 jobs in nonhealth sectors due to indirect or induced effects of funding losses.

In 2026, there would be $2.1 billion in losses of state and local tax revenues in addition to $5.4 billion in federal tax revenues, the report estimated. This would make balancing budgets and paying for essential tax-funded services more difficult.

The report also estimated that the states hit the hardest would be those where Medicaid was not expanded and more residents rely on marketplace subsidies: Alabama, Florida, Georgia, Kansas, Mississippi, South Carolina, Tennessee, Texas, Wisconsin, and Wyoming. These states would account for almost 70% of the projected nationwide job losses, $23 billion of the GDP losses, and $1.3 billion in state and local tax revenue.

“Enhanced premium tax credits have been a lifeline for millions of Americans, ensuring they can get the health care they need without financial hardship,” study author Sara R. Collins, Commonwealth Fund senior scholar and vice president for Health Care Coverage and Access, said.³ “Without them, families will face skyrocketing premiums, and many will lose coverage entirely. We know that access to affordable health care is critical to people’s long-term health and financial well-being; protecting it must be a priority.”

References

1. Ku L, Gorak T, Kwon KN, Nketiah L, Cordes JJ. The cost of eliminating the enhanced premium tax credits. The Commonwealth Fund. March 3, 2025. Accessed March 5, 2025. https://www.commonwealthfund.org/publications/issue-briefs/2025/mar/cost-eliminating-enhanced-premium-tax-credits

2. Richards C, Collins SR. Enhanced premium tax credits for ACA health plans: who they help, and who gets hurt if they’re not extended. The Commonwealth Fund. February 18, 2025. Accessed March 5, 2025. https://www.commonwealthfund.org/publications/explainer/2025/feb/enhanced-premium-tax-credits-aca-health-plans

3. New report: Loss of health insurance premium tax credits projected to cost states $34 billion in GDP and more than $2 billion in lost tax revenue. News release. The Commonwealth Fund. March 3, 2025. Accessed March 5, 2025. https://www.commonwealthfund.org/sites/default/files/2025-03/Ku_cost_of_eliminating_enhanced_premium_tax_credits_PR_2025-03-03_revised.pdf